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
ACM 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: June 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
-------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
-------------------------------------------------------------------------------
ACM Income Fund
Semi-Annual Report
June 30, 2006
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
The Fund's Board of Directors approved amended and restated by-laws for the
Fund effective July 1, 2006. The by-laws are an exhibit to the Fund's most
recently filed report on Form N-SAR, which is on file with the SEC and may be
accessed via the SEC's website which is at www.sec.gov. A copy is also
available upon written request to the Secretary of the Fund.
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 AllianceBernsteinR 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 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.
August 18, 2006
Semi-Annual Report
This report provides management's discussion of fund performance for ACM Income
Fund (the "Fund") for the semi-annual reporting period ended June 30, 2006. The
Fund is a closed-end fund that trades under the New York Stock Exchange symbol
"ACG".
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 page 4 and "Note G-Risks
Involved in Investing in the Fund" of the Notes to Financial Statements on page
42.
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 June 30, 2006.
The Fund outperformed its benchmark for both the six- and 12-month periods
ended June 30, 2006. Contributing positively to the Fund's performance for the
six-month period was the Fund's high yield allocation, which significantly
outperformed the benchmark. Additionally, security selection within the Fund's
high yield holdings was also positive.
The Fund's emerging market allocation, particularly its holdings in local
Brazilian debt, also contributed positively to relative performance. For the
semi-annual reporting period, Brazil posted the strongest local country returns
at 16.64%, according to the J.P. Morgan Emerging Local Markets Index (ELMI)
Plus, with the strength of its currency providing more than half of that
return. Brazilian debt benefited from slowing growth, low inflation, high real
rates and a strong currency.
The Fund's use of leverage for the semi-annual period did not have a
significant effect on the Fund's outperformance versus its benchmark.
For the 12-month period, the Fund's emerging market debt and high yield
allocations were again the primary positive contributors to performance
relative to the benchmark, as both sectors outperformed the U.S.-only
investment-grade benchmark.
Market Review and Investment Strategy
Bond market returns were mostly negative in the first half of 2006, as yields
ACM INCOME FUND o 1
continued to rise globally alongside official rate increases by the U.S.
Federal Reserve (the "Fed") as well as other central banks. During the
reporting period, the Fed raised official rates by 1.0% in quarter point
increments, ending the period at 5.25%. U.S. Treasury yields rose approximately
75 basis points across the maturity spectrum, with most Treasury yields ending
the period within a few basis points of 5.15%. As a result, U.S. Treasuries
posted a negative absolute return of -1.29%, according to Lehman Brothers, and
underperformed most U.S. fixed-income sectors in both absolute- and
duration-adjusted terms.
Investment-grade corporate bonds fell 1.56%, posting the weakest returns within
the Fund's benchmark. This was due to inflation concerns, the Fed's actions and
increased event risk. In addition to the negative effects of interest rate
hikes and greater volatility, the corporate market was also pressured by news
of several large buyouts. For example, the oil and gas pipeline company, Kinder
Morgan, began planning a mammoth management buyout (MBO) worth an estimated $22
billion, including debt, making it the biggest MBO on record. The deal spurred
concern that other large leveraged buyouts (LBOs)/MBOs could be in the
pipeline. Within the investment-grade corporate universe, longer-maturity
corporates underperformed shorter-maturity debt and lower-rated corporates
underperformed higher-quality debt.
High yield corporates outpaced most fixed-income sectors, returning 3.14%
during the semi-annual reporting period, according to Lehman Brothers. High
yield debt outperformed as it is less sensitive to the negative effects of
rising interest rates. Additionally, strong returns within the automotive
industry at 10.12%, led by a rebound in General Motors (GM) at 12.52% and Ford
Motor Company at 8.58%, also boosted high yield returns. GM bonds drove
industry outperformance on a series of positive developments. These
developments included news that GM benefited from positive news that auto-parts
supplier Delphi had reached an agreement with GM and the United Automobile
Workers union over an employee buyout package. Ford benefited from
better-than-expected earnings, as well as its new restructuring plan.
After a period of strong performance, U.S.-dollar denominated emerging markets
ended the first half of 2006 in negative territory, returning -0.69%, according
to the J.P. Morgan Emerging Market Bond Index (EMBI) Global. Weaker local
equity markets, higher global interest rates and political instability
associated with numerous local elections led to investor risk aversion in the
emerging markets. Higher U.S. interest rates were the primary cause of the
negative performance. Despite the negative return, however, emerging market
debt spreads tightened modestly relative to U.S. Treasuries. During the period,
the Latin region returned 0.40%, outperforming non-Latin countries at -2.16%.
Local emerging market debt (local currency-denominated) fared much better,
according to the J.P. Morgan ELMI Plus, posting a positive return of 2.34% for
the period under review. As men-
2 o ACM INCOME FUND
tioned in the Investment Results section, on a country level, Brazil led in
local currency terms, posting a return of 16.64%, followed by Indonesia at
13.30% and Thailand at 10.41%.
During the reporting period, allocations to U.S. government, mortgage-backed
and corporate securities, as well as emerging market debt were maintained in
the Fund. Although credit metrics such as corporate profits continued to be
strong, historically narrow spreads and a flat yield curve made the corporate
market vulnerable to event risk, including increased leverage buyout activity.
The Fund's portfolio management team focused on underweighting longer maturity
corporates, whose prices are especially vulnerable to market disruptions and
which tend to suffer more than their shorter-duration counterparts when the
yield curve is flat. Within the Fund's high yield allocation, the team
continued to underweight the more risk-sensitive part of the market. With few
opportunities to add value through security selection within the Fund's
investment-grade and high yield allocation, the Fund's corporate holdings were
extremely well-diversified and focused on avoiding problem credits.
Additionally, the Fund continued to hold bank loan debt as strong investor
demand, a benign default-rate environment and historically low volatility made
leveraged loans attractive.
Within the Fund's emerging market allocation, Brazil, Russia and Mexico
continued to be the Fund's top country selections with a focus on local debt,
particularly in Brazil. Individual country fundamentals, especially progress on
debt reduction, supported the team's belief that concentrated positions rather
than a highly diversified allocation, was a more effective strategy for the
Fund. Brazil's debt-to-gross domestic product (GDP) ratio continued to decline
as it began to buy back a scheduled $20 billion of bonds. Aggressive rate cuts,
the central bank's response to declining GDP growth in the context of low
inflation, also have helped the county's creditworthiness. Similarly, Russia's
credit profile continued to improve as it buys back external debt using oil
reserve funds. Foreign exchange reserves have reached a record $204.1 billion
due to high oil prices.
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 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 abbreviation "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." For additional
shareholder information regarding this Fund, please see page 53.
Benchmark Disclosure
The unmanaged Lehman Brothers (LB) U.S. Aggregate Index does not reflect fees
and expenses associated with the active management of a fund portfolio. 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.
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 realize shareholders higher returns than if the Fund
were not leveraged, and the use of leverage techniques can add to net asset
value (NAV). 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%.
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 (including
emerging markets) and is subject to greater risk than would a fund with a more
diversified asset class portfolio. 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)
THE FUND VS. ITS BENCHMARK
PERIODS ENDED JUNE 30, 2006
Returns
6 Months 12 Months
-------------------------------------------------------------------------------
ACM Income Fund (NAV) -0.18% 2.15%
LB U.S. Aggregate Index -0.72% -0.81%
The Fund's Market Price per share on June 30, 2006 was $7.41. The Fund's
Net Asset Value Price per share on June 30, 2006 was $7.92. For additional
Financial Highlights, please see page 48.
6 o ACM INCOME FUND
PORTFOLIO SUMMARY
June 30, 2006 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $ 1,817.2
SECURITY TYPE BREAKDOWN*
[ ] 60.6% U.S. Government and Government Sponsored
Agency Obligations
[ ] 21.8% Sovereign Debt Obligations [PIE CHART OMITTED]
[ ] 6.4% Corporate Debt Obligations
[ ] 3.1% Bank Loans
[ ] 0.1% Preferred Stock
[ ] 8.0% Short-Term
* All data are as of June 30, 2006. The Fund's security type breakdown is
expressed as a percentage of total investments (excluding security lending
collateral) and may vary over time.
