<PAGE>
LETTER TO SHAREHOLDERS ACM Managed Income Fund
================================================================================
October 26, 1998
Dear Shareholder:
We are pleased to report to you on our investment strategy, performance and
outlook of the ACM Managed Income Fund. The Fund's objective is to provide
investors with a high level of total return by seeking both high current income
and capital appreciation. The Fund invests primarily in U.S. Government
securities and corporate fixed income securities, including higher yielding,
lower-rated fixed income securities. In addition, the Fund may utilize certain
other investment techniques, including investing in options and futures
contracts.
INVESTMENT RESULTS
Over the past six and 12-month periods your Fund
underperformed the benchmark. Although our U.S.
Treasury allocation posted strong gains, the
portfolio's exposure to high-yield debt securities,
which performed poorly over both periods, dampened
performance relative to the benchmark. The strong
gains made by the Fund early in the period were
reversed in July and August when the Fund's high
yield debt holdings experienced the sell-off discussed
in the following commentary.
INVESTMENT RESULTS*
Periods Ended August 31, 1998
Total Returns
6 Months 12 Months
-------- ---------
ACM Managed
Income Fund -3.15% 8.74%
Lehman Brothers
Aggregate Bond Index 4.58% 10.57%
* The Fund's investment results represent total returns and are based on the net
asset value as of August 31, 1998. All fees and expenses related to the
operation of the Fund have been deducted, but no adjustment has been made for
sales charges that may apply when shares are purchased or redeemed. Returns
for the Fund include the reinvestment of any distributions paid during the
period. Past performance is no guarantee of future results.
The Lehman Brothers Aggregate Bond Index is composed of the Mortgage-Backed
Securities Index, the Asset-Backed Securities Index and the
Government/Corporate Bond Index. An investor cannot invest directly in an
index.
MARKET OVERVIEW
Through the six-month period, the U.S. bond market recorded positive returns in
an environment of healthy economic growth and low inflation. However, returns
were dampened across all sectors of the U.S. bond market, except for the
government sector, by events unfolding in the emerging markets. In May, renewed
volatility in Asia, weakness in the yen and fiscal problems in Russia heightened
investor concerns about all higher-yielding asset classes. This trend gained
momentum in August when a collapse of the Russian financial system led to an
abrupt sell-off across global credit sensitive bond and stock markets. During
this volatile period the U.S. government sector, acting as a safe haven, posted
the best return among the U.S. bond market sectors.
Up until July of 1998, the U.S. high-yield sector had posted the strongest
return among the U.S. bond market sectors. Boosted by a healthy U.S. economy,
low default rates and robust demand for higher-
1
<PAGE>
ACM Managed Income Fund
================================================================================
yielding assets, prices for high-yield bonds reached new highs. However, in
July, this rally came to an end when events in Russia prompted a general flight
to quality, causing the high-yield sector to end the six-month period with the
worst performance among the U.S. bond market sectors.
INVESTMENT STRATEGY
Over the six-month period ended August 31, 1998, we maintained a modestly
barbelled duration structure among our U.S. Treasury holdings, using a
combination of long- and short-maturity securities. Within our high yield
allocation, we increased our holdings in the cable and telecommunications
sectors. These sectors continue to benefit from positive earnings and merger
activity.
OUTLOOK
Going forward, we anticipate slowing global growth and continued benign
inflation as Asia exports cheaper goods to the world and imports less from
abroad. In the U.S. we expect growth to continue slowing, with second half 1998
Gross Domestic Product (GDP) growth declining to 2.8%, and 1999 growth slowing
further. Strong domestic demand will continue to be offset by weakening
industrial production and a continued deterioration in the U.S. trade deficit.
The combination of low U.S. inflation and slowing domestic and global growth
will prompt one or more additional rate cuts before the end of 1998. We expect
U.S. interest rates to remain low as the U.S. Treasury market will continue to
provide a safe haven for investors during periods of volatility overseas.
We continue to view the high-yield sector favorably. The combination of moderate
growth and low inflation provide an ideal environment for these securities.
However, the importance of issuer selection will increase as the domestic
economy slows and turmoil in global markets causes short-term price volatility.
