<PAGE>
Letter To Shareholders ACM Municipal Securities Income Fund, Inc.
================================================================================
December 9, 1996
Dear Shareholder:
We are pleased to provide you with an update on municipal market activity and
the investment results for ACM Municipal Securities Income Fund for the fiscal
year ended October 31, 1996. During the period, the Fund continued to provide
shareholders with current tax-free income. On a net asset value basis, the Fund
achieved total returns of 7.83% for the six month period and 8.74% for the
twelve month period ended October 31, 1996.
MARKET OVERVIEW
The municipal bond market outperformed most other sectors of the domestic fixed
income markets in 1996, recovering from the negative impact of the "flat tax"
campaign issue earlier in the year. The tax-exempt market's successful
performance is largely due to very favorable supply and demand technical factors
brought about by the continued high pace of early redemptions of outstanding
securities by municipal issuers. This shortage of securities is not helped by
the relatively low new-issue volume of municipal bonds, which continues to be
stable at an annual rate of approximately $150 billion, down dramatically from
1993 volume of nearly $300 billion. At Alliance, we believe that pricing of tax-
exempt securities is driven first and foremost by the continuing supply/demand
imbalance. Therefore, we attempt to take advantage of the resulting market
cycles to maximize total return to our shareholders.
Credit ratings, for the most part, improved in 1996. This improvement is a
direct reflection of the more stable economic environment for state and local
governments as a result of the recent economic expansion the nation has enjoyed.
Orange County emerged from bankruptcy in early July, having paid all principal
and interest due on its defaulted note issues. As we mentioned at the end of
fiscal year 1995, we believe that the Orange County bankruptcy has resulted in
better financial disclosure by state and local government agencies and stricter
investment guidelines for their fund managers.
INVESTMENT STRATEGY
The bond market volatility of early 1996, combined with the media attention
granted to various flat tax proposals from Republican presidential candidates,
provided ACM Municipal Securities Income Fund with ample opportunity to follow
its investment philosophy of "buy on weakness, sell on strength." The Fund was
repositioned following the March decline in bond prices to take advantage of any
rally in the second half of the Fund's fiscal year. The bond market has rallied
in recent months, allowing the Fund to realize the gains provided by the March
repositioning.
Consistent with our fundamental investment objective of providing high current
income exempt from regular federal income tax, we continue to be fully invested
in long-term securities. We seek out bonds that offer both high current income
and excellent call protection, which generate outstanding total returns from
price appreciation. To make room in the Fund for attractive new issues, we sold
older bonds with shorter maturity dates and higher early redemption risk. We
also sold bonds that had been "pre-refunded" by their issuers, which causes
these securities to reach maximum price appreciation potential earlier than
normal. Finally, our core strategy of buying bonds that are undervalued, or out
of favor, was quite successful in the second half of the fiscal year as
demonstrated by our excellent investment results.
MARKET OUTLOOK
Municipal bond investors should expect a more stable market environment over the
coming year. Despite higher energy prices and signs of wage pressures in the
economy, we believe that inflation will remain in check for the foreseeable
future and that interest rates
<PAGE>
ACM Municipal Securities Income Fund, Inc.
================================================================================
will continue to be range-bound in a less volatile environment. The "flat tax"
debate looks to be dormant, but is certain to arise again before the
presidential elections in the year 2000. Nevertheless, municipal bonds continue
to offer excellent value as they continue to trade at very cheap prices relative
to fully taxable investments. We believe that the greatest risk to investors in
the long term will be their ability to find attractively priced investments that
offer high after tax returns -- returns that are currently available in the
municipal bond market.
We appreciate your investment in ACM Municipal Securities Income Fund and look
forward to reporting to you again in the coming period.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Susan P. Keenan
Susan P. Keenan
Senior Vice President
<PAGE>
Portfolio Of Investments
October 31, 1996 ACM Municipal Securities Income Fund, Inc.
=========================================================================
Standard Principal
& Poor's Amount
Rating+ (000) Value
- -------------------------------------------------------------------------
MUNICIPAL BONDS--99.4%
ARIZONA--1.2%
AAA Yuma IDR
MFHR (Alexandrite
Sands Apt)
AMT FHA Ser '90
7.70%, 12/01/29........................ $ 2,485 $ 2,614,444
------------
CALIIFORNIA--16.7%
AA- California HFA
SFMR (Homeownership
Mtg)
AMT Ser '91B
7.55%, 8/01/20......................... 595 612,427
Ser '94H
7.50%, 8/01/25......................... 12,345 13,141,129
A+ California Pollution Ctl
Fin Auth Res Recovery
Rev., (Waste Mgmt., Inc.)
