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  **UNITED STATES SECURITIES AND EXCHANGE COMMISSION****WASHINGTON, D.C. 20549**** ****FORM 10-Q**** **   þ **QUARTERLY REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934******FORTHE QUARTER ENDED March 31, 2007******OR**   o **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934******For the transition period from                      to**                    ** **Commission file number 0-19564** **Municipal Securities Purchase, Inc.****(Exact name of registrant as specified in its charter)**   **Delaware** **13-3633082**   (State or other jurisdiction incorporation or (I.R.S. Employer Identificationorganization) No.)   **201 High Ridge Road, Stamford,**  **Connecticut** **06927** (Address of principal executive offices) (Zip Code)**(Registrants telephone number, including area code)****(203) 357-4000****SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:****None****SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:****Title of each class****Common Stock, par value $10.00 per share**Indicate by check mark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yesþ       No o.Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act. (Check one):Large accelerated filer o      Accelerated filer o      Non-accelerated filer þIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). Yes o      No þ.AtApril 26, 2007, 10 shares of voting common stock, which constitutes all of the outstandingcommon equity, with a par value of $10.00 per share were outstanding.REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q ANDIS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.  
 

 
**MUNICIPAL SECURITIES PURCHASE, INC.**         **Page**     **PART I.** **Financial Information**       Item 1. Financial Statements    Statement of Financial Position 1  Statement of Income 2  Statement of Changes in Shareowner’s Equity 3  Statement of Cash Flows 4  Notes to Unaudited Interim Financial Statements 5     Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition 6     Item 4. Controls and Procedures 7     **PART II.** **Other Information**       Item 6. Exhibits 8Signatures 9 EX-31.A: CERTIFICATION EX-31.B: CERTIFICATION EX-32: CERTIFICATIONUnless the context otherwise requires, the “Company,” “Municipal-SPI,” “We,” “Us,” or “Our” shallmean Municipal Securities Purchase, Inc.**Forward-Looking Statements**This document contains “forward-looking statements” — that is, statements related to future, notpast, events. In this context, forward-looking statements often address our expected futurebusiness and financial performance, and often contain words such as “expect,” “anticipate,”“intend,” “plan,” “believe,” “seek,” or “will.” Forward-looking statements by their natureaddress matters that are, to different degrees, uncertain. For us, particular uncertainties arisefrom the behavior of financial markets, including fluctuations in interest rates and from numerousother matters of national, regional and global scale, including those of a political, economic,business, competitive or regulatory nature. These uncertainties may cause our actual futureresults to be materially different than those expressed in our forward-looking statements. We donot undertake to update our forward-looking statements.
 

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**PART I. FINANCIAL INFORMATION****Item 1. Financial Statements****MUNICIPAL SECURITIES PURCHASE, INC.**Statement of Financial Position           **March 31,**  **December 31,**   **2007**  **2006**   (unaudited)     **Assets**        Liquidity fees receivable $106,111  $508,315 Due from GE Capital  2,890,577   2,244,661        Total assets $2,996,688  $2,752,976                 **Liabilities and Shareowner’s Equity**                 Deferred liquidity fee income $82,125  $125,022 Accounts payable and accrued expenses  64,531   9,027        Total liabilities  146,656   134,049                 Common stock, par value $10.00 per share. Authorized,issued, and outstanding 10 shares  100   100 Additional paid-in capital  822,145   822,145 Retained earnings  2,027,787   1,796,682        Total shareowner’s equity  2,850,032   2,618,927        Total liabilities and shareowner’s equity $2,996,688  $2,752,976        See accompanying notes to unaudited interim financial statements.
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**MUNICIPAL SECURITIES PURCHASE, INC.**Statement of Income(Unaudited)           **Three months ended**   **March 31**   **2007**  **2006** Liquidity fee income $444,710  $1,067,286        Total revenues  444,710   1,067,286                 General and administrative expenses  46,553   49,216 GE Capital commitment fees  15,849   38,251        Total operating expenses  62,402   87,467                 Income before provision forincome taxes  382,308   979,819                 Income tax expense:        Federal:  124,441   318,931 State and local  26,762   68,588                 Total income tax expense  151,203   387,519                 Net income $231,105  $592,300        See accompanying notes to unaudited interim financial statements.
