<PAGE>
LETTER TO SHAREHOLDERS ACM Managed Income Fund
- -------------------------------------------------------------------------------
October 29, 1999
Dear Shareholder:
We are pleased to report to you on the performance, strategy and outlook for the
ACM Managed Income Fund (the "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 investment-grade
securities and high-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
The following table shows how your Fund performed over the past six- and
twelve-month periods ended August 31, 1999. For comparison, we have included
performance for the Lehman Brothers Aggregate Bond Index, a standard measure of
the performance of a basket of unmanaged debt securities.
Over the past six- and twelve-month periods ended August 31, 1999, your Fund
underperformed the benchmark. Over both time periods, our longer interest-rate
duration, as well as individual security selection in the high-yield sector,
dampened performance. Longer interest-rate duration means that our securities
are more sensitive to changes in interest rates. When interest rates rise, bond
prices in a long-duration portfolio fall more than they do in a shorter-duration
portfolio.
Within the high-yield sector we held four issuers that had problems: Iridium
L.L.C. Capital Corp, ICO Global Communications, Optel Inc. and Goss Graphic
Systems Inc. Iridium and ICO are satellite communication companies (Iridium
backed by Motorola and ICO backed by Hughes) that declared bankruptcy after
failing to meet their targeted revenues. Optel, which provides cable to
apartments, was downgraded after poor operating results. Goss Graphics, a
printing company, had its debt downgraded after it filed for bankruptcy.
- -------------------------------------------------------------------------------
INVESTMENT RESULTS(*)
Periods Ended August 31, 1999
Total Returns
6 Months 12 Months
-------- ---------
ACM Managed
Income Fund -11.08% -16.95%
Lehman Brothers
Aggregate Bond Index -0.80% 0.80%
- -------------------------------------------------------------------------------
(*) The Fund's investment results represent total returns and are based on the
net asset value as of August 31, 1999. 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 Lehman Brothers
Mortgage-Backed Securities Index, the Lehman Brothers Asset-Backed
Securities Index and the Lehman Brothers Government/Corporate Bond Index.
An investor cannot invest directly in an index.
MARKET OVERVIEW
During the six-month period ended August 31, 1999, the outlook for the global
economy improved. U.S. economic growth downshifted but remained strong, while
inflation and unemployment stayed low. With economic activity remaining strong
and global liquidity concerns abating, the Federal Reserve adopted a monetary
policy tightening bias in May and increased the Federal Funds rate by 25 basis
points in June and then another 25 basis points in August. For the six months
ended August 31, the U.S. yield curve flattened as short- and intermediate-term
rates rose more than long-term rates. The two-year U.S. Treasury yield rose from
5.20% to 5.73%, while the thirty-year Treasury yield rose from 5.67% to 6.07%.
1
<PAGE>
ACM Managed Income Fund
- ------------------------------------------------------------------------------
During the six-month period, the U.S. bond market, as represented by the Lehman
Brothers Aggregate Bond Index, declined by 0.8% as the global economic outlook
improved and the U.S. Federal Reserve raised interest rates. Among the sectors
of the U.S. bond market, the high-yield sector recorded the strongest
performance, while the investment-grade corporate sector recorded the weakest
performance. Rising interest rates, uncertainty regarding future interest-rate
policy, large corporate debt issuance and Y2K uncertainty, hurt corporate bond
performance. Similarly, the high-yield sector's performance was dampened by the
above mentioned factors as well as rising default rates and mutual-fund
outflows. However, the improving economic growth environment as well as
historically high yields helped the high-yield sector outperform the other U.S.
bond market sectors. Within the high-yield sector, lower-quality, B-rated
securities outperformed higher-quality, BB-rated securities.
INVESTMENT STRATEGY
Over the six-month period ended August 31, 1999, we maintained a longer
interest-rate duration than the market, generally employing U.S. Treasury
holdings with maturities of ten years or more. Within our high-yield corporate
allocation, we selectively picked credits that we thought were undervalued. We
were overweight B-rated securities versus BB-rated securities.
OUTLOOK
The global economy continues to gather momentum. We expect the U.S. economy to
remain strong through year-end and into the millennium. Growth estimates for
1999 are close to 4.0%, with growth moderating somewhat next year toward 3.5%.