AMT Ser '91A
7.15%, 02/01/11........................ 4,600 4,998,084
NR Los Angeles County
Comm Fac Calabasas Area
Ser '92A
7.70%, 9/01/17......................... 5,750 5,961,370
NR Orange County Irvine
Coast (Pelican Hill Proj)
Ser '92A
8.25%, 9/02/18......................... 3,970 4,082,827
A- Placer County
Western Placer
Waste Mgmt Auth
AMT Ser '94
6.75%, 7/01/14......................... 5,800 6,011,468
AAA Sacramento
Inflos Municipal
Util Dist Elec Rev
Ser '92A FGIC
8.8922%, 8/15/18(a).................... 2,500 2,794,675
----------
37,601,980
----------
COLORADO--14.2%
Baa* Arapahoe County
Public Highway Auth.
7.00%, 8/31/26......................... 10,330 11,167,143
Standard Principal
& Poor's Amount
Rating+ (000) Value
- -------------------------------------------------------------------------
BB Denver City & County
Arpt Rev (United Airlines)
AMT Ser '92A
6.875%, 10/01/32....................... $ 20,300 $ 20,876,520
------------
32,043,663
------------
FLORIDA--2.3%
Aaa* Brevard County HFA
SFMR (Homeownership
Mtg)
AMT GNMA Ser '94
6.70%, 9/01/27......................... 5,000 5,122,150
-----------
ILLINOIS--1.8%
BB+ Chicago Arpt Rev
(American Airlines)
AMT Ser '94
8.20%, 12/01/24........................ 3,500 4,109,070
-----------
MARYLAND--3.5%
AAA Baltimore County
MFHR (Dunfield Proj)
FHA Ser '92A
6.90%, 8/01/28......................... 7,500 7,853,400
----------
MASSACHUSETTS--7.5%
A- Mass Health & Ed Fac
Auth Hosp Rev (Jordan
Hospital) Ser B
6.875%, 10/01/15....................... 1,500 1,567,155
AAA Mass Health & Ed Fac
Auth Hosp Rev (Metro
West Health)
Ser '92C
6.50%, 11/15/18........................ 2,690 2,997,252
A+ Mass HFA
SFMR (Residential
Mtg.) AMT Ser. 40
6.65%, 12/01/27........................ 7,355 7,573,885
Al* New England Ed Loan
Mktg Student Loan Rev
AMT Ser '93H
6.90%, 11/01/09........................ 4,425 4,751,697
----------
16,889,989
----------
<PAGE>
Portfolio Of
Investments(cont.) ACM Municipal Securities Income Fund, Inc.
=========================================================================
Standard Principal
& Poor's Amount
Rating+ (000) Value
- -------------------------------------------------------------------------
MICHIGAN--1.5%
AAA Detroit Sewage Disposal
Rev System
Ser '93A FGIC
7.5115%, 7/01/23 (a)................... $ 2,120 $ 2,053,453
AAA Kalamazoo
Hosp Fin Auth
(Borgess Med Ctr)
Ser '94A FGIC
6.6762%, 6/01/11(a).................... 1,000 947,020
AA+ Michigan Hsg Dev Auth
SFMR (Homeownership
Mtg.) AMT Ser '95B
7.05%, 6/01/26......................... 385 403,080
-----------
3,403,553
-----------
MINNESOTA--1.0%
BBB South St. Paul Hosp Rev
(Healtheast Proj)
Ser '94
6.75%, 11/01/09........................ 2,130 2,227,533
-----------
NEW HAMPSHIRE--2.2%
AAA Keene Housing Dev Corp
MFHR (Central Square)
FHA Ser '90A
7.50%, 2/01/25......................... 4,400 4,860,988
-----------
NEW YORK--18.6%
Aaa* Cohoes IDR
(Norlite Corp. Project)
AMT Ser. '92B
6.75%, 5/01/09......................... 8,500 9,466,110
BBB+ New York City GO
Ser '95B
7.25%, 8/15/19......................... 13,770 14,903,547
BBB+ New York City GO
Ser '93D
8.0259%, 8/29/14(a).................... 3,750 3,705,225
AA New York City
Hsg Dev Corp
(S. Williamsburg Co-op)
AMT MFHR Ser '90A
7.90%, 2/01/23......................... 3,825 4,024,665
AAA New York HFA
MFHR (Erie/Monroe Cnty)
AMT AMBAC Ser '89B
7.55%, 11/01/29........................ 9,315 9,764,169
-----------
41,863,716
-----------
Standard Principal
& Poor's Amount
Rating+ (000) Value
- -------------------------------------------------------------------------
OHIO--4.0%
BBB Hamilton County
Health Fac (Franciscan
Sisters / Providence Hosp)
Ser '92
6.875%, 7/01/15........................ $ 500 $ 514,445
Aaa* Kent Ohio MFHR