We will continue to review each security using a fundamental, bottom-up
investment approach.
Thank you for your continued interest and investment in the ACM Managed Income
Fund. We look forward to reporting its progress to you in the coming months.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Wayne D. Lyski
Wayne D. Lyski
Senior Vice President
2
<PAGE>
PORTFOLIO OF INVESTMENTS
August 31, 1998 ACM Managed Income Fund
================================================================================
Moody's Principal
Investor Amount
Ratings+ (000) Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
OBLIGATIONS--65.0%
Aaa U.S. TREASURY BONDS--30.7%
6.25%, 8/15/23................... $ 1,250 $ 1,385,157
6.375%, 8/15/27.................. 8,000 9,112,504
6.625%, 2/15/27.................. 12,000 14,070,012
8.125%, 8/15/19.................. 6,600 8,782,132
12.375%, 5/15/04................. 32,300 43,816,985
14.00%, 11/15/11................. 8,700 13,746,009
------------
90,912,799
------------
Aaa U.S. TREASURY NOTES--18.1%
6.25%, 10/31/01.................. 10,000 10,359,380
6.25%, 2/15/07................... 17,800 19,157,268
7.00%, 7/15/06................... 21,400 23,974,698
------------
53,491,346
------------
Aaa U.S. TREASURY STRIPS--16.2%
Zero coupon, 5/15/09............. 2,880 1,643,515
Zero coupon, 5/15/10............. 19,130 10,288,726
Zero coupon, 2/15/11............. 16,500 8,497,566
Zero coupon, 5/15/14............. 65,100 27,640,679
------------
48,070,486
------------
Total U.S. Government Obligations
(cost $182,021,456).............. 192,474,631
------------
CORPORATE
OBLIGATIONS--35.4%
BROADCASTING
& CABLE--1.7%
B3 Optel, Inc., Series B
13.00%, 2/15/05(a).............. 5,000 5,025,000
------------
BUSINESS SERVICES--1.5%
B1 Geologistics Corp
9.75%, 10/15/07................. 5,000 4,575,000
------------
COMMUNICATIONS--7.5%
Caa1 Caprock Communications
Corp
12.00%, 7/15/08(b).............. 4,000 3,920,000
NR Dobson Wireline
Communications Corp
12.25%, 6/15/08(b).............. 8,000 7,440,000
NR Exodus Communications,
Inc
11.25%, 7/01/08(b).............. 3,000 2,745,000
B3 ICO Global
Communications
15.00%, 8/01/05(c).............. $6,000 $ 5,550,000
B3 Level 3 Communications,
Inc
9.125%, 5/01/08................. 3,000 2,685,000
------------
22,340,000
------------
CONSUMER PRODUCTS
& SERVICES--3.5%
B3 Riverwood
International Corp
10.625%, 8/01/07................ 5,000 4,575,000
NR Waterford Gaming L.L.C
12.75%, 11/15/03................ 3,784 4,162,400
B3 Zeta Consumer Products
Corp
11.25%, 11/30/07(b)............. 3,500 1,575,000
------------
10,312,400
------------
ENERGY--2.4%
B1 Chesapeake Energy Corp
9.625%, 5/01/05(b).............. 2,000 1,650,000
Caa2 Transamerican Energy,
Inc., Series B
11.50%, 6/15/02................. 9,000 5,535,000
------------
7,185,000
------------
FOOD--1.5%
Caa1 Specialty Foods Corp
Series B
11.125%, 10/01/02............... 5,000 4,337,500
------------
INDUSTRIAL--3.2%
B2 Anchor Glass Corp
11.25%, 4/01/05................. 2,500 2,612,500
B2 Evenflo Company, Inc
11.75%, 8/15/06(b).............. 3,800 3,724,000
B3 MVE, Inc
12.50%, 2/15/02................. 1,500 1,440,000
B3 Wesco International, Inc
11.125%, 6/01/08(b)(d).......... 3,000 1,605,000
------------
9,381,500
------------
METALS/MINERALS--1.0%
Caa1 Acme Metals, Inc
10.875%, 12/15/07............... 4,613 2,929,255
------------
3
<PAGE>
PORTFOLIO OF INVESTMENTS (continued) ACM Managed Income Fund
================================================================================
Moody's Principal
Investor Amount
Ratings+ (000) Value
- --------------------------------------------------------------------------------
OIL & GAS--1.5%
B3 Gothic Production Corp.