The risk of tighter monetary policy in the U.S. remains. Positive inflation
fundamentals, however, will keep long-term interest rates trading in a range
around 6.0%. While we believe there are structural forces in the marketplace
rendering credit markets less liquid, the passing of Y2K should alleviate some
liquidity pressures, causing non-Treasury spreads to narrow somewhat from
current levels. The overall credit-quality environment, however, is no longer
improving in aggregate. Over the longer term, this is negative for
credit-sensitive spreads.
We continue to view the high-yield sector favorably. Currently, the average
high-yield index is yielding about 6.0% over Treasuries, which offers
significant value. The combination of strong growth and low inflation suggests
high-yield spreads should contract, resulting in rising bond prices. We will be
focusing more on single B-rated credits with hard assets, contributed equity
from the sponsor, or a large market capitalization.
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
/s/ Wayne D. Lyski
Wayne D. Lyski
President
2
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
August 31, 1999 ACM Managed Income Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Moody's Principal Moody's Principal
Investor Amount Investor Amount
Ratings(a) (000) U.S. $ Value Ratings(a) (000) U.S. $ Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT CHEMICALS-2.9%
OBLIGATIONS-63.7% Ba3 Lyondell Chemical Co.
U.S. TREASURY BONDS-30.8% Series A
Aaa 6.25%, 8/15/23 .............$1,250 $1,225,781 9.625%, 5/01/07.......... $1,800 $1,836,000
6.625%, 2/15/27 .............12,000 12,371,256 Ba3 Series B
8.125%, 8/15/19 ............. 6,600 7,794,191 9.875%, 5/01/07.......... 5,200 5,226,000
12.375%, 5/15/04 ............32,300 40,445,672 ---------
14.00%, 11/15/11 ............ 8,700 12,514,411 7,062,000
------------ ---------
74,351,311
------------ COMMUNICATIONS-1.7%
NR Logix Communications
Enterprises
U.S. TREASURY NOTES-14.6% 12.25%, 6/15/08.......... 5,000 4,175,000
Aaa 6.25%, 10/31/01.............. 5,000 5,046,875 ---------
6.25%, 2/15/07............... 7,800 7,831,692
7.00%, 7/15/06...............21,400 22,356,323 CONSUMER PRODUCTS
------------ & SERVICES-3.1%
35,234,890 B2 Evenflo Company, Inc.
------------ Series B
U.S. TREASURY STRIPS-18.3% 11.75%, 8/15/06.......... 2,300 2,291,375
Aaa Zero coupon, 5/15/09......... 2,880 1,559,860
Zero coupon, 5/15/10.........19,130 9,676,413 B3 Riverwood International
Zero coupon, 2/15/11.........16,500 7,939,189 Corp.
Zero coupon, 5/15/14.........65,100 25,092,665 10.625%, 8/01/07......... 5,000 5,062,500
------------ ---------
44,268,127 7,353,875
------------ ---------
Total U.S. Government
Obligations ELECTRONICS-1.4%
(cost $158,861,925)......... 153,854,328 Caa1 CHS Electronics, Inc.
----------- 9.875%, 4/15/05.......... 7,500 3,337,500
---------
CORPORATE
OBLIGATIONS-39.0% ENERGY-1.9%
AUTOMOTIVE-0.1% B3 Chesapeake Energy Corp.
Caa3 Breed Technologies, Inc Series B
9.25%, 4/15/08.............. 7,000 175,000 9.625%, 5/01/05.......... 5,000 4,675,000
----------- ---------
BROADCASTING & CABLE-1.5%
Caa1 OpTel, Inc FINANCIAL SERVICES-2.8%
Series B B3 Lodgian Financing Corp.
13.00%, 2/15/05............. 5,000 3,525,000 12.25%, 7/15/09 (b)...... 4,000 3,990,000
----------- Ba3 Willis Corroon Corp.
9.00%, 2/01/09 (b)....... 3,000 2,805,000
---------
BUILDING/MAINTENANCE 6,795,000
& SERVICE-1.9% ---------
B2 Building One Services, Inc.
10.50%, 5/01/09........... 5,000 4,675,000 FOOD-3.4%
----------- Caa2 Richmont Marketing
Specialists, Inc.