ACM INCOME FUND o 7
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT SPONSORED
AGENCY OBLIGATIONS-100.3%
U.S. Treasury Bonds-37.7%
5.375%, 2/15/31(a) U.S.$ 1,961 $ 1,994,859
6.25%, 5/15/30(b) 62,230 70,485,183
7.25%, 5/15/16(b) 21,695 25,120,445
11.25%, 2/15/15(b) 160,000 227,237,440
12.00%, 8/15/13(a) 82,000 93,182,094
12.50%, 8/15/14(a) 70,300 85,115,163
13.25%, 5/15/14(a) 150,000 182,167,950
--------------
685,303,134
U.S. Treasury Notes-17.9%
2.625%, 5/15/08(b) 24,615 23,504,445
3.00%, 11/15/07(b) 50,000 48,544,900
3.25%, 8/15/07(b) 80,000 78,271,840
3.50%,11/15/09(a) 154 146,378
3.875%, 2/15/13(a) 3,030 2,820,503
4.00%, 9/30/07-2/15/15(a)(b) 54,614 53,577,059
4.125%, 8/15/08-5/15/15(a) 3,074 2,942,564
4.25%, 11/30/07-8/15/15(a) 21,020 20,302,997
4.375%, 8/15/12(a) 700 673,367
4.50%, 11/15/15(b) 36,435 34,704,337
4.50%, 2/15/16(a) 598 568,941
4.75%, 5/15/14(b) 60,280 58,803,622
4.875%, 2/15/12(a) 250 247,265
--------------
325,108,218
U.S. Treasury Strips-15.1%
Zero coupon, 5/15/17(a) 260,000 147,891,900
Zero coupon, 11/15/21(a) 285,350 126,017,123
--------------
273,909,023
Government National Mortgage
Association-14.9%
Zero coupon, 11/16/45(c) 16,668 938,491
5.50%, TBA 158,630 153,722,305
5.50%, 3/15/36-6/15/36(a) 37,389 36,246,509
6.00%, TBA 70,560 69,898,500
6.00%, 7/20/32(a) 6,560 6,428,800
7.00%, 12/15/26(a) 4,032 4,157,252
--------------
271,391,857
Federal National Mortgage
Association-6.0%
4.175%, 9/01/35(a) 1,657 1,633,396
4.347%, 8/01/34(a) 2,729 2,717,756
4.371%, 8/01/34(a) 4,406 4,374,108
4.416%, 8/01/34(a) 2,708 2,677,632
4.466%, 5/01/33(a) 2,718 2,695,976
8 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
4.471%, 1/01/36(a) U.S.$ 2,344 $ 2,309,512
4.484%, 8/01/35(a) 1,548 1,531,219
4.521%, 7/01/35(a) 3,936 3,894,356
4.692%, 5/01/35(a) 2,777 2,742,723
4.785%, 7/01/35(a) 5,987 5,919,826
4.831%, 7/01/35(a) 2,471 2,441,595
5.00%, 2/01/18-10/25/33(a) 39,037 18,282,948
5.375%, 6/07/21(c) GBP 144 276,677
5.50%, 9/25/17-7/25/34(a) U.S.$ 15,424 15,057,320
6.034%, 1/01/36(a) 4,070 4,192,803
6.50%, 4/25/32-2/01/36(a) 38,579 38,827,826
--------------
109,575,673
Federal Home Loan Mortgage
Corporation-4.9%
4.249%, 10/01/35(a) 2,998 2,957,275
4.399%, 8/01/34(a) 2,367 2,341,479
4.406%, 9/01/34(a) 1,697 1,675,554
4.50%, 10/15/30(a) 6,180 5,554,275
4.613%, 4/01/35(a) 2,143 2,110,215
4.692%, 6/01/35(a) 4,407 4,346,438
5.00%, 4/15/16(a) 10,623 10,404,286
5.50%, 7/15/17(a) 15,680 15,442,566
5.875%, 5/15/16(a) 44,341 44,082,936
--------------
88,915,024
Resolution Funding Corp.-3.8%
Zero coupon, 10/15/20 150,000 69,011,250
Total U.S. Government and Government
Sponsored Agency Obligations
(cost $1,847,424,776) 1,823,214,179
SOVEREIGN DEBT OBLIGATIONS-36.0%
Argentina-1.6%
Republic of Argentina
Zero coupon, 12/15/35(c) ARS 4,423 111,159
0.63%, 12/31/38(c) 1,285 184,182
4.889%, 8/03/12 FRN(c) U.S.$ 22,839 21,105,406
5.83%, 12/31/33(c) ARS 1,420 523,240
7.00%, 3/28/11(c) U.S.$ 195 180,949
7.82%, 12/31/33(c) EUR 5,763 6,274,971
8.28%, 12/31/33(c) U.S.$ 446 398,294
--------------
28,778,201
ACM INCOME FUND o 9
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Brazil-9.4%
Brazilian Real Structured Notes
Zero coupon, 9/20/07(d) BRL 120,551 $ 46,928,566
Zero coupon, 1/03/08(d) 59,180 22,111,150
Zero coupon, 1/05/09(d) 76,692 24,661,502
Zero coupon, 1/05/10(d) 180,614 49,883,581
Republic of Brazil
7.125%, 1/20/37(b)(c) U.S.$ 3,865 3,561,597
8.00%, 1/15/18(c) 1,144 1,186,900
8.25%, 1/20/34(c) 6,408 6,673,932
8.875%, 10/14/19-4/15/24(c) 9,796 10,794,870
12.50%, 1/05/16(c) BRL 13,899 6,288,850
--------------
172,090,948
Bulgaria-0.0%
Republic of Bulgaria
8.25%, 1/15/15(d) U.S.$ 346 389,769
Colombia-0.7%
Republic of Colombia
10.75%, 1/15/13(c) 1,239 1,454,586
11.75%, 3/01/10(c) COP 14,720,000 5,937,929
11.75%, 2/25/20(c) U.S.$ 4,239 5,542,492
--------------
12,935,007
Costa Rica-0.0%
Costa Rican Colon Structured Notes
Zero coupon, 1/12/07(d) CRC 226,359 415,440
Republic of Costa Rica
8.05%, 1/31/13(d) U.S.$ 195 204,750
8.11%, 2/01/12(d) 227 238,350
--------------
858,540
Dominican Republic-0.0%
Dominican Peso Structured Notes
Zero coupon, 10/30/06(d) DOP 3,424 99,349
Zero coupon, 12/11/06(d) 13,100 373,800
Zero coupon, 3/12/07(d) 3,936 108,024
Dominican Republic
9.50%, 9/27/11(d) U.S.$ 229 245,896
--------------
827,069
Ecuador-0.3%
Republic of Ecuador
9.00%, 8/15/30(d)(e) 5,601 5,418,968
9.375%, 12/15/15(d) 348 341,910
--------------
5,760,878
El Salvador-0.0%
Republic of El Salvador
7.625%, 9/21/34(d) 527 541,493
7.65%, 6/15/35(d) 369 353,318
--------------
894,811
10 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
France-0.0%
French Treasury Note
3.00%, 1/12/10(c) EUR 600 $ 748,335
Indonesia-0.6%
Indonesian Rupiah Structured Notes
11.00%, 10/15/14(d) IDR 2,504,025 250,570
11.00%, 11/18/20(d) 3,553,512 331,837
12.90%, 6/17/22(d) 2,102,200 215,786
14.00%, 6/17/09(d) 4,000,000 443,545
14.25%, 6/19/13(d) 80,000,000 9,169,673
Republic of Indonesia
6.75%, 3/10/14(d) U.S.$ 565 550,875
6.875%, 3/09/17(d) 269 257,568
7.25%, 4/20/15(d) 362 358,923
8.50%, 10/12/35(d) 251 264,805
--------------
11,843,582
Jamaica-0.0%
Government of Jamaica
10.625%, 6/20/17(c) 207 225,112
Lebanon-0.1%
Lebanese Republic
7.875%, 5/20/11(d) 420 428,400
10.125%, 8/06/08(d) 875 927,500
11.625%, 5/11/16(d) 120 150,480
--------------
1,506,380
Mexico-6.3%
Mexican Bonos
8.00%, 12/24/08(c) MXN 16,890 1,486,275
9.00%, 12/20/12(c) 565,573 50,292,513
10.00%, 12/05/24(c) 515,531 47,670,346
United Mexican States
6.375%, 1/16/13(c) U.S.$ 2,626 2,619,435
7.50%, 1/14/12(c) 775 818,787
8.00%, 9/24/22(c) 2,170 2,414,125
8.125%, 12/30/19(c) 3,775 4,256,313
9.875%, 2/01/10(c) 2,180 2,452,500
11.375%, 9/15/16(c) 1,201 1,630,358
--------------
113,640,652
Nigeria-0.1%
Central Bank of Nigeria
6.25%, 11/15/20(c) 2,000 1,992,600
ACM INCOME FUND o 11
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Panama-0.2%
Republic of Panama
6.70%, 1/26/36(c) U.S.$ 679 $ 601,934
7.125%, 1/29/26(c) 973 921,918
7.25%, 3/15/15(c) 75 75,750
8.875%, 9/30/27(c) 372 418,128
9.375%, 7/23/12-4/01/29(c) 761 868,970
--------------
2,886,700
Peru-0.7%
Peru Bono Soberano
7.84%, 8/12/20(c) PEN 1,250 372,912
8.60%, 8/12/17(c) 7,350 2,324,312
9.91%, 5/05/15(c) 1,600 553,392
Republic of Peru