Series B
11.125%, 5/01/05........... $5,500 $ 4,427,500
-----------
PLASTICS--1.8%
NR Foamex L.P.
13.50%, 8/15/05............ 5,000 5,525,000
-----------
SUPERMARKETS--0.5%
B3 The Pantry, Inc.
10.25%, 10/15/07........... 1,500 1,477,500
-----------
TELECOMMUNICATIONS--9.3%
B3 Iridium L.L.C.
Capital Corp.
Series B,
14.00%, 7/15/05............ 6,000 5,610,000
NR Knology Holdings, Inc.
11.875%, 10/15/07(d)....... 6,500 3,315,000
NR Long Distance Direct
Holdings, Inc.
12.25%, 4/15/08(b)(e)...... 4,000 3,840,000
B2 Orion Network
Systems, Inc.
11.25%, 1/15/07............ 4,950 5,333,625
NR Pathnet, Inc.
12.25%, 4/15/08(b)(f)...... 3,000 2,715,000
NR Startec Global
Communications Corp.
12.00%, 5/15/08(b)(g)...... 3,000 2,685,000
NR Winstar Communications
Inc.
10.00%, 3/15/08(b)......... 5,000 4,125,000
-----------
27,623,625
-----------
Total Corporate Obligations
(cost $117,937,081)........ 105,139,280
-----------
Shares or
Moody's Principal
Investor Amount
Ratings+ (000) Value
- --------------------------------------------------------------------------------
YANKEE OBLIGATIONS--7.1%
B3 Brunner Mond Group PLC
11.00%, 7/15/08(b)......... $4,000 $ 3,620,000
B1 Centaur Mining
& Exploration
11.00%, 12/01/07........... 3,000 2,775,000
B2 Central European Media
Entertainment, Class A
9.375%, 8/15/04............ 3,000 2,700,000
Ba1 Glencore Nickel
Property Ltd.
9.00%, 12/01/14............ 2,100 1,638,000
Caa3 Ionica PLC
15.00%, 5/01/07(d)......... 7,500 412,500
B1 Mastellone Hermanos SA
11.75%, 4/01/08(b)......... 4,000 2,810,000
B3 Northern Offshore ASA
10.00%, 5/15/05(b)......... 5,000 4,187,500
B3 Panoceanic Bulk
Carriers Ltd.
12.00%, 12/15/07........... 4,200 2,961,000
-----------
Total Yankee Obligations
(cost $29,137,189)......... 21,104,000
-----------
PREFERRED STOCK--1.0%
Caa Nextel Communications,
Inc., Series E
11.125%, 2/15/10(h)
(cost $3,181,697).......... 3,172 3,021,330
-----------
4
<PAGE>
PORTFOLIO OF INVESTMENTS (continued) ACM Managed Income Fund
================================================================================
Moody's
Investor
Ratings+ Shares Value
- --------------------------------------------------------------------------------
OTHER INVESTMENTS--0.1%
NR Knology Holdings, Inc.
Warrants, expiring
10/15/07(i)(j).................. 2,500 $ 10,000
NR Microcell
Telecommunications, Inc.
Warrants, expiring
6/01/06(i)(k)................... 12,000 148,200
NR Orion Network
Systems, Inc.
Warrants, expiring
1/15/07(i)(l)................... 4,950 71,775
----------
Total Other Investments
(cost $169,500)................. 229,975
----------
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------
TIME DEPOSIT--5.3%
State Street Bank
& Trust Co.
5.25%, 9/01/98
(cost $15,616,000).............. $15,616 $ 15,616,000
------------
TOTAL INVESTMENTS--113.9%
(cost $348,062,923)............. 337,585,216
Other assets less
liabilities--(13.9%).............. (41,316,930)
------------
NET ASSETS--100.0%.................. $296,268,286
============
- --------------------------------------------------------------------------------
+ Unaudited.