BUSINESS SERVICES-1.6% 10.125%, 12/15/07......... 4,000 3,300,000
B3 Geologistics Corp.
9.75%, 10/15/07........... 5,000 3,775,000 Caa1 Specialty Foods Corp.
----------- Series B
11.125%, 10/01/02........ 5,000 4,825,000
---------
8,125,000
---------
</TABLE>
3
<PAGE>
PORTFOLIO OF INVESTMENTS(continued) ACM Managed Income Fund
- -------------------------------------------------------------------------------
Moody's Principal
Investor Amount
Ratings(a) (000) U.S. $ Value
- -------------------------------------------------------------------------------
INTERNET SOFTWARE-1.7%
B3 Psinet, Inc.
11.00%, 8/01/09 (b)....... $4,000 $ 3,980,000
-----------
MACHINERY-0.4%
Ca Goss Graphic Systems, Inc.
12.00%, 10/15/06 (c)...... 4,000 1,020,000
-----------
METALS/MINERALS-0.2%
Ca Acme Metals, Inc.
10.875%, 12/15/07 (c)..... 2,913 538,905
-----------
PLASTICS-2.0%
Caa2 Foamex L.P.
13.50%, 8/15/05........... 5,000 4,925,000
-----------
TELECOMMUNICATIONS-11.3%
Caa3 Iridium LLC Capital Corp.
Series B
14.00%, 7/15/05 (c)....... 3,000 435,000
Caa2 KMC Telecommunications
Holdings, Inc.
13.50%, 5/15/09 (b)....... 4,000 4,120,000
NR Long Distance
International, Inc.
12.25%, 4/15/08........... 4,000 2,660,000
B3 Nextlink Communications, Inc.
10.75%, 6/01/09........... 3,000 3,063,750
B3 Primus Telecommunications
Groups, Inc.
11.25%, 1/15/09........... 4,000 3,840,000
NR Startec Global
Communications Corp.
12.00%, 5/15/08........... 3,400 3,043,000
NR Viatel, Inc.
11.50%, 3/15/09 (b)....... 4,500 4,488,750
B3 Winstar Equipment Corp.
12.50%, 3/15/04........... 5,500 5,665,000
-----------
27,315,500
-----------
TOYS/COMIC PUBLISHING-1.1%
NR Marvel Enterprises, Inc.
12.00%, 6/15/09 (b)....... 3,000 2,715,000
-----------
Total Corporate Obligations
(cost $114,367,752)........ 94,167,780
-----------
- -------------------------------------------------------------------------------
Shares or
Moody's Principal
Investor Amount
Ratings(a) (000) U.S. $ Value
- -------------------------------------------------------------------------------
YANKEE OBLIGATIONS-10.0%
B2 Alestra, SA
12.625%, 5/15/09 (b)..... $4,000 $ 3,730,000
B3 Doman Industries Limited
12.00%, 7/01/04 (b)...... 5,000 5,068,750
B3 Northern Offshore ASA
Series B
10.00%, 5/15/05.......... 5,000 3,075,000
B2 RSL Communications Plc
9.875%, 11/15/09 (b)..... 5,000 4,375,000
B3 TM Group Holdings
11.00%, 5/15/08.......... 4,000 3,950,000
NR Versatel Telecom BV
11.875%, 7/15/09......... 2,000 1,919,762
B3 Worldwide Fiber, Inc.
12.00%, 8/01/09 (b)...... 2,000 2,015,000
-----------
Total Yankee Obligations
(cost $26,619,972)........ 24,133,512
-----------
COMMON STOCKS &
OTHER INVESTMENTS-0.1%
NR Knology Holdings, Inc.
Warrants, expiring
10/15/07 (b)(d)(e)....... 2,500 6,250
NR Long Distance
International, Inc.
Warrants, expiring
4/13/08 (d)(f)........... 4,000 10,000
NR Loral Space &
Communication, Inc.
Warrants, expiring
1/15/07 (d)(g)........... 4,950 51,975
NR Microcell
Telecommunications, Inc.
Warrants, expiring
6/01/06 (b)(d)(h)........ 12,000 262,476
NR OpTel, Inc.
Common Stock (d)........... 5,000 50
NR Startec Global
Communications Corp.