7.35%, 7/21/25(c) U.S.$ 1,273 1,215,715
8.375%, 5/03/16(c) 3,928 4,202,960
8.75%, 11/21/33(c) 2,669 2,929,228
9.875%, 2/06/15(c) 557 647,513
--------------
12,246,032
Philippines-1.3%
Republic of Philippines
7.75%, 1/14/31(c) 4,441 4,352,180
8.25%, 1/15/14(c) 1,113 1,145,277
8.375%, 2/15/11(c) 84 86,940
8.875%, 3/17/15(c) 3,135 3,359,153
9.00%, 2/15/13(c) 450 471,375
9.50%, 2/02/30(c) 4,112 4,615,720
9.875%, 1/15/19(c) 920 1,060,300
10.625%, 3/16/25(c) 6,182 7,634,770
--------------
22,725,715
Poland-0.0%
Poland Government Bond
6.25%, 10/24/15(c) PLN 2,036 665,577
Russia-5.0%
Russian Federation
5.00%, 3/31/30(d)(e) U.S.$ 78,437 83,143,220
11.00%, 7/24/18(d) 490 674,975
Russian Ministry of Finance
3.00%, 5/14/08-5/14/11(c) 6,690 6,253,612
--------------
90,071,807
South Korea-2.2%
Korean Won Structured Notes
5.25%, 12/10/10-12/11/10(d) KRW 36,649,060 39,148,512
Spain-0.0%
Kingdom of Spain
5.25%, 4/06/29(c) GBP 109 214,822
12 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Turkey-4.8%
Republic of Turkey
6.875%, 3/17/36(c) U.S.$ 953 $ 790,990
7.00%, 6/05/20(c) 1,430 1,278,420
7.375%, 2/05/25(c) 587 525,365
11.00%, 1/14/13(c) 1,860 2,104,590
11.50%, 1/23/12(c) 860 979,540
11.75%, 6/15/10(c) 623 697,760
11.875%, 1/15/30(c) 208 282,672
Turkish Lira Structured Notes
Zero coupon, 1/25/07(d) TRY 914 515,024
Zero coupon, 6/28/07(d) 153,757 79,393,605
--------------
86,567,966
Ukraine-0.1%
Government of Ukraine
6.875%, 3/04/11(d) U.S.$ 302 292,185
7.65%, 6/11/13(d) 387 386,613
11.00%, 3/15/07(d) 320 325,456
--------------
1,004,254
United Kingdom-1.3%
United Kingdom Gilt
4.00%, 3/07/09(c) GBP 8,666 15,702,740
4.25%, 6/07/32-3/07/36(c) 1,755 3,183,703
4.75%, 9/07/15-3/07/20(c) 264 490,143
5.00%, 9/07/14-3/07/25(c) 1,264 2,468,952
8.00%, 6/07/21(c) 205 513,658
8.75%, 8/25/17(c) 203 505,691
--------------
22,864,887
Uruguay-0.3%
Republic of Uruguay
7.50%, 3/15/15(c) U.S.$ 4,120 3,944,900
7.875%, 1/15/33 PIK(c) 425 384,819
8.00%, 11/18/22(c) 334 319,805
9.25%, 5/17/17(c) 739 791,839
--------------
5,441,363
Venezuela-1.0%
Republic of Venezuela
5.75%, 2/26/16(c) 1,847 1,643,830
6.09%, 4/20/11 FRN(d) 420 416,556
7.00%, 12/01/18(d) 1,957 1,878,720
8.50%, 10/08/14(c) 612 647,190
9.25%, 9/15/27(c) 5,895 6,920,730
10.75%, 9/19/13(c) 4,904 5,855,376
13.625%, 8/15/18(c) 522 741,240
--------------
18,103,642
Total Sovereign Debt Obligations
(cost $591,142,630) 654,433,161
ACM INCOME FUND o 13
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-10.6%
Corporate Debt - High Yield
Obligations-6.6%
Allied Domecq Finance PLC
6.625%, 4/18/11(c) GBP 50 $ 95,309
Antenna TV SA
7.25%, 2/15/15(d) EUR 10 11,607
Ardagh Glass Finance BV
8.875%, 7/01/13(d) 3 3,338
Associated Materials Inc.
11.25%, 3/01/14(c)(f)* U.S.$ 12,545 7,558,362
AT&T Corp.
9.75%, 11/15/31(c) 1,000 1,148,103
Banco BMG SA
9.15%, 1/15/16(d) 400 392,000
C&M Finance LTD
8.10%, 2/01/16(d) 1,690 1,613,950
Central European Distribution Corp.
8.00%, 7/25/12(d) EUR 78 107,129
Chaoda Modern Agriculture
7.75%, 2/08/10(d) U.S.$ 423 416,655
Charter Communications Holdings
11.00%, 10/01/15(c) 4,009 3,507,875
11.75%, 5/15/14(c)(f)* 10,000 6,300,000
Citigroup (JSC Severstal)
9.25%, 4/19/14(d) 230 238,602
Cognis GmbH
9.50%, 5/15/14(d) EUR 5 7,035
Deutsche Bank AG for Gazstream SA
5.625%, 7/22/13(d) U.S.$ 230 221,568
Digicel, Ltd.
9.25%, 9/01/12(d) 865 903,925
Eircom Funding
8.25%, 8/15/13(c) EUR 10 14,245
Evraz Group SA
8.25%, 11/10/15(d) U.S.$ 5,502 5,350,695
Fairfax Financial Holdings Ltd.
8.30%, 4/15/26(c)* 5,000 3,925,000
Ford Motor Credit Co.
4.95%, 1/15/08(c) 152 143,087
6.625%, 6/16/08(c) 454 432,114
7.00%, 10/01/13(c) 1,500 1,290,957
Freeport-McMoran Copper & Gold, Inc.
10.125%, 2/01/10(c) 500 530,625
Gallery Capital
10.125%, 5/15/13(d) 200 187,164
Gazprom OAO
9.625%, 3/01/13(d) 3,180 3,635,125
14 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
General Motors Acceptance Corp.
6.75%, 12/01/14(c)* U.S.$ 10,000 $ 9,288,200
6.875%, 9/15/11(c) 3,960 3,778,474
8.00%, 11/01/31(c)* 4,000 3,844,600
Hawaiian Telecom Communications, Inc.
12.50%, 5/01/15(c)* 4,940 5,174,650
Heckler & Koch GmbH
9.25%, 7/15/11(d) EUR 5 6,715
Hertz Corporation
10.50%, 1/01/16(d)* U.S.$ 5,000 5,300,000
Inmarsat Finance PLC
10.375%, 11/15/12(c)(f) 6,475 5,511,844
Kazkommerts International BV
8.50%, 4/16/13(d) 325 333,125
Kyivstar
7.75%, 4/27/12(d) 100 96,375
10.375%, 8/17/09(d) 200 212,500
Legrand S.A.
8.50%, 2/15/25(c) 10 11,425
Mobifon Holdings BV
12.50%, 7/31/10(c) 5,205 5,894,663
Mobile Telesystems Finance S.A.
9.75%, 1/30/08(d)* 1,185 1,222,031
NCL Corp.
10.625%, 7/15/14(c) 3,845 3,777,713
Noble Group Ltd.
6.625%, 3/17/15(d) 560 485,439
NRG Energy Inc.
7.25%, 2/01/14(c) 5 4,875
7.375%, 2/01/16(c) 15 14,625
Paxson Communications Corp.
11.318%, 1/15/13 FRN(d) 6,000 6,015,000
Quality Distribution LLC
9.00%, 11/15/10(c) 1,775 1,630,781
Rainbow National Services LLC
10.375%, 9/01/14(d) 2,500 2,768,750
Reliant Energy Inc.
9.50%, 7/15/13(c) 4,800 4,824,000
R H Donnelley Corp.
6.875%, 1/15/13(d) 935 860,200
R H Donnelley Finance Corp. III
6.875%, 1/15/13(d) 1,706 1,569,520
8.875%, 1/15/16(d) 2,695 2,718,581
Rural Cellular Corp.
9.75%, 1/15/10(c)* 4,500 4,483,125
Russian Standard Finance SA
7.50%, 10/07/10(d) 386 359,945
Select Medical Corp.
10.82%, 9/15/15 FRN(d)* 5,000 4,550,000
SGL Carbon Luxembourg SA
8.50%, 2/01/12(d) EUR 10 13,878
ACM INCOME FUND o 15
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
SunGard Data Systems, Inc.
9.125%, 8/15/13(d) U.S.$ 3,500 $ 3,631,250
Tyumen Oil Co.
11.00%, 11/06/07(d) 90 94,680
Unibanco
8.70%, 2/11/10(d) BRL 4,290 1,814,817
Willis Group N America
5.125%, 7/15/10(c) U.S.$ 500 482,298
Yioula Glassworks SA
9.00%, 12/01/15(d) EUR 253 335,735
Total Corporate Debt-High Yield
Obligations (cost $123,027,250) 119,144,284
Corporate Debt-High Grade
Obligations-4.0%
ABB International Finance LTD
4.625%, 6/06/13(c) 58 73,126
Aegon NV
6.125%, 12/15/31(c) GBP 26 53,681
AK Steel Corp.
7.875%, 2/15/09(c)* U.S.$ 5,000 4,975,000
America Movil S.A. de C.V.
6.375%, 3/01/35(c) 104 90,399
AMP Group Finance Services
7.125%, 8/06/19(c) GBP 50 95,014
AMP UK Finance Services
6.375%, 11/17/10(c) 110 208,305
Aries Vermogensverwaltng
9.60%, 10/25/14(d) U.S.$ 11,750 14,591,150
Australia & New Zealand Banking
Group Ltd.