(a) Consists of $5,000,000 senior notes and 5,000 shares of Common Stock.
(b) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At August 31,
1998, the market value of these securities aggregated $46,641,500 or 15.7%
of net assets.
(c) Warrants are attached. Each warrant entitles the holder to purchase 19.85
shares of Common Stock at $13.20 per share.
(d) 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.
(e) Warrants are attached. Each warrant entitles the holder to purchase 15.0874
shares of Common Stock at $.01 per share. The warrants are exercisable
until 4/13/08.
(f) Warrants are attached. Each warrant entitles the holder to purchase 1.1
shares of Common Stock. The warrants are exercisable until 4/15/08.
(g) Warrants are attached. Each warrant entitles the holder to purchase 1.25141
shares of Common Stock at $24.20 per share. The warrants are exercisable
until 5/15/08.
(h) PIK Preferred, quarterly stock payments.
(i) Non-income producing security.
(j) Each warrant entitles the holder to purchase .00373 shares of Common Stock.
The warrants are exercisable until 10/15/07.
(k) Each warrant entitles the holder to purchase 3.072 shares of Common Stock.
The warrants are exercisable until 6/01/06.
(l) Each warrant entitles the holder to purchase .8463 shares of Common Stock.
The warrants are exercisable until 1/15/07.
Glossary of Terms:
NR--Not Rated
PIK--Payment in Kind
See notes to financial statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1998 ACM Managed Income Fund
================================================================================
ASSETS
Investments in securities, at value (cost $348,062,923).......... $337,585,216
Cash............................................................. 634
Interest receivable.............................................. 5,652,007
Receivable for investment securities sold........................ 1,965,000
Prepaid expenses................................................. 12,971
------------
Total assets..................................................... 345,215,828
------------
LIABILITIES
Payable for investment securities purchased...................... 48,531,883
Advisory fee payable............................................. 151,382
Administrative fee payable....................................... 46,578
Accrued expenses and other liabilities........................... 217,699
------------
Total liabilities................................................ 48,947,542
------------
NET ASSETS........................................................ $296,268,286
============
COMPOSITION OF NET ASSETS:
Preferred stock, $.01 par value per share; 1,900 shares
Remarketed Preferred Stock authorized, 950 shares issued
and outstanding at $100,000 per share liquidation preference.... $ 95,000,000
Common stock, $.01 par value per share; 299,998,100 shares
authorized, 22,390,264 shares issued and outstanding............ 223,903
Additional paid-in capital....................................... 201,543,815
Undistributed net investment income.............................. 3,418,254
Accumulated net realized gain on investment transactions......... 6,560,021
Net unrealized depreciation of investments....................... (10,477,707)
------------
$296,268,286
============
NET ASSET VALUE PER SHARE OF COMMON STOCK
($296,268,286 less Remarketed Preferred Stock at liquidation
value of $95,000,000 divided by 22,390,264 shares of Common
Stock outstanding).............................................. $8.99
=====
- --------------------------------------------------------------------------------
See notes to financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
Year Ended August 31, 1998 ACM Managed Income Fund
================================================================================
INVESTMENT INCOME
Interest................................................ $30,789,228
Dividends............................................... 181,698
EXPENSES
Advisory fees........................................... $1,995,558
Administrative fee...................................... 614,017
Remarketed Preferred Stock-remarketing agent's fees..... 247,798
Audit & legal........................................... 70,527
Reports and notices to shareholders..................... 56,221
Transfer agency......................................... 46,316
Directors' fees and expenses............................ 40,488
Custodian............................................... 38,572
Registration fees....................................... 35,072
Taxes................................................... 22,425
Miscellaneous........................................... 35,129
-----------
Total expenses.......................................... 3,202,123
-----------
Net investment income................................... 27,768,803
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions............ 11,028,968
Net change in unrealized appreciation of investments.... (15,421,654)
-----------
Net loss on investments................................. (4,392,686)
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS............... $23,376,117
===========
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
For the Year Ended August 31,
--------------------------------
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income....................................... $ 27,768,803 $ 26,388,799
Net realized gain on investment transactions................ 11,028,968 10,751,417
Net change in unrealized appreciation
(depreciation) of investments............................... (15,421,654) 5,277,153
------------ ------------
Net increase in net assets from operations.................. 23,376,117 42,417,369