Warrants, expiring
5/15/08 (d)(i)........... 4,500 4,500
-----------
Total Common Stocks
& Other Investments
(cost $169,875)........... 335,251
-----------
4
<PAGE>
PORTFOLIO OF INVESTMENTS (continued) ACM Managed Income Fund
- --------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value U.S. $ Value
- -------------------------------------------------------------------------------
TIME DEPOSIT-3.0% TOTAL INVESTMENTS-115.8%
State Street Bank & (cost $307,266,524).... $279,737,871
Trust Co. Other assets less
4.875%, 9/01/99 liabilities-(15.8%).... (38,254,654)
------------
(cost $7,247,000).. $7,247 $ 7,247,000
------------
NET ASSETS-100.0% $241,483,217
============
- -------------------------------------------------------------------------------
(a) Unaudited
(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,
1999, the market value of these securities aggregated $37,556,226 or 15.6%
of net assets.
(c) Security is in default and non-income producing.
(d) Non-income producing security.
(e) Each warrant entitles the holder to purchase .00373 shares of Common Stock.
The warrants are exercisable until 10/15/07.
(f) Each warrant entitles the holder to purchase 15.0874 shares of Common Stock
at $.01 per share. The warrants are exercisable from 4/07/99 to 4/13/08.
(g) Each warrant entitles the holder to purchase .6056 shares of Common Stock at
$.014 per share. The warrants are exercisable until 1/15/07.
(h) Each warrant entitles the holder to purchase 3.072 shares of Common Stock.
The warrants are exercisable until 6/01/06.
(i) 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.
Glossary:
NR-Not Rated.
See notes to financial statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1999 ACM Managed Income Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (cost $307,266,524) .......................... $ 279,737,871
Cash ............................................................................. 3,011,552
Interest receivable .............................................................. 6,803,889
Receivable for investment securities sold ........................................ 1,062,500
Prepaid expenses ................................................................. 11,272
--------------
Total assets ..................................................................... 290,627,084
--------------
LIABILITIES
Payable for investment securities purchased ...................................... 48,282,029
Advisory fee payable ............................................................. 140,119
Administrative fee payable ....................................................... 43,110
Accrued expenses and other liabilities ........................................... 678,609
--------------
Total liabilities ................................................................ 49,143,867
--------------
NET ASSETS ........................................................................ $ 241,483,217
==============
COMPOSITION OF NET ASSET
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, 23,105,450 shares issued and outstanding ........................... 231,055
Additional paid-in capital ....................................................... 207,473,675
Undistributed net investment income .............................................. 1,623,838
Accumulated net realized loss on investment transactions ......................... (35,316,698)
Net unrealized depreciation of investments ....................................... (27,528,653)
--------------
$ 241,483,217
==============
NET ASSET VALUE PER SHARE OF COMMON STOCK
($241,483,217 less Remarketed Preferred Stock at liquidation
value of $95,000,000 divided by 23,105,450 shares of Common
Stock outstanding) ............................................................. $ 6.34
======
</TABLE>
- -------------------------------------------------------------------------------
See notes to financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
Year Ended August 31, 1999 ACM Managed Income Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Interest .................................................... $ 30,249,999
Dividends ................................................... 161,645 $ 30,411,644
------------
EXPENSES
Advisory fee ................................................ 1,755,874
Administrative fee .......................................... 540,248
Remarketed Preferred Stock-remarketing agent's fee .......... 240,798
Audit and legal ............................................. 133,088
Printing .................................................... 57,909
Transfer agency ............................................. 46,179
Custodian ................................................... 34,205
Directors' fees and expenses ................................ 33,773
Registration fees ........................................... 33,053
Taxes ....................................................... 24,450
Miscellaneous ............................................... 33,449
------------
Total expenses .............................................. 2,933,026
------------
Net investment income ....................................... 27,478,618
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investment transactions ................ (34,892,171)
Net change in unrealized depreciation of investments ........ (17,050,946)
------------
Net loss on investments ..................................... (51,943,117)
------------
NET DECREASE IN NET ASSETS FROM OPERATIONS
$(24,464,499)
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended August 31,
---------------------
1999 1998
---- ----
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income .................................................. $ 27,478,618 $ 27,768,803
Net realized gain (loss) on investment transactions .................... (34,892,171) 11,028,968
Net change in unrealized depreciation of investments ................... (17,050,946) (15,421,654)
------------- -------------
Net increase (decrease) in net assets from operations .................. (24,464,499) 23,376,117
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Common Stock ......................................................... (21,817,892) (20,855,196)
Remarketed Preferred Stock ........................................... (4,930,538) (5,384,809)
Distributions from net realized gain on investments:
Common Stock ......................................................... (9,509,152) (462,408)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in the issuance of Common Stock .... 5,937,012 3,920,134
------------- -------------
Total (decrease) increase .............................................. (54,785,069) 593,838
NET ASSETS:
Beginning of year ...................................................... 296,268,286 295,674,448
------------- -------------
End of year (including undistributed net investment income of
$1,623,838 and $3,418,254, respectively) ............................. $ 241,483,217 $ 296,268,286
============= =============
</TABLE>
- -------------------------------------------------------------------------------
See notes to financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1999 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 any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3.Investment Income and Investment
Transactions
Interest income is accrued daily. 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 decrease in accumulated
net realized loss on investment transactions and a decrease in undistributed net
investment income. This reclassification had no effect on net assets.