4.875%, 12/22/08(c) GBP 106 194,817
Bank of Scotland Capital Funding
8.117%, 5/31/10(d)(g) 90 181,225
Barclays Bank
8.55%, 6/15/11(d) U.S.$ 638 703,524
9.875%, 5/12/08(c) GBP 195 389,044
Berkley W R Corp.
6.15%, 8/15/19(c) U.S.$ 100 95,159
BMW U.S. Capital Corp.
4.625%, 11/28/08(c) GBP 60 109,486
British Sky Broadcasting PLC
7.75%, 7/09/09(c) 94 184,134
British Telecommunications PLC
8.625%, 3/26/20(c) 34 75,907
BSKYB Finance UK PLC
5.625%, 10/15/15(d) U.S.$ 350 331,465
5.75%, 10/20/17(d) GBP 50 89,997
Capital One Bank
6.50%, 6/13/13(c) U.S.$ 1,200 1,227,097
16 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Centex Corp.
7.50%, 1/15/12(c) U.S.$ 200 $ 208,830
CIT Group, Inc.
5.50%, 12/15/08(c) GBP 175 324,356
Citigroup, Inc.
5.50%, 11/18/15(c) 85 159,176
5.875%, 7/01/24(c) 32 62,673
Clear Channel Communications, Inc.
5.75%, 1/15/13(c) U.S.$ 220 206,453
Columbia/HCA HealthCare Corp.
6.25%, 2/15/13(c) 175 163,410
7.58%, 9/15/25(c) 630 586,767
7.69%, 6/15/25(c) 355 335,471
Comcast Corp.
4.95%, 6/15/16(c) 1,400 1,247,666
Comerica Bank
8.375%, 7/15/24 2,000 2,261,076
Countrywide Home Loan
5.875%, 12/15/08(c) GBP 53 98,752
DaimlerChrysler NA Holding
7.50%, 12/07/06(c) 210 391,908
Danske Bank A/S
5.563%, 3/16/17(c) 46 83,330
Duke Capital Corp.
6.25%, 2/15/13(c) U.S.$ 1,500 1,514,448
Emap PLC
6.25%, 12/09/13(c) GBP 124 230,324
Embarq Corp.
7.082%, 6/01/16(c) U.S.$ 1,202 1,195,397
Farmers Exchange Capital
7.05%, 7/15/28(d) 200 191,373
Farmers Insurance Exchange
8.625%, 5/01/24(d) 250 277,383
FirstEnergy Corp.
6.45%, 11/15/11(c) 243 247,258
7.375%, 11/15/31(c) 491 526,770
Foodcorp Ltd.
8.875%, 6/15/12(d) EUR 194 259,302
FP Finance PLC
9.125%, 11/25/06(d)(g) GBP 60 112,462
Friends Provident PLC
6.292%, 7/01/15(c) 127 232,831
General Electric Capital Corp.
5.375%, 12/18/40(c) 41 79,779
Goldman Sachs Group Inc.
6.125%, 2/14/17(c) 45 86,441
HSBC Bank USA
4.625%, 4/01/14(c) U.S.$ 1,000 916,863
HSBC Holdings PLC
6.50%, 5/02/36(c) 1,600 1,572,925
ACM INCOME FUND o 17
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
ILFC E-Capital Trust I
5.90%, 12/21/65(d)(g)* U.S.$ 650 $ 633,623
ING Bank NV
7.00%, 10/05/10(c) GBP 95 186,171
Inter-American Development Bank
9.75%, 5/15/15(c) 56 138,474
International Lease Finance Corp.
3.50%, 4/01/09(c) U.S.$ 496 468,027
Investec Finance PLC
7.75%, 3/01/16(c)(g) GBP 83 162,713
Ipalco Enterprises Inc.
8.375%, 11/14/08(c) U.S.$ 100 102,750
J.P. Morgan Chase & Co.
6.625%, 3/15/12 1,400 1,449,566
Legal & General Finance PLC
5.875%, 4/05/33(c) GBP 26 52,503
Liberty Mutual Group Inc.
5.75%, 3/15/14(d) U.S.$ 170 159,676
Lloyds TSB Capital
7.834%, 2/07/15(c)(g) GBP 49 102,351
10.625%, 10/21/08(c) 134 276,840
Marks & Spencer PLC
5.625%, 3/24/14(c) 89 162,073
6.250%, 1/23/07(c) 23 42,702
MBNA Europe Funding PLC
6.00%, 11/12/10(c) 70 132,811
Merrill Lynch & Co.
6.00%, 2/17/09(c) U.S.$ 100 100,664
Mizuho Finance
5.79%, 4/15/14(d) 100 97,901
MM02 PLC
7.625%, 1/25/12(c) GBP 106 214,070
MMG Fiduciary (AES EL Salvador)
6.75%, 2/01/16(d) U.S.$ 350 322,438
Morgan Stanley
5.125%, 11/30/15(c) GBP 100 178,425
Nationwide Building Society
5.25%, 2/12/18(c)(g) 65 118,790
Northern Rock PLC
5.75%, 2/28/17(c)(e) 169 315,768
Oracle Corp. / Ozark Holding Inc.
5.25%, 1/15/16(c) U.S.$ 980 917,780
PanAmSat Corp.
10.375%, 11/01/14(c)(f) 8,405 6,212,892
Philip Morris
7.75%, 1/15/27(c) 1,900 2,131,950
Prudential PLC
6.125%, 12/19/31(c) GBP 27 53,179
Red Arrow Intl Leasing
8.375%, 3/31/12(c) RUB 12,500 470,548
18 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Resolution PLC
6.5864%, 4/25/16(c) GBP 50 $ 89,129
Resona Bank Ltd.
4.125%, 9/27/12(d) EUR 67 81,546
5.85%, 4/15/16(d) U.S.$ 138 128,392
Resona Preferred Global Securities
7.191%, 7/30/15(d) 160 160,494
Rexam PLC
7.125%, 3/27/09(c) GBP 58 111,242
Rogers Cable, Inc.
5.50%, 3/15/14(c) U.S.$ 360 319,500
Royal & Sun Alliance Insurance
7.387%, 12/31/10(c) 117 231,849
8.50%, 12/08/14(c)(g) GBP 34 71,217
Santander Central Hispano Issue Ltd.
6.80%, 11/29/10(c) 83 161,715
7.25%, 12/07/11(c) 70 139,870
SBC Jersey
8.75%, 12/18/25(c) 87 228,499
SLM Student Loan Trust
5.15%, 9/17/15(d) 100 183,984
South Wales Electricity
9.25%, 11/09/20(c) 19 47,591
Southern Peru Copper Corp.
6.375%, 7/27/15(c) U.S.$ 100 95,602
Sprint Capital Corp.
8.75%, 3/15/32(c)* 5,663 6,829,023
Standard Chartered Bank
6.75%, 4/27/09(c) GBP 100 191,438
Svenska Handelsbanken
6.125%, 3/04/09(c) 169 317,582
TCNZ Finance LTD.
6.125%, 12/12/08(c) 60 112,862
Telekom Finanzmanagement
5.00%, 7/22/13(c) EUR 1,174 1,511,666
Tengizchevroil Fin Co
6.124%, 11/15/14(d) U.S.$ 2,172 2,098,695
Time Warner Entertainment Co. LP
8.375%, 3/15/23(c) 145 161,236
TYCO International Group SA
6.00%, 11/15/13(c) 140 138,697
6.50%, 11/21/31(c) GBP 1,585 3,105,401
Union Carbide Corp.
7.75%, 10/01/96(c) U.S.$ 1,785 1,780,311
Vodafone Group PLC
5.625%, 12/04/25(c) GBP 59 105,372
6.250%, 7/10/08(c) 47 88,495
Wachovia Cap Trust III
5.80%, 3/15/11(c) U.S.$ 552 535,662
WellPoint Inc.
5.85%, 1/15/36(c) 83 74,167
ACM INCOME FUND o 19
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Western Power Distribution LLC
5.875%, 3/25/27(c) GBP 30 $ 58,017
Westpac Banking Corp.
5.875%, 4/29/18(c) 60 113,794
WMC Finance USA
5.125%, 5/15/13(c) U.S.$ 500 478,661
WPP Finance Corp.
5.875%, 6/15/14(c) 180 174,414
Yorkshire Power Finance
7.25%, 8/04/28(c) GBP 86 188,374
Zurich Capital Trust
8.376%, 6/01/37(d) U.S.$ 253 267,452
Zurich Finance PLC
6.625%, 10/02/22(c)(g) GBP 47 90,785
Total Corporate Debt-High Grade
Obligations
(cost$72,487,651) 72,919,373
Total Corporate Debt Obligations
(cost $195,514,901) 192,063,657
BANK LOANS-5.2%
Advantage Sales
7.22%, 3/29/13 U.S.$ 998 986,278
Alion Science and Technology
Corporation
5.50%, 12/31/11 1,000 997,500
Alon USA Energy, Inc.