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Dividends From Net Investment Income:
Common Stock............................................... (20,855,196) (19,578,018)
Remarketed Preferred Stock................................. (5,384,809) (6,400,824)
Distributions From Net Realized Gain on Investments:
Common Stock............................................... (462,408) -0-
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in the issuance
of Common Stock............................................ 3,920,134 3,987,994
------------ ------------
Total increase.............................................. 593,838 20,426,521
NET ASSETS:
Beginning of year........................................... 295,674,448 275,247,927
------------ ------------
End of year (including undistributed net investment
income of $3,418,254 and $2,338,632, respectively)......... $296,268,286 $295,674,448
============ ============
- -------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1998 ACM Managed Income Fund
================================================================================
NOTE A: Significant Accounting Policies
ACM Managed Income Fund, Inc., (the "Fund") is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end management investment
company. The financial statements have been prepared in conformity with
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 traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are generally
valued at the last reported sale price or, if there was no sale on such day, the
last bid price quoted on such day. If no bid prices are quoted, then the
security is valued at the mean of the bid and asked prices as obtained on that
day from one or more dealers regularly making a market in that security.
Securities traded on the over-the-counter market, and securities listed on a
foreign securities market whose operations are similar to the United States
over-the-counter market and securities listed on a national securities exchange
whose primary market is believed to be over-the-counter are valued at the mean
of the closing bid and asked price provided by two or more dealers regularly
making a market in such securities. U.S. Government securities and other debt
securities which mature in 60 days or less are valued at amortized cost unless
this method does not represent fair value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by, or in accordance with procedures approved by the Board of
Directors. Fixed income securities may be valued on the basis of prices provided
by a pricing service when such prices are believed to reflect the fair market
value of such securities.
2. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially all
of its investment company taxable income and net realized gains, if applicable,
to shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Dividend income is recorded on the ex-dividend
date. Investment transactions are accounted for on the date the investments are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discount as an adjustment to interest income.
4. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gains distributions are determined in accordance with federal
tax regulations and may differ from those determined in accordance with
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.
During the current fiscal year, permanent differences, primarily due to book and
tax differences on accrual of income, resulted in a net increase in accumulated
net realized gain on investment transactions and a decrease in undistributed net
investment income. This reclassification had no effect on net assets.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) ACM Managed Income Fund
================================================================================
NOTE B: Advisory, Administrative Fees and
Other Transactions with Affiliates
Under the terms of an Investment Advisory Agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser") an advisory fee equal to an annualized
rate of .65 of 1% of the average adjusted weekly net assets of the Fund during
the month.
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Adviser, the Fund reimburses AFS for
costs relating to servicing phone inquiries for the Fund. The Fund reimbursed
AFS $1,400 during the year ended August 31, 1998.
Under the terms of an Administrative Agreement, the Fund pays Princeton
Administrators, L.P. (the "Administrator") a monthly fee equal to an annualized
rate of .20 of 1% of the Fund's average adjusted weekly net assets. The
Administrator prepares certain financial and regulatory reports for the Fund and
provides clerical and other services.
- --------------------------------------------------------------------------------
NOTE C: Investment Transactions
Purchases and sales of investment securities (excluding U.S. government
securities, short term investments and options) aggregated $271,165,647 and
$275,001,578 respectively, for the year ended August 31, 1998. There were
purchases of $252,793,679 and sales of $252,809,886 of U.S. government and
government agency obligations for the year ended August 31, 1998. At August 31,
1998, the cost of investments for federal income tax purposes was $349,032,651.
Accordingly, gross unrealized appreciation of investments was $13,076,212 and
gross unrealized depreciation of investments was $24,523,647, resulting in net
unrealized depreciation of $11,447,435.
- --------------------------------------------------------------------------------
NOTE D: Capital Stock
There are 300,000,000 shares of $.01 par value capital stock authorized.
Common Stock
There are 22,390,264 shares of common stock outstanding at August 31, 1998.