8
<PAGE>
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 $1,250 during the year ended August 31, 1999.
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 and short term investments) aggregated $171,465,540 and $149,875,923
respectively, for the year ended August 31, 1999. There were purchases of
$511,231,481 and sales of $534,560,360 of U.S. government and government agency
obligations for the year ended August 31, 1999.
At August 31, 1999, the cost of investments for federal income tax purposes was
$314,645,314. Accordingly, gross unrealized appreciation of investments was
$2,931,898 and gross unrealized depreciation of investments was $37,839,341,
resulting in net unrealized depreciation of $34,907,443.
At August 31, 1999, the Fund had a capital loss carry-forward of $697,447 which
expires in the year 2007.
Capital losses incurred after October 31 ("post October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
$27,240,460 during fiscal year 1999. To the extent that the carryover losses are
used to offset future capital gains, it is probable that the gain to offset will
not be distributed to shareholders.
- -------------------------------------------------------------------------------
NOTE D: Capital Stock
There are 300,000,000 shares of $.01 par value capital stock authorized.
Common Stock
There are 23,105,450 shares of common stock outstanding at August 31, 1999.
During the years ended August 31, 1999 and August 31, 1998, the Fund issued
715,186 and 404,189 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 5.13%
and is effective through September 15, 1999.
9
<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,
--------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................ $ 8.99 $ 9.13 $ 8.36 $ 8.14 $ 7.99
------ ------ ------ ------ ------
Income From Investment Operations
- ---------------------------------
Net investment income ............................. 1.21 1.24 1.20 1.20 1.18
Net realized and unrealized gain
(loss) on investments and
written options ................................. (2.26) (.18) .76 .04 .30
----- ---- --- --- ---
Net increase (decrease) in net asset value
from operations ................................. (1.05) 1.06 1.96 1.24 1.48
----- ---- ---- ---- ----
Less: Dividends and Distributions
- ---------------------------------
Distributions to common shareholders:
Dividends from net investment income ............ (.96) (.94) (.90) (.83) (.83)
Distributions from net realized gains ........... (.42) (.02) -0- -0- -0-
Distributions in excess of net
investment income .............................. -0- -0- -0- -0- (.09)
Tax return of capital distribution .............. -0- -0- -0- -0- (.16)
Distributions to preferred shareholders:
Common Stock equivalent of dividends
paid to Remarketed Preferred
shareholders ................................... (.22) (.24) (.29) (.19) (.25)
---- ---- ---- ---- ----
Total dividends and distributions ................. (1.60) (1.20) (1.19) (1.02) (1.33)
----- ----- ----- ----- -----
Net asset value, end of year ...................... $ 6.34 $ 8.99 $ 9.13 $ 8.36 $ 8.14
====== ====== ====== ====== ======
Market value, end of year ......................... $ 8.625 $ 8.6875 $ 10.000 $ 9.500 $ 9.375
======= ======== ======== ======= =======
Total Return
- ------------
Total investment return based on: (a)
Market value .................................... 16.91% (4.05)% 16.03% 11.39% 20.63%
Net asset value ................................. (16.95)% 8.74% 20.38% 12.89% 16.34%
Ratios/Supplemental Data
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Net assets, end of year (000's omitted) ........... $ 241,483 $ 296,268 $ 295,674 $ 275,248 $ 266,569
Ratio of expenses to average net assets (b) ....... 1.09% 1.04% 1.05% 1.09% 1.07%
Ratio of net investment income to
average net assets (b) .......................... 10.17% 9.04% 9.21% 9.30% 9.69%
Portfolio turnover rate ........................... 222% 157% 253% 360% 392%
</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.