2.50%, 5/18/13 1,000 1,005,630
American Safety Razor Company
7.97%, 8/28/12 1,392 1,392,083
Amscan 1TL
8.19-8.30%,12/21/12 499 496,256
Atlantic Broadband Finance, LLC
7.99%, 6/30/11 998 1,013,709
Audatex North America, Inc.
7.30%, 4/13/13 375 378,750
Basell TLB
7.73%, 9/30/15 500 505,160
Basell TLC
8.23%, 9/30/16 500 505,160
Beverly Enterprises
7.96-8.25%, 7/24/11 1,247 1,251,551
Blockbuster TLB
8.48-9.32%, 8/20/11 1,025 1,024,943
Bluegrass Container Company LLC
5.00%, 6/30/13 1,000 1,010,000
Builders FirstSource, Inc.
7.49%, 7/11/11 178 178,222
Burlington Coat Factory Warehouse
Corporation
7.43-7.53%, 5/28/13 998 971,136
20 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Butler Animal Health Supply, LLC
7.44%, 6/01/11 U.S.$ 1,980 $ 1,980,000
Cablevisions TLB
6.74-6.99%, 3/14/13 499 495,882
Calgen 1TL Ommerc BRL SC
8.38%, 4/01/09 500 510,535
Cellnet Technology, Inc.
8.50%, 4/22/12 955 959,361
Cebridge Conn Assets Ale Ln
10.13%, 10/01/13 2,000 1,985,000
Cebridge Conn Lien 2 Tranche A
4.50%, 4/30/14 1,250 1,204,163
Cebridge Conn PIK
6.00%, 4/30/14 2,500 2,379,175
Cebridge Conn TLB
7.38%, 10/01/13 1,000 993,750
Cheniere LNG Holdings, LLC
8.25%, 9/30/12 1,489 1,496,655
CII Carbon, LLC
7.38%, 8/18/12 990 990,000
Cognis Deutschland GMBH & Co.
10.03%, 11/10/13 1,000 1,015,630
Consolidated Communications, Inc.
6.93-7.25%, 10/14/11 1,330 1,330,798
Delphi Corp TL JP PR
13.75%, 6/14/11 1,500 1,547,820
Doubleclick, Inc.
9.17%, 6/14/12 781 788,817
DynCorp International LLC
7.81-8.31%, 2/08/11 988 987,500
Eastman-Kodak TLB
7.33-7.70%, 10/18/12 995 991,952
F & W Publications
12.32%, 1/12/13 500 502,500
Fender Musical 2TL
11.12%, 9/30/12 500 501,250
Ferro Corporation
8.53%, 6/06/12 400 400,000
FHC Health Systems, Inc.
6.00%, 6/30/08 1,000 1,030,000
Georgia Pacific TLC
3.00%, 2/14/14 1,000 1,007,710
Graham Packaging Company, L.P.
9.75%, 3/04/12 939 948,103
Harlan TL
8.00-9.50%, 12/19/11 498 498,744
Hawaiian Telecom
Communications, Inc.
7.75%, 10/31/12 998 1,001,360
Hertz Corp DDW
7.38%, 12/21/12 11 11,324
ACM INCOME FUND o 21
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Hertz Corp LOC
7.67%, 12/21/12 U.S.$ 33 $ 33,341
Hertz Corp TL
1.13%, 12/21/12 226 226,783
Hil Operating TLC
10.68-11.26%, 6/30/10 500 502,750
HIT Entertainment, Inc.
7.17%, 8/05/12 995 998,731
Jarden Corporation
7.50%, 1/01/12 903 899,325
John Maneely CTL
8.09%, 3/24/13 550 552,294
Keystone Automotive TL
7.99-9.75%, 12/30/12 998 996,253
Kranson Industries, Inc.
8.10%, 7/31/11 932 933,201
La Paloma Generating Company, LLC
7.10-7.25%, 8/16/12 1,926 1,916,554
London Arena W TLB
8.78%, 1/31/12 1,746 1,761,999
LPL Holdings TLB GS PR
8.13-8.75%, 6/28/13 1,493 1,505,559
Maax, Inc.
8.13-8.50%, 6/01/11 1,731 1,679,442
MetroPCS Wireless, Inc.
9.50%, 5/03/11 2,200 2,251,326
MGM Holdings II
7.75%, 3/15/12 2,494 2,501,032
Motorsport Aftermarket Group, Inc.
8.50%, 12/31/11 1,468 1,473,236
Mueller Group LLC
7.36-10.12%, 10/30/12 2,046 2,054,899
MultiPlan Merger Corporation
7.50%, 5/31/13 1,461 1,453,651
National Renal Institutes
7.42-7.53%, 3/31/13 850 847,875
NewPage Corp.
8.50%, 4/15/11 776 778,010
North Las Vegas
8.25-12.50%, 4/20/11 300 299,500
NRG Funded LOC
7.50%, 1/03/13 138 137,939
NRG TLB
7.23%, 1/06/13 611 611,724
PanAmSat Corporation
7.18%, 7/01/11 978 977,898
Plumpoint 2NL PIK
10.75%, 9/15/14 1,788 1,756,943
Prestige Brands, Inc.
7.23-7.66%, 4/05/11 2,652 2,658,540
Rainbow National Services LLC
10.00%, 3/31/12 2,963 2,980,097
22 o ACM INCOME FUND
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Rayovac Corporation
8.08-8.44%, 2/07/12 U.S.$ 2,349 $ 2,354,259
Reliant Energy, Inc.
7.47%, 12/22/10 181 180,902
Riverside Energy Center
9.38%, 6/22/11 1,603 1,643,024
Rocky Mountain Energy Center, LLC
5.03-9.38%, 6/22/11 1,236 1,267,408
Sealy Mattress Company
6.98-7.08%, 4/15/13 1,575 1,575,615
Select Personal Services TL
4.50%, 6/30/12 1,000 990,000
SemCrude, L.P.
7.50-7.58%, 3/16/11 812 814,091
Sensata Technology
6.86%, 4/26/13 1,000 993,540
Smurfit Stone Container
7.38-7.56%, 10/01/10 349 350,193
7.38-7.56%, 10/01/11 798 800,710
SSA Global TL
7.49%, 9/28/11 1,489 1,485,028
Stewart Enterprises
4.00-7.28%, 11/01/11 403 402,737
Stratus Technologies 2LT
7.42%, 3/28/12 1,500 1,447,500
Swett & Crawford 2LL
11.83%, 11/10/12 500 500,000
Trinidad Drilling
7.61%, 4/13/11 998 998,333
UAL
8.62-9.12%, 2/01/12 250 252,605
Universal City Development
Partners, Ltd
7.07-7.50%, 6/09/11 980 981,637
UPC Holdings TLJ
7.11%, 3/31/13 500 498,815
UPC Holdings TLK
7.11%, 12/31/13 500 499,166
Vanguard Car Rental USA Holding, Inc.
8.32%, 5/15/13 1,000 1,001,250
Venetian Maca TLB
1.35-8.10%, 2/01/13 667 667,500
Vertafore Inc.
7.73-7.85%, 1/31/12 259 260,284
Visteon Corporation
8.18%, 5/31/13 1,000 999,380
Wide Open West Finance, LLC
10.23%, 5/01/14 1,000 1,004,500
WMG Acquisitions Corporation
7.21-7.32%, 3/22/11 1,424 1,424,665
ACM INCOME FUND o 23
Shares or
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Xerium Technology TLB
7.75%, 5/18/12 U.S.$ 746 $ 743,378
Total Bank Loans
(cost $94,257,113) 94,199,829
NON-CONVERTIBLE-PREFERRED STOCK-0.1%
MetLife, Inc.
6.50%(c)
(cost $1,024,000) 40,000 985,200
CONVERTIBLE-PREFERRED STOCK-0.0%
UBS Capital VIII
6.35%(c)
(cost $975,000) 39,000 895,157
WARRANTS(h)-0.0%
Central Bank of Nigeria
Warrants, expiring 11/15/20(c) 4,500 675,000
Republic of Venezuela
Warrants, expiring 4/15/20 1,785 0
Total Warrants
(cost $0) 675,000
SHORT-TERM INVESTMENTS-13.2%
Repurchase Agreement-8.4%
Merrill Lynch & Co.