During the years ended August 31, 1998 and August 31, 1997, the Fund issued
404,189 and 433,096 shares, respectively, in connection with the Fund's dividend
reinvestment plan.
Preferred Stock
The Fund has issued and outstanding 950 shares of Remarketed Preferred Stock
each at a liquidation value of $100,000 per share. The dividend rate on the
Remarketed Preferred Stock may change generally every 28 days as set by the
remarketing agent. The dividend rate on the Remarketed Preferred Stock is 5.60%
and is effective through September 16, 1998.
- --------------------------------------------------------------------------------
NOTE E: Year 2000 and Euro (Unaudited)
Many computer systems and applications in use today process transactions using
two digit date fields for the year of the transaction, rather than the full four
digits. If these systems are not modified or replaced, transactions occurring
after 1999 could be processed as year "1900", which could result in processing
inaccuracies and computer system failures. This is commonly known as the year
2000 problem. In addition to the Year 2000 problem, the European Economic and
Monetary Union has established a single currency, the Euro Currency ("Euro")
that will replace the national currency of certain European countries effective
January 1, 1999. Computer systems and applications must be adapted in order to
be able to process Euro sensitive information accurately beginning in 1999.
Should any of the computer systems employed by the Fund's major service
providers fail to process Year 2000 or Euro related information properly, that
could have a significant negative impact on the Fund's operations and the
services that are provided to the Fund's
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) ACM Managed Income Fund
================================================================================
shareholders. In addition, to the extent that the operations of issuers of
securities held by the Fund are impaired by the Year 2000 problem or Euro, or
prices of securities held by the Fund decline as a result of real or perceived
problems relating to the Year 2000 or the Euro, the value of the Fund's shares
may be materially affected.
With respect to the Year 2000, the Fund has been advised that the Adviser,
("Alliance") began to address the Year 2000 issue several years ago in
connection with the replacement or upgrading of certain computer systems and
applications. During 1997, Alliance began a formal Year 2000 initiative, which
established a structure and coordinated process to deal with the Year 2000
issues on its domestic and international computer systems and applications.
Currently, management of Alliance expects that the required modifications for
the majority of its significant systems and applications that will be in use on
January 1, 2000, will be completed and tested by the end of 1998. Full
integration testing of these systems and testing of interfaces with third-party
suppliers will continue through 1999. At this time, management of Alliance
believes that the costs associated with resolving this issue will not have a
material adverse effect on its operations or on its ability to provide the level
of services it currently provides to the Fund.
With respect to the Euro, the Fund has been advised that Alliance has
established a project team to assess changes that will be required in connection
with the introduction of the Euro. Alliance reports that its project team has
assessed all systems, including those developed or managed internally, as well
as those provided by vendors, in order to determine the modifications that will
be required to process accurately transactions denominated in Euro after 1998.
At this time, management of Alliance expects that the required modifications for
the introduction of the Euro will be completed and tested before the end of
1998. Management of Alliance believes that the costs associated with resolving
this issue will not have a material adverse effect on its operations or on its
ability to provide the level of services it currently provides to the Fund.
The Fund and Alliance have been advised by the Fund's Transfer Agent and
Custodian that they are also in the process of reviewing their systems with the
same goals. As of the date of this report the Fund and Alliance have no reason
to believe that the Transfer Agent and Custodian will be unable to achieve these
goals.