10
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ACM Managed Income Fund
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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, 1999, 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 and financial highlights. Our procedures included confirmation of
securities owned as of August 31, 1999, by correspondence with the custodian and
others. 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, 1999, 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 8, 1999
TAX INFORMATION (unaudited)
- -------------------------------------------------------------------------------
In order to meet certain requirements of the Internal Revenue Code we are
advising you that $3,927,972 of the capital gain distributions paid by the Fund
during the fiscal year August 31, 1999 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 2000.
11
<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.
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
12
<PAGE>
ACM Managed Income Fund
- -------------------------------------------------------------------------------
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.
Year 2000
Many computer systems and applications that process transactions use two-digit
date fields for the year of a 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 inoperability at or after the year 2000.
The Funds and their major service providers, including Alliance, utilize a
number of computer systems and applications that have been either developed
internally or licensed from third party suppliers. In addition, the Funds and
their major service providers, including Alliance, are dependent on third party
suppliers for certain systems applications and for electronic receipt of
information critical to their business. Should any of the computer systems
employed by the Funds or their major service providers, including Alliance, fail
to process Year 2000 related information properly, that could have a significant
negative impact on the Funds' operations and the services that are provided to
the Funds' shareholders. To the extent that the operations of issuers of
securities held by the Funds are impaired by the Year 2000 problem, the value of
the Fund's shares may be materially affected. In addition, for the Funds'
investments in foreign markets, it is possible that foreign companies and
markets will not be as prepared for Year 2000 as domestic companies and markets.
The Year 2000 issue is a high priority for the Funds and Alliance. During 1997
Alliance began a formal Year 2000 initiative which established a structured and
coordinated process to deal with the Year 2000 issue. As part of its initiative,
Alliance established a Year 2000 project office to manage the Year 2000
initiative, focusing on both information technology and non-information
technology systems. The Year 2000 project office meets periodically with the
audit committee of the board of directors of Alliance Capital Management
Corporation, Alliance's general partner and with Alliance's executive management
to review the status of the Year 2000 efforts. Alliance has also retained the
services of a number of consulting firms which have expertise in advising and
assisting with regard to Year 2000 issues. Alliance reports that by June 30,
1998 it had completed its inventory and assessment of its domestic and
international computer systems and applications, identified mission critical
systems (those systems where loss of their function would result in immediate
stoppage or significant impairment to core business units) and nonmission
critical systems and determined which of these systems were not Year 2000
compliant. All third party suppliers of mission critical computer systems and
applications and nonmission critical systems have been contacted to verify
whether their systems and applications will be Year 2000 compliant and their
responses are being evaluated. Substantially all of those contacted have
responded and approximately 90% have informed Alliance that their systems and
applications are or will be Year 2000 compliant. All mission critical and
nonmission critical systems supplied by third parties have been tested with the
exception of those third parties not able to comply with Alliance's testing
schedule. Alliance reports that it expects that all testing will be completed
before the end of 1999.
Alliance has remediated, replaced or retired all of its non-compliance mission
critical systems and applications that can affect the Funds. All nonmission
critical systems have been remediated. After each system has been remediated, it
is tested with 19xx dates to determine if it still performs its intended
business function correctly. Next, each system undergoes a simulation test using
dates occurring after December 31, 1999. Inclusive of the replacement and
retirement of some of its systems, Alliance has completed these testing phases
for approximately 98% of mission critical systems and 100% of nonmission
critical systems.