5.18%, 6/30/06, due 7/03/06 in
the amount of $151,800,000
(collateralized by $154,260,000
FHLMC, 5.125%, 10/24/07; value-
$151,800,000)
(cost $151,800,000) U.S.$ 151,800 151,800,000
Time Deposit-0.8%
State Street
4.60%, 7/03/06
(cost $15,200,000) 15,200 15,200,000
Canada Government Treasury
Obligation-0.0%
Canada Government Treasury Bill
Zero coupon, 8/10/06(c)
(cost $557,244) CAD 630 561,672
24 o ACM INCOME FUND
Shares or
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
U.S. Treasury Obligations-4.0%
U.S. Treasury Bills
Zero coupon, 7/06/06(a) U.S.$ 57,000 $ 56,980,791
Zero coupon, 8/10/06(a) 4,000 3,980,468
Zero coupon, 8/31/06(a) 6,000 5,953,488
Zero coupon, 9/21/06(i) 6,000 5,936,220
(cost $72,830,152) 72,850,967
Total Short-Term Investments
(cost $240,387,396) 240,412,639
Total Investments Before Security
Lending Collateral-165.4%
(cost $2,970,725,816) 3,006,878,822
INVESTMENT OF CASH COLLATERAL FOR
SECURITIES LOANED-1.9%
Short-Term Investment
UBS Private Money Market Fund, LLC
5.11%
(cost $34,014,929) 34,014,929 34,014,929
Total Investments-167.3%
(cost $3,004,740,745) 3,040,893,751
Other assets less liabilities-(67.3%) (1,223,723,946)
Net Assets-100.0% $1,817,169,805
FINANCIAL FUTURES CONTRACTS SOLD (see Note C)
Value at Unrealized
Number of Expiration June 30, Appreciation/
Type Contracts Month Original Value 2006 (Depreciation)
-----------------------------------------------------------------------------------------------------
5 Year Swap September
Futures 4,289 2006 $445,439,673 $443,509,406 $ 1,930,267
U.S. Treasury 10 Year September
Futures 4,111 2006 432,708,002 431,076,891 1,631,111
U.S. Treasury 30 Year September
Futures 180 2006 19,120,481 19,198,125 (77,644)
------------
$ 3,483,734
ACM INCOME FUND o 25
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 7/14/06 35,225 $ 26,405,761 $ 26,170,373 $ (235,388)
British Pound,
settling 7/18/06 491 928,903 907,781 (21,122)
settling 7/24/06 211 389,080 390,990 1,910
settling 8/09/06 63 117,035 116,621 (414)
settling 8/16/06 726 1,340,930 1,344,590 3,660
Canadian Dollar,
settling 7/10/06 35,942 32,672,570 32,207,561 (465,009)
Euro,
settling 7/18/06 14,573 18,692,350 18,664,275 (28,075)
Japanese Yen,
settling 7/31/06 4,316,830 38,702,428 37,903,385 (799,043)
Mexican Peso,
settling 7/24/06 21,687 1,895,326 1,909,662 14,336
Polish Zloty,
settling 8/09/06 475 154,086 149,828 (4,258)
South African Rand,
settling 7/28/06 3,261 496,211 453,936 (42,275)
South Korean Won,
settling 7/21/06 19,544,302 20,047,494 20,614,884 567,390
Sale Contracts:
British Pound,
settling 8/01/06 469 863,379 867,582 (4,203)
settling 8/16/06 20,414 37,721,030 37,789,611 (68,581)
Euro,
settling 7/18/06 766 988,120 980,991 7,129
Mexican Peso,
settling 7/24/06 869,347 76,542,972 76,549,581 (6,609)
settling 8/17/06 407,689 35,468,838 35,853,440 (384,602)
Peruvian Nuevo Sol,
settling 7/12/06 1,050 321,541 321,639 (98)
settling 8/21/06 1,430 436,908 437,802 (894)
Polish Zloty,
settling 8/09/06 2,124 688,390 669,436 18,954
South Korean Won,
settling 7/21/06 19,742,597 20,554,500 20,824,042 (269,542)
settling 8/21/06 17,349,217 18,426,500 18,317,254 109,246
settling 9/18/06 18,408,728 18,948,378 19,455,601 (507,223)
26 o ACM INCOME FUND
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 Colombia
8.375%, 2/15/27 1,900 3.02% 1/20/10 $ (131,431)
Citigroup Global Markets, Inc.
Republic of Hungary
4.50%, 2/06/13 10,250 0.50 11/26/13 108,184
Citigroup Global Markets, Inc.
Republic of Hungary
4.50%, 1/29/14 10,000 0.30 10/20/15 304,134
J P Morgan Chase
Republic of Hungary
4.75%, 2/03/15 1,280 0.30 10/20/15 38,929
Sale Contracts:
Citibank N.A.
Republic of Brazil
12.25%, 3/06/30 1,910 3.09 8/20/10 134,521
Citigroup Global Markets, Inc.
Gazprom OAO
5.875-10.50%,
4/25/07-4/28/34 10,000 1.04 10/20/10 (51,552)
Citigroup Global Markets, Inc.
Republic of Brazil
12.25%, 3/06/30 1,932 1.98 4/20/07 33,752
Citigroup Global Markets, Inc.
Republic of Colombia
8.375%, 2/15/27 3,750 1.13 1/20/07 36,901
Citigroup Global Markets, Inc.
Republic of Philippines
10.625%, 3/16/25 3,360 4.95 3/20/09 327,182
Credit Suisse First Boston
Republic of Brazil
12.25%, 3/06/30 600 6.90 6/20/07 38,945
Credit Suisse First Boston
Republic of Venezuela
9.25%, 9/15/27 950 3.17 10/20/15 46,461
Deutsche Bank AG
Republic of Brazil
12.25%, 3/06/30 1,932 1.90 4/20/07 32,082
J P Morgan Chase
Gazprom OAO
5.875-10.50%,
4/25/07-4/28/34 1,380 1.04 10/20/10 (7,113)
Morgan Stanley
Republic of Brazil
12.25%, 3/06/30 4,800 3.80 8/20/06 91,894
ACM INCOME FUND o 27
REVERSE REPURCHASE AGREEMENTS (see Note C)
Interest
Broker Rate Maturity Amount
-------------------------------------------------------------------------
Barclays Securities 4.00% 12/29/06 $ 2,838,834
J.P. Morgan Securities 4.90 7/11/06 228,284,220
Merrill Lynch 4.80 7/11/06 58,728,955
Merrill Lynch 4.93 7/11/06 70,124,930
Merrill Lynch 4.95 7/11/06 34,632,288
Merrill Lynch 4.96 7/11/06 48,589,263
Merrill Lynch 4.98 7/11/06 151,595,896
Merrill Lynch 5.02 7/11/06 25,098,836
-------------
$ 619,893,222
* Represents entire or partial securities out on loan.
(a) Positions, or portion thereof, with an aggregate market value of
$980,581,178 have been segregated to collateralize the loan payable outstanding.
(b) Positions, or portion thereof, with an aggregate market value of
$628,094,601 have been segregated to collateralize reverse repurchase
agreements.
(c) Positions, or portion thereof, with an aggregate market value of
$381,580,969 have been segregated to collateralize open forward exchange
currency contracts.
(d) 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 June 30, 2006, the aggregate market value of these securities
amounted to $438,190,110 or 24.1% of net assets.
(e) Coupon changes periodically based upon a predetermined schedule. Stated
interest rate in effect at June 30, 2006.
(f) 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.
(g) Variable rate coupon, rate shown as of June 30, 2006.
(h) Non-income producing security.
(i) Positions, or portion thereof, with an aggregate market value of
$5,936,220 has been segregated to collateralize margin requirements for the
open futures contracts.
Currency Abbreviations:
ARS - Argentine Peso
BRL - Brazilian Real
CAD - Canadian Dollar
COP - Colombian Peso
CRC - Costa Rican Colon
DOP - Dominican Peso
EUR - Euro
GBP - British Pound
IDR - Indonesian Rupiah
KRW - South Korean Won
MXN - Mexican Peso
PEN - Peruvian Nuevo Sol
PLN - Polish Zloty
RUB - Russian Ruble
TRY - New Turkish Lira
U.S. $ - United States Dollar
28 o ACM INCOME FUND
Glossary of Terms:
FHLMC - Federal Home Loan Mortgage Corporation
FRN - Floating Rate Note
LOC - Letter of Credit
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.
COUNTRY BREAKDOWN
Percent of
Country Total Investments
-----------------------------------------------------
United States 75.85%
Brazil 5.74
Mexico 3.78
Russia 3.13
Turkey 2.88
South Korea 1.30
United Kingdom 1.14
Argentina 0.96
Philippines 0.76
Venezuela 0.60
Germany 0.50
Colombia 0.43
Peru 0.41
Indonesia 0.39
Luxembourg 0.35
Netherlands 0.24
Ecuador 0.19
Uruguay 0.18
Bermuda 0.17
Canada 0.16
Cayman Islands 0.15
Panama 0.11
Nigeria 0.09
Kazakhstan 0.08
Austria 0.05
Lebanon 0.05
Ukraine 0.04
Australia 0.03
Costa Rica 0.03
Dominican Republic 0.03
El Salvador 0.03
France 0.03
Ireland 0.02
Poland 0.02
Spain 0.02
Bulgaria 0.01
Greece 0.01
Jamaica 0.01
Japan 0.01
South Africa 0.01
Sweden 0.01
All data are as of June 30, 2006. The Fund's country breakdown is
expressed as a percentage of total investments and may vary over time.
See notes to financial statements.