10
<PAGE>
FINANCIAL HIGHLIGHTS ACM Managed Income Fund
================================================================================
Selected Data For A Share Of Common Stock Outstanding Throughout Each Year
<TABLE>
<CAPTION>
Year Ended August 31,
-------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.................................. $ 9.13 $ 8.36 $ 8.14 $ 7.99 $10.79
------- ------- ------ ------ ------
Income From Investment Operations
- ---------------------------------
Net investment income............................................... 1.24 1.20 1.20 1.18 1.16
Net realized and unrealized gain
(loss) on investments and option
transactions...................................................... (.18) .76 .04 .30 (1.07)
------- ------- ------ ------ ------
Net increase in net asset value
from operations................................................... 1.06 1.96 1.24 1.48 .09
------- ------- ------ ------ ------
Less: Dividends and Distributions
- ---------------------------------
Distributions to common shareholders:
Dividends from net investment income.............................. (.94) (.90) (.83) (.83) (1.09)
Distributions from net realized gains............................. (.02) -0- -0- -0- (1.48)
Distributions in excess of net
investment income............................................... -0- -0- -0- (.09) (.09)
Tax return of capital distribution................................ -0- -0- -0- (.16) (.04)
Distributions to preferred shareholders:
Common Stock equivalent of dividends
paid to Remarketed Preferred
shareholders.................................................... (.24) (.29) (.19) (.25) (.19)
------- ------- ------ ------ ------
Total dividends and distributions................................... (1.20) (1.19) (1.02) (1.33) (2.89)
------- ------- ------ ------ ------
Net asset value, end of year........................................ $ 8.99 $ 9.13 $ 8.36 $ 8.14 $ 7.99
======= ======= ====== ====== ======
Market value, end of year........................................... $8.6875 $10.000 $9.500 $9.375 $8.875
======= ======= ====== ====== ======
Total Return
- ------------
Total investment return based on: (a)
Market value...................................................... (4.05)% 16.03% 11.39% 20.63% .66%
Net asset value................................................... 8.74% 20.38% 12.89% 16.34% (4.42)%
Ratios/Supplemental Data
- ------------------------
Net assets, end of year (000's omitted)............................. $296,268 $295,674 $275,248 $266,569 $258,018
Ratio of expenses to average net assets (b)......................... 1.04% 1.05% 1.09% 1.07% 1.14%
Ratio of net investment income to
average net assets (b)............................................ 9.04% 9.21% 9.30% 9.69% 8.32%
Portfolio turnover rate............................................. 157% 253% 360% 392% 366%
</TABLE>
- --------------------------------------------------------------------------------
(a) 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.
(b) The expense ratio and net investment income ratio do not reflect the effect
of dividend payments to preferred shareholders.
11
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ACM Managed Income Fund
================================================================================
To the Shareholders and Board of Directors
ACM Managed Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities of ACM
Managed Income Fund, Inc. (the "Fund"), including the portfolio of investments,
as of August 31, 1998, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of ACM
Managed Income Fund, Inc. at August 31, 1998, and the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the indicated
periods, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
October 7, 1998
- --------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
In order to meet certain requirements of the Internal Revenue Code, we are
advising you that the Fund made capital gain distribution of $462,408 during the
fiscal year ended August 31, 1998 which are subject to a maximum tax rate of
20%. Shareholders should not use the above information to prepare their tax
returns. The information necessary to complete your income tax returns will be
included with your Form 1099 DIV which will be sent to you separately in January
1999.
12
<PAGE>
ADDITIONAL INFORMATION ACM Managed Income Fund
================================================================================
Shareholders whose shares are registered in their own names will automatically
be participants in the Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), pursuant to which dividends and capital gain distributions to
shareholders will be paid in or reinvested in additional shares of the Fund (the
"Dividend Shares"). State Street Bank and Trust Company (the "Agent") will act
as agent for participants under the Plan. Shareholders whose shares are held in
the name of a broker or nominee should contact such broker or nominee to
determine whether or how they may participate in the Plan.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will issue
new shares at the greater of net asset value or 95% of the then current
market price.
(ii) If the shares of Common Stock are trading at a discount from net
asset value at the time of valuation, the Agent will receive the dividend
or distribution in cash and apply it to the purchase of the Fund's shares
of Common Stock in the open market, on the New York Stock Exchange or
elsewhere, for the participants' accounts. Such purchases will be made on
or shortly after the payment date for such dividend or distribution and in
no event more than 30 days after such date except where temporary
curtailment or suspension of purchase is necessary to comply with Federal
securities laws. If, before the Agent has completed its purchases, the
market price exceeds the net asset value of a share of Common Stock, the
average purchase price per share paid by the Agent may exceed the net asset
value of the Fund's shares of Common Stock, resulting in the acquisition of
fewer shares than if the dividend or distribution had been paid in shares
issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of the
participant, and each shareholder's proxy will include those shares purchased or
received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average cost,
including brokerage commissions, of any shares purchased in the open market plus
the cost of any shares issued by the Fund.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent to
written notice of the change sent to participants in the Plan at least 90 days
before the record date for such dividend or distribution. The Plan may also be
amended or terminated by the Agent on at least 90 days' written notice to
participants in the Plan. All correspondence concerning the Plan should be
directed to the Agent at State Street Bank and Trust Company, P.O. Box 366,
Boston, Massachusetts 02101.