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**MUNICIPAL SECURITIES PURCHASE, INC.**Statement of Changes in Shareowner’s EquityThree months ended March 31, 2007 and 2006(Unaudited)                       **Additional**      **Common** **Paid-in** **Retained**    **Stock** **Capital** **Earnings** **Total**Balance, December 31, 2005 $100  $822,145  $2,774,943  $3,597,188 Dividends paid          (3,000,000)  (3,000,000)Net income          592,300   592,300    Balance, March 31, 2006 $100  $822,145  $367,243  $1,189,488                     Balance, December 31, 2006 $100  $822,145  $1,796,682  $2,618,927 Net income          231,105   231,105    Balance, March 31, 2007 $100  $822,145  $2,027,787  $2,850,032    See accompanying notes to unaudited interim financial statements.
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**MUNICIPAL SECURITIES PURCHASE, INC.**Statement of Cash Flows(Unaudited)           **Three months ended**   **March 31**   **2007**  **2006** Operating activities:        Net income $231,105  $592,300 Adjustments to reconcile net income to net cashprovided by operating activities:        Change in due from GE Capital  (645,916)  2,545,239 Change in liquidity fees receivable  402,204   (182,638)Change in deferred liquidity fee income  (42,897)  6,936 Change in accounts payable and accrued expenses  55,504   38,163        Cash from operating activities  —   3,000,000          Financing activities:        Dividends paid  —   (3,000,000)       Cash used for financing activities  —   (3,000,000)         Net change in cash and cash equivalents  —   — Cash and cash equivalents at beginning of period  —   —        Cash and cash equivalents at the end of period $—  $—        See accompanying notes to unaudited interim financial statements.
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**MUNICIPAL SECURITIES PURCHASE, INC.****Notes to Unaudited Interim Financial Statements****(1)** **Business Description**   Municipal Securities Purchase, Inc. (the Company) is a wholly-owned subsidiary of GEFunding Services Inc. (the Parent), which is a wholly-owned subsidiary of GEI, Inc., andin turn, wholly owned by General Electric Capital Corporation (GE Capital), the ultimateparent of which is General Electric Company (GE). In the fourth quarter of 2003, FGICSecurities Purchase, Inc. (FGIC-SPI) changed its name to Municipal Securities Purchase,Inc. The Company provides liquidity for certain floating rate municipal securitieswhereby the Company will, under certain circumstances, purchase such securities in theevent they are tendered by the holders as permitted under the terms of the respectivebond indentures. As of March 31, 2007, the Company hadapproximately $285 million (paramount and interest) of potential obligations under such arrangements. When issued,each of the liquidity facilities had a term not exceeding five years (subject torenewal). In order to obtain funds to purchase the securities, in the event suchpurchases are necessary, the Company has entered into standby loan agreements with GECapital totaling $285 million as of March 31, 2007, under which GE Capital isirrevocably obligated to lend funds as needed for the Company to purchase thesecurities.   **Basis of Consolidation**   The preparation of financial statements in conformity with U.S. generally acceptedaccounting principles requires management to make estimates and assumptions that affectreported amounts and related disclosures. Actual results could differ from thoseestimates.   The unaudited interim financial statements of the Company contained in this reportreflect all normal recurring adjustments necessary, in the opinion of management, for afair statement of income, financial position and cash flows. The results reported inthese quarterly financial statements should not be regarded as necessarily indicative ofresults that may be expected for the entire year. We label our quarterly informationusing a calendar convention, that is, first quarter is labeled as ending March 31,second quarter as ending on June 30, and third quarter as ending on September 30. It isour longstanding practice to establish interim quarterly closing dates using a fiscalcalendar, which requires our business to close their books on a Saturday. The effectsof this practice are modest and only exist within a reporting year.   These unaudited interim financial statements should be read in conjunction with thefinancial statements and related notes included in the annual reporton Form 10-K for the year ended December 31, 2006. **(2)** **Income Taxes**   We are included in GE’s consolidated U.S. federal income tax return under anintercompany tax-sharing agreement. The provision for current tax expense includes oureffect on the consolidated return. We provide for taxes as if we filed a separatereturn.