13
<PAGE>
ADDITIONAL INFORMATION (continued) ACM Managed Income Fund
- -------------------------------------------------------------------------------
Integrated systems tests were conducted to verify that the systems would
continue to work together. Full integration testing of all mission critical and
nonmission critical systems is complete. Testing of interfaces with third-party
suppliers has begun and will continue throughout 1999. Alliance reports that it
has completed an inventory of its facilities and related technology applications
and has begun to evaluate and test these systems. Alliance reports that it
anticipates that these systems will be fully operable in the year 2000. Alliance
has deferred certain other planned information technology projects until after
the Year 2000 initiative is completed. Such delay is not expected to have a
material adverse effect on Alliance's financial condition or results of
operations. Alliance, with the assistance of a consulting firm, is developing
Year 2000 specific contingency plans with emphasis on mission critical
functions. These plans seek to provide alternative methods of processing in the
event of a failure that is outside Alliance's control.
The estimated current cost to Alliance of the Year 2000 initiative ranges from
approximately $40 million to $45 million. These costs consist principally of
modification and testing and costs to develop formal Year 2000 specific
contingency plans. These costs which will generally be expensed as incurred will
be funded from Alliance's operations and the issuance of debt. Through June 30,
1999 Alliance had incurred approximately $36.0 million of costs related to the
Year 2000 initiative. At this time, management of Alliance believes that the
costs associated with resolving the Year 2000 issue will not have a material
adverse effect on Alliance's results of operations, liquidity or capital
resources.
There are many risks associated with Year 2000 issues, including the risks that
the computer systems and applications used by the Funds and their major service
providers will not operate as intended and that the systems and applications of
third-party providers to the Funds and their service providers will not be Year
2000 compliant. Likewise there can be no assurance the compliance schedules
outlined above will be met or that the actual cost incurred will not exceed
current estimates. Should the significant computer systems and applications used
by the Funds or their major service providers, or their systems of their
important third party suppliers, be unable to process date-sensitive information
accurately after 1999, the Funds and their service providers may be unable to
conduct their normal business operations and to provide shareholders with
required services. In addition, the Funds and their service providers may incur
unanticipated expenses, regulatory actions and legal liabilities. The Funds and
Alliance cannot determine which risks, if any, are most reasonably likely to
occur or the effects of any particular failure to be year 2000 compliant.
Certain statements provided by Alliance in this section entitled "Year 2000" as
such statements relate to Alliance, are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. To the fullest
extent permitted by law, the foregoing Year 2000 discussion is a "Year 2000
Readiness Disclosure" within the meaning of the Year 2000 Information and
Readiness Disclosure Act, 15 U.S.C. Sec 1 (1998).
14
<PAGE>
ACM Managed Income Fund
- -------------------------------------------------------------------------------
Supplemental Proxy Information
The Annual Meeting of Shareholders of The ACM Managed Income Fund, Inc. was held
on March 9, 1999. The description of each proposal and number of shares voted at
the meeting are as follows:
Voted
Voted For Against/Abstain
- --------------------------------------------------------------------------------
1. To elect directors: Class Two Nominees
(term expires in 2002)
David H. Dievler 20,762,731 400,556
William H. Foulk 20,763,954 399,333
Dr. James M. Hester 20,758,880 404,407
Voted
Voted For Against Withheld/Abstain
- --------------------------------------------------------------------------------
2. To ratify the selection of
Ernst & Young LLP as the Fund's
independent auditors for the Fund's
fiscal year ending August 31, 1999: 20,854,902 86,403 221,982
15
<PAGE>
ACM Managed Income Fund
- -------------------------------------------------------------------------------
BOARD OF DIRECTORS
John D. Carifa, Chairman
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, President
Kathleen A. Corbet, Senior Vice President
Paul J. DeNoon, Vice President
Vicki L. Fuller, Vice President
Wayne C. Tappe, 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 LLP
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.
<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
The daily net asset value of the Fund's shares is available from the Fund's
Transfer Agent by calling 1-800-426-5523. The Fund also distributes its daily
net asset value to various financial publications or independent organizations
such as Lipper Analytical Services, 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 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
AllianceCapital [LOGO]/R/
(/R/) These registered service marks used under license from the owner, Alliance
Capital Management L.P.
MIFAR899
- -------------------------------------------------------------------------------
ACM
------------
Managed
------------
Income Fund
Annual Report
August 31, 1999
Alliance/R/
- -------------------------------------------------------------------------------