13
<PAGE>
ACM Managed Income Fund
================================================================================
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change of
control of the Fund, (iii) no material changes in the principal risk factors
associated with investment in the Fund, and (iv) no change in the person
primarily responsible for the day-to-day management of the Fund's portfolio, who
is Wayne D. Lyski, a Senior Vice President of the Fund.
Supplemental Proxy Information
The Annual Meeting of Shareholders of The ACM Managed Income Fund, Inc. was held
on May 28, 1998. The description of each proposal and number of shares voted at
the meeting are as follows:
Shares Shares Voted
Voted For Without Authority
- --------------------------------------------------------------------------------
1. To elect directors: Class One Nominees
(term expires in 2001)
John H. Dobkin 15,354,880 289,065
Clifford L. Michel 15,375,408 268,537
Donald J. Robinson 15,375,408 268,537
Class Two Nominees
(term expires in 1999)
William H. Foulk, Jr. 15,374,926 269,019
Shares Shares Voted Shares
Voted For Against Abstaining
- --------------------------------------------------------------------------------
2. To ratify the selection of
Ernst & Young LLP as the Fund's
independent auditors for the Fund's
fiscal year ending August 31, 1998: 15,382,120 101,050 160,775
14
<PAGE>
ACM Managed Income Fund
================================================================================
BOARD OF DIRECTORS
John D. Carifa, Chairman and President
Ruth Block (1)
David H. Dievler (1)
John H. Dobkin (1)
William H. Foulk, Jr. (1)
Donald J. Robinson (1)
Dr. James M. Hester (1)
Clifford L. Michel (1)
Robert C. White (1)
OFFICERS
Wayne D. Lyski, Senior Vice President
Kathleen A. Corbet, Senior Vice President
Paul J. DeNoon, Vice President
Wayne C. Tappe, Vice President
Christian G. Wilson, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Juan J. Rodriguez, Controller
ADMINISTRATOR
Princeton Administrators, L.P.
P.O. Box 9095
Princeton, NJ 08543-9095
COMMON STOCK:
CUSTODIAN, DIVIDEND PAYING AGENT,
TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
LEGAL COUNSEL
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
PREFERRED STOCK:
DIVIDEND PAYING AGENT,
TRANSFER AGENT AND REGISTRAR
IBJ Schroder Bank & Trust Co.
1 State Street
New York, NY 10004
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
- --------------------------------------------------------------------------------
(1) Member of the Audit Committee
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its Common Stock in the open market.
This report, including the financial statements herein, is transmitted to the
shareholders of ACM Managed Income Fund for their information. This is not a
prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report.
15
<PAGE>
ACM Managed Income Fund
Summary of General Information
The Fund
ACM Managed Income Fund is a closed-end investment company whose shares trade on
the New York Stock Exchange. The Fund seeks to provide investors with a high
level of total return by seeking both high current income and capital
appreciation. In seeking this objective the Fund will invest primarily in U.S.
Government securities and corporate fixed income securities. In addition, the
Fund may utilize certain other investment techniques, including options and
futures contracts.
Shareholder Information
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction section of newspapers. The Fund's NYSE trading
symbol is "AMF". 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 distribution in additional Fund shares.
For questions concerning shareholder account information, or if you would like a
brochure describing the Dividend Reinvestment Plan, please call State Street
Bank and Trust Company at 1-800-219-4218.
ACM Managed Income Fund
1345 Avenue of the Americas
New York, New York 10105
ALLIANCE CAPITAL [LOGO](R)
(R) These registered service marks used under license from the owner,
Alliance Capital Management L.P.
MIFSR
- --------------------------------------------------------------------------------
ACM
--------------------
Managed
--------------------
Income Fund
--------------------
Annual Report
August 31, 1998
Alliance(R)
- --------------------------------------------------------------------------------