ACM INCOME FUND o 29
STATEMENT OF ASSETS & LIABILITIES
June 30, 2006 (unaudited)
Assets
Investments in securities, at value (cost $3,004,740,745 --
including investment of cash collateral for securities
loaned of $34,014,929) $3,040,893,751(a)
Cash 124,289
Foreign cash, at value (cost $30,270,292) 30,502,716
Receivable for investments securities sold and
foreign currency transactions 78,471,740
Interest and dividends receivable 37,510,844
Unrealized appreciation on credit default swap contracts 1,192,985
Paydown receivable 753,305
Unrealized appreciation on forward exchange
currency contracts 722,625
Total assets 3,190,172,255
Liabilities
Reverse repurchase agreements 619,893,222
Loan payable 400,000,000
Payable for investment securities purchased and
foreign currency transactions 309,104,275
Payable for collateral received on securities loaned 34,014,929
Payable for variation margin on futures contracts 3,008,656
Unrealized depreciation on forward exchange
currency contracts 2,837,336
Loan interest payable 2,594,193
Advisory fee payable 1,116,353
Unrealized depreciation on credit default swap contracts 190,096
Administrative fee payable 34,856
Accrued expenses 208,534
Total liabilities 1,373,002,450
Net Assets $1,817,169,805
Composition of Net Assets
Capital stock, at par $ 2,294,363
Additional paid-in capital 2,135,583,473
Distributions in excess of net investment income (50,015,266)
Accumulated net realized loss on investments
and foreign currency transactions (309,346,234)
Net unrealized appreciation of investments
and foreign currency denominated assets and liabilities 38,653,469
--------------
$1,817,169,805
Net Asset Value Per Share--300 million shares
of capital stock authorized, $.01 par value
(based on 229,436,279 shares outstanding) $7.92
(a) Includes securities on loan with a value of $32,458,588 (see Note E).
See notes to financial statements.
30 o ACM INCOME FUND
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
Investment Income
Interest (net of foreign taxes withheld
of $11,837) $ 97,007,594
Dividends 101,335 $ 97,108,929
Expenses
Advisory fee 5,976,815
Custodian 253,353
Administrative fee 185,152
Printing 157,479
Registration fee 101,522
Transfer agency 71,191
Audit 47,213
Legal 39,901
Directors' fees 17,974
Miscellaneous 43,103
Total expenses before interest expense 6,893,703
Interest expense 21,247,517
Total expenses 28,141,220
Net investment income 68,967,709
Realized and Unrealized Gain (Loss)
on Investment and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions 7,447,907
Futures contracts 22,154,956
Written options (10,292)
Swap contracts (1,385,077)
Foreign currency transactions 6,541,843
Net change in unrealized
appreciation/depreciation of:
Investments (116,679,372)
Futures contracts 10,290,138
Swap contracts 1,032,854
Foreign currency denominated assets
and liabilities (1,404,868)
Net loss on investment and
foreign currency transactions (72,011,911)
Net Decrease in Net Assets from
Operations $ (3,044,202)
See notes to financial statements.
ACM INCOME FUND o 31
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, Year Ended
2006 December 31,
(unaudited) 2005
---------------- ----------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 68,967,709 $ 150,595,096
Net realized gain on investment
and foreign currency transactions 34,749,337 44,424,809
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities (106,761,248) (43,820,796)
Net increase (decrease) in net assets
from operations (3,044,202) 151,199,109
Dividends and Distributions to
Shareholders from
Net investment income (72,235,887) (155,530,605)
Common Stock Transactions
Reinvestment of dividends resulting in
the issuance of Common Stock 2,524,291 5,985,431
Total increase (decrease) (72,755,798) 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 $50,015,266 and $46,747,088,
respectively) $1,817,169,805 $1,889,925,603
See notes to financial statements.
32 o ACM INCOME FUND
STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2006 (unaudited)
Increase (Decrease) in Cash from
Operating Activities:
Interest and dividends received $ 69,105,709
Interest expense paid (21,027,575)
Operating expenses paid (7,075,883)
Net increase in cash from operating
activities $ 41,002,251
Investing Activities:
Purchases of long-term investments (2,439,254,113)
Proceeds from disposition of long-term
investments 2,456,273,799
Purchases of short-term investments, net (30,326,580)
Premiums received on written options (10,292)
Proceeds from swap contracts (1,385,077)
Variation margin paid on futures contracts 26,441,940
Net increase in cash from investing
activities 11,739,677
Financing Activities*:
Cash dividends paid (69,711,596)
Effect of exchange rate on cash 5,770,661
Increase in reverse repurchase
agreements 3,717,009
Net decrease in cash from financing
activities (60,223,926)
Net decrease in cash (7,481,998)
Cash at beginning of period 38,109,003
Cash at end of period $ 30,627,005
-------------------------------------------------------------------------------
Reconciliation of Net Increase in
Net Assets from Operations to
Net Increase in Cash from
Operating Activities:
Net decrease in net assets from
operations $ (3,044,202)
Adjustments:
Increase in interest and dividend
receivable $ (4,483,009)
Accretion of bond discount and
amortization of bond premium (23,520,211)
Increase in interest payable 219,942
Decrease in accrued expenses (182,180)
Net realized gain on investments
and foreign currency transactions (34,749,337)
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities 106,761,248
Total adjustments 44,046,453
Net Increase in Cash from Operating
Activities $ 41,002,251
* Non-cash financing activities not included herein consist of reinvestment
of dividends.
See notes to financial statements.
ACM INCOME FUND o 33
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
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 or on a foreign securities exchange are valued at the last
sale price at the close of the exchange or foreign securities exchange. If
there has been no sale on such day, the securities are valued at the mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
are valued using the closing settlement price or, in the absence of such a
price, the most recent quoted bid price. If there are no quotations available
for the day of valuation, the last available closing settlement price is used;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February 4,
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
34 o ACM INCOME FUND
daily basis, a recently obtained quoted price on a security; and OTC and other
derivatives are valued on the basis of a quoted bid price or spread from a
major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities.
2. 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.
ACM INCOME FUND o 35
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 Adviser, the Fund reimburses ABIS for costs relating to servicing phone
inquiries
36 o ACM INCOME FUND
on behalf of the Fund. During the six months ended June 30, 2006, the Fund made
no reimbursements to ABIS.
Under the terms of the Administrative Agreement, the Fund pays its
Administrator, Princeton Administrators, L.P., 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. Princeton Administrators, L.P. prepares financial and regulatory
reports for the Fund and provides other administrative services.
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
Purchases Sales
Investment securities (excluding
U.S. government securities) $ 353,430,872 $ 322,913,181
U.S. government securities 2,200,232,429 2,212,588,359
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding foreign currency
transactions, futures contracts, written options and swap contracts) are as
follows:
Gross unrealized appreciation $116,389,804
Gross unrealized depreciation (80,236,798)
Net unrealized appreciation $ 36,153,006
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 to the difference between the value of the contract
at the time it was opened and the time it was closed.
ACM INCOME FUND o 37
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 and 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 unexercised
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
38 o ACM INCOME FUND
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 six months ended June 30, 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 -0- -0-
Options expired (1,370) (11,782)
Options outstanding at June 30, 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.
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. 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
recor-
ACM INCOME FUND o 39
ded 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) semi-annual 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 June 30, 2006, the Fund had Sale Contracts outstanding with Maximum Payout
Amounts aggregating $30,614,000 with net unrealized appreciation of $683,073
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 credit event occurs. The Fund had Buy Contracts outstanding with a
Notional Amount of $1,900,000 with respect to the same referenced obligations
and same counterparties of certain Sale Contracts outstanding, which reduced
its obligation to make payments on Sale Contracts to $28,714,000 as of June 30,
2006.
40 o ACM INCOME FUND
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 six months ended June 30, 2006, the Fund earned drop income of $1,186,435
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 six months ended June 30, 2006, the average amount of reverse
repurchase agreements outstanding was $506,013,424 and the daily weighted
average annual interest rate was 4.45%.
NOTE D
Capital Stock
During the six months ended June 30, 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 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
ACM INCOME FUND o 41
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 June 30,
2006, the Fund had loaned securities with a value of $32,458,588 and received
cash collateral of $34,014,929, which was invested in a money market fund as
included in the accompanying portfolio of investments. For the six months ended
June 30, 2006, the Fund earned fee income of $124,580, 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 4.70% and the average borrowing was
$400,000,000 for the six months ended June 30, 2006. At June 30, 2006, the
interest rate in effect was 5.07% 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 or notes. Increases in interest
rates may cause the value of the Fund's investments to decline. Credit risk is
the risk that the issuer or guarantor of a debt security, or the counterparty
to a derivative contract, will be unable or unwilling to make timely principal
and/or interest payments, or to otherwise honor its obligations. The degree of
risk for a particular security may be reflected in its credit risk rating.
Credit risk is greater for medium quality and lower-rated securities.
Lower-rated debt securities and similar unrated securities (commonly known as
"junk bonds") have speculative elements or are predominantly speculative risks.
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
42 o ACM INCOME FUND
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 realize shareholders higher returns than if the Fund
were not leveraged, and the use of leverage techniques can add to net asset
value (NAV). 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%.