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**Item 2.      Management’s Discussion and Analysis of Results of Operations and FinancialCondition****Results of Operations****Revenues**We provide liquidity facilities for certain floating rate municipal securities wherebywe will, under certain circumstances, purchase such securities in the event they aretendered by the holders. We earn liquidity fees from the issuers of these securities,municipal governments in the U.S., for providing the liquidity facilities.During2006 and the three months ended March 31, 2007, we did not commit to any newliquidity facilities.Weearned liquidity fees of approximately $0.4 and $1.1 million during thethree months ended March 31, 2007 and 2006, respectively. The total liquidity facilityin force as of March 31, 2007 and March 31, 2006 was approximately $285 Million and $2.5billion, respectively.**Operating Expenses**Weincurred $62,402 and $87,467 of total operating expenses during thethree monthsended March 31, 2007 and 2006, respectively. Included in total operating expenses werecommitment fees owed to GE Capital under the standby loan agreements, which are based onthe outstanding par in force on each of the liquidity facilities at a rate of 0.625basis points. Commitment fees were $15,849 and $38,251 for the three months ended March31, 2007 and 2006, respectively. The decrease in commitment fees from 2006 to 2007corresponds with the respective decrease in liquidity fees earned, which is also basedupon the par in force on each of the liquidity facilities outstanding. Total operatingexpenses also includes general and administrative expenses, which are principallycomprised of intercompany overhead expense allocation. General and administrativeexpenses were $46,553 and $49,216 for the three months ended March 31, 2007 and 2006,respectively.**Income Tax Expense**Thestatutory U.S. Federal tax rate during the three months ended March 31, 2007 and2006 was 35%. Our effective tax rate was 39.55% including the net effect of statetaxes.**Capital Resources and Liquidity**Liquidity is a measure of the ability to generate sufficient cash to meet cashobligations as they come due. The largest use of potential liquidity would be if wewere required to purchase all securities under the liquidity facilities issued. Sinceinception, we have not been required to purchase any securities. If we were required topurchase such securities, we would draw on the standby loan agreements with GE Capital.Since the standby loan agreements with GE Capital are irrevocable during the period theliquidity agreements are outstanding, we believe we have sufficient liquidity in theevent that we are required to fund any draw downs under the liquidity facilities issued.Our other primary source of cash is from liquidity fee income, which we lend to GECapital. We believe that such income and access to the intercompany receivable from GECapital (approximately $2.9 million at March 31, 2007) is sufficient to fund our generaland administrative expenses.
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Therewere no cash flows related to investing or financing activities forthe three months ended March 31, 2007.**Item 4.      Controls and Procedures**Under the direction of our Chairman of the Board (serving as the principal executiveofficer) and Vice President and Treasurer (serving as the chief financial officer), weevaluated our disclosure controls and procedures and internal control over financialreporting and concluded that (i) our disclosure controls and procedures were effectiveas of March 31, 2007, and (ii) no change in internal control over financial reportingoccurred during the quarter ended March 31, 2007, that has materially affected, or isreasonably likely to materially affect, such internal control over financial reporting.
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**PART II — OTHER INFORMATION****Item 6. Exhibits**Exhibit 31(a) — Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under theSecurities Exchange Act of 1934, as Amended.Exhibit 31(b) — Certification Pursuant to Rules 13a-14(a) and 15d-14(a) under theSecurities Exchange Act of 1934, as Amended.Exhibit 32 — Certification Pursuant to 18 U.S.C. Section 1350.
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**SIGNATURES**Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registranthas duly caused this report to be signed on its behalf by the undersigned, thereunto dulyauthorized.Municipal Securities Purchase, Inc.