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
ACM INCOME FUND o 43
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 to be paid for the year ending December 31,
2006, will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
Distributions paid from:
Ordinary income $155,530,605 $177,629,178
Total taxable distributions 155,530,605 177,629,178
Total distributions paid $155,530,605 $177,629,178
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Accumulated capital and other losses $(346,510,828)(a)
Unrealized appreciation/(depreciation) 101,082,886(b)
Total accumulated earnings/(deficit) $(245,427,942)
(a) On December 31, 2005, the Fund had a net capital loss carryforward of
$329,808,305 of which $67,634,579 expires in the year 2006, $67,513,083 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 $48,756,242. For the year ended December
31, 2005, the Fund deferred losses on straddles of $3,495,315. Net capital
losses incurred after October 31, and within the taxable year are deemed to
arise in the first business day of the Funds next taxable year. For the year
ended December 31, 2005, the Fund deferred to January 1, 2006 post October
capital losses of $12,170,401 and currency losses of $1,036,807.
(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.
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
44 o ACM INCOME FUND
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 ("NYAGOrder"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the "Reimbursement
Fund") to compensate mutual fund shareholders for the adverse effects of market
timing attributable to market timing relationships described in the SEC Order.
According to the SEC Order, the Reimbursement Fund is to be paid, in order of
priority, to fund investors based on (i) their aliquot share of losses suffered
by the fund due to market timing, and (ii) a proportionate share of advisory
fees paid by such fund during the period of such market timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some of
the AllianceBernstein long-term, open-end retail funds, commencing January 1,
2004, for a period of at least five years; and
ACM INCOME FUND o 45
(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 Order and for other relief. On April 12, 2006, respondents' petition
was denied. On May 4, 2006, respondents appealed the court's determination.
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
46 o ACM INCOME FUND
Research & Management, Inc., certain current and former directors of the
AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin
Complaint names certain of the AllianceBernstein mutual funds as nominal
defendants. The Fund was not named as a defendant in the Aucoin Complaint. The
Aucoin Complaint was filed in the United States District Court for the Southern
District of New York by alleged shareholders of an AllianceBernstein mutual
fund. The Aucoin Complaint alleges, among other things, (i) that certain of the
defendants improperly authorized the payment of excessive commissions and other
fees from fund assets to broker-dealers in exchange for preferential marketing
services, (ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint. On July 5,
2006, plaintiffs filed a notice of appeal.
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.
ACM INCOME FUND o 47
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
Six Months
Ended Year Ended December 31,
June 30, 2006 ---------------------------------------------------------------------------
(unaudited) 2005 2004(a) 2003 2002 2001(b)
---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 8.25 $ 8.27 $ 8.39 $ 7.91 $ 7.87 $ 8.45
Income From Investment Operations
Net investment income(c) .30 .66 .67 .76 .89 .76
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions (.31) -0- (.01) .59 .07 (.11)
Net increase (decrease) in net asset
value from operations (.01) .66 .66 1.35 .96 .65
Less: Dividends and Distributions
Dividends from net investment income (.32) (.68) (.78) (.87) (.85) (.77)
Distributions in excess of net
investment income -0- -0- -0- -0- -0- (.07)
Tax return of capital -0- -0- -0- -0- (.07) -0-
Total dividends and distributions (.32) (.68) (.78) (.87) (.92) (.84)
Less: Fund Share Transactions
Dilutive effect of rights offering -0- -0- -0- -0- -0- (.32)
Offering costs charged to
paid-in-capital in excess of par -0- -0- -0- -0- -0- (.07)
Total fund share transactions -0- -0- -0- -0- -0- (.39)
Net asset value, end of period $ 7.92 $ 8.25 $ 8.27 $ 8.39 $ 7.91 $ 7.87
Market value, end of period $ 7.41 $ 8.28 $ 8.16 $ 8.58 $ 8.46 $ 7.30
Premium/(Discount) (6.44)% .36% (1.33)% 2.26% 6.95% (7.24)%
Total Investment Return
Total investment return based on:(d)
Net asset value (.18)% 8.32% 8.44% 17.66% 13.27% 3.11%
Market value (6.94)% 10.18% 4.63% 12.50% 30.60% 7.80%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $1,817,170 $1,889,926 $1,888,272 $1,904,853 $1,785,164 $1,764,895
Ratio to average net assets of:
Expenses 3.04%(f) 2.46% 1.66% 1.67% 1.87% 2.31%
Expenses, excluding interest
expense(e) .74%(f) .79% .98% 1.10% 1.26% 1.18%
Net investment income 7.45%(f) 7.99% 8.27% 9.28% 11.69% 9.33%
Portfolio turnover rate 90% 160% 139% 276% 414% 676%
Asset coverage ratio 413% 443% 492% 559% 376% 379%
Bank borrowing outstanding
(in millions) $400 $400 $400 $400 $400 $300
See footnote summary on page 49.
48 o ACM INCOME FUND
(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) As required, effective January 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide of Investment Companies, and
began amortizing premium on debt securities for financial reporting purposes
only. The effect of this change for the year ended December 31, 2001, was to
decrease net investment income per share by $.05, decrease net realized and
unrealized loss on investment transactions per share by $.05, and decrease the
ratio of net investment income to average net assets from 9.92% to 9.33%.
(c) Based on average shares outstanding.
(d) 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.
(e) Excludes net interest expense of 2.30%, 1.67%, .68%, .57%, .61% and 1.13%,
respectively, on borrowings (see Notes C and F).
(f) Annualized.
ACM INCOME FUND o 49
SUPPLEMENTAL PROXY INFORMATION
(unaudited)
The Annual Meeting of Stockholders of ACM Income Fund, Inc. ("the Fund") was
held on March 29, 2006. A description of each proposal and number of shares
voted at the meeting are as follows:
Authority
Voted For Withheld
To elect three Directors of the Fund's
common stockholders for a term of two
or three years and until his successor is
duly elected and qualifies.
Class Two (term expires 2008)
D. James Guzy 206,183,547 2,658,884
Class Three (terms expire 2009)
Marc O. Mayer 206,243,917 2,598,515
Marshall C. Turner, Jr. 206,278,193 2,564,239
50 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)
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
Princeton Administrators, L.P.
P.O. Box 9095
Princeton, NJ08543-9095
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 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.
ACM INCOME FUND o 51
ALLIANCEBERNSTEIN FAMILY OF FUNDS
-----------------------------------------
Wealth Strategies Funds
-----------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy
-----------------------------------------
Blended Style Funds
-----------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
-----------------------------------------
Growth Funds
-----------------------------------------
Domestic
Growth Fund
Mid-Cap Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
Global & International
Global Health Care Fund
Global Research Growth Fund
Global Technology Fund
Greater China '97 Fund
International Growth Fund
International Research Growth Fund*
-----------------------------------------
Value Funds
-----------------------------------------
Domestic
Balanced Shares
Focused Growth & Income Fund
Growth & Income Fund
Real Estate Investment Fund
Small/Mid-Cap Value Fund
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
-----------------------------------------
Taxable Bond Funds
-----------------------------------------
Global Government Income Trust*
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Intermediate Bond Portfolio*
Short Duration Portfolio
U.S. Government Portfolio
-----------------------------------------
Municipal Bond Funds
-----------------------------------------
National Michigan
Insured National Minnesota
Arizona New Jersey
California New York
Insured California Ohio
Florida Pennsylvania
Massachusetts Virginia
-----------------------------------------
Intermediate Municipal Bond Funds
-----------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
-----------------------------------------
Closed-End Funds
-----------------------------------------
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
-----------------------------------------
Retirement Strategies Funds
-----------------------------------------
2000 Retirement Strategy
2005 Retirement Strategy
2010 Retirement Strategy
2015 Retirement Strategy
2020 Retirement Strategy
2025 Retirement Strategy
2030 Retirement Strategy
2035 Retirement Strategy
2040 Retirement Strategy
2045 Retirement Strategy
We also offer Exchange Reserves,** which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our website at
www.alliancebernstein.com or call us at (800) 227-4618 for a current
prospectus. You should read the prospectus carefully before you invest.
* On July 8, 2005, New Europe Fund merged into International Research Growth
Fund. Prior to February 1, 2006, Global Government Income Trust was named
Americas Government Income Trust and Intermediate Bond Portfolio was named
Quality Bond Portfolio.
** An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
52 o ACM INCOME FUND
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.
ACM INCOME FUND o 53
NOTES
54 o ACM INCOME FUND
NOTES
ACM INCOME FUND o 55
NOTES
56 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-0152-0606
ITEM 2. CODE OF ETHICS.
Not applicable when filing a semi-annual report to shareholders.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable when filing a semi-annual report to shareholders.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable when filing a semi-annual report to shareholders.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable when filing a semi-annual report to shareholders.
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.
Not applicable when filing a semi-annual report to shareholders.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable when filing a semi-annual report to shareholders.
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-2(c) under the Investment Company Act of 1940, as
amended) are effective at the reasonable assurance level based on their
evaluation of these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) There were no 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 (b) (1) Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2) Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (c) Certification of Principal Executive Officer and Principal
Financial Officer Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): ACM Income Fund, Inc.
By: /s/ Marc O. Mayer
-------------------
Marc O. Mayer
President
Date: August 28, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Marc O. Mayer
-------------------
Marc O. Mayer
President
Date: August 28, 2006
By: /s/ Joseph J. Mantineo
-------------------
Joseph J. Mantineo
Treasurer and Chief Financial Officer
Date: August 28, 2006