(Silver Meadows)
AMT GNMA Ser '95
7.15%, 12/20/26........................ 1,100 1,167,782
AAA Ohio HFA
SFMR (GNMA
Collateralized)
AMT Ser '95 A-2
6.625%, 3/01/26........................ 5,000 5,132,800
A Ohio Water
Dev Auth
Solid Waste Rev
(North Star)
AMT
6.45%, 9/01/20......................... 2,100 2,174,193
-----------
8,989,220
-----------
PENNSYLVANIA--0.7%
A Pittsburgh Urban Redev
Auth SFMR
(Homeownership Mtg)
AMT Ser '95A
7.15%, 10/01/27........................ 520 546,432
A New Moran Ind Dev Auth
Solid Waste(Brown Ferris)
AMT Ser '94
6.50%, 4/01/19......................... 1,000 1,037,650
-----------
1,584,082
-----------
RHODE ISLAND--4.3%
AA+ Rhode Island Hsg & Mtg
Fin Corp SFMR
(Homeownership Mtg)
AMT Ser '92-7A
6.75%, 10/01/25........................ 2,000 2,076,620
AMT Ser '91-8
10.3041%, 4/01/24(a)................... 7,000 7,586,250
-----------
9,662,870
-----------
<PAGE>
ACM Municipal Securities Income Fund, Inc.
=========================================================================
Standard Principal
& Poor's Amount
Rating+ (000) Value
- -------------------------------------------------------------------------
SOUTH CAROLINA--1.9%
AAA Horry County Arpt Rev
(Myrtle Beach Jet Port)
AMT FSA Ser '90
7.30%, 7/01/20......................... $ 4,000 $ 4,300,680
------------
SOUTH DAKOTA--4.9%
A* South Dakota
Student Loan Fin Corp.
AMT Ser '96-1E
6.55%, 8/01/20......................... 11,000 11,077,990
------------
TENNESSEE--1.4%
AAA Metro Govt Nashville &
Davidson County
Water System Rev
Ser '92 AMBAC
8.3397%, 1/01/22(a).................... 3,000 3,091,050
TEXAS--5.4%
BB Alliance Airport Auth
(Federal Express)
AMT Ser '96
6.375%, 4/01/21........................ 4,300 4,308,299
AAA Amarillo Texas
Health Facs Corp.
(High Plains Baptist
Hospital) FSA Ser '92B
9.2663%, 1/01/22(a).................... 3,200 3,609,920
BB+ Dallas--Ft. Worth
Airport (American
Airlines)
AMT
7.25%, 11/01/30 3,985 4,242,869
------------
12,161,088
------------
Standard Principal
& Poor's Amount
Rating+ (000) Value
- -------------------------------------------------------------------------
VIRGINIA--5.8%
A+ Giles County
(Hoechst-Celanese Corp.)
AMT Ser '96
6.45%, 5/01/26......................... $ 3,740 $ 3,881,372
BBB+ Peninsula Port Auth
Health Fac
(Mary Immaculate
Proj)
Ser '94
7.00%, 8/01/17......................... 2,000 2,103,460
AAA Suffolk Virginia Redev
& Hsg MFHR
(Prince William Commons)
AMT FNMA Ser '95A
6.50%, 6/01/29......................... 2,650 2,700,907
AA+ Virginia Hsg Dev Auth
(Commonwealth Mtg)
AMT SFMR Ser '94G
7.125%, 7/01/22........................ 4,195 4,352,438
------------
13,038,177
------------
WEST VIRGINIA--0.5%
AAA West Virginia Parkways
Eco Dev Parkway Rev
Ser '93 FGIC
7.8384%, 5/16/19(a).................... 1,100 1,102,519
------------
TOTAL INVESTMENTS--99.4%
(cost $217,254,061) 223,598,162
Other assets less liabilities--0.6% 1,290,127
------------
NET ASSETS--100% $224,888,289
============
- -------------------------------------------------------------------------
+ Unaudited.
* Moody's Rating.
(a) Inverse Floater Security--Security with variable or floating interest rate
that moves in opposite direction of short-term interest rates.
See notes to financial statements.
Glossary of Terms
AMBAC American Municipal Bond Assurance
Corporation
AMT Alternative Minimum Tax--(subject to)
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Administration
FNMA Federal National Mortgage Association
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage Association
GO General Obligation
HFA Housing Finance Authority
IDR Industrial Development Revenue
MFHR Multi-Family Housing Revenue
SFMR Single Family Mortgage Revenue
<PAGE>
Statement Of Assets And Liabilities
October 31, 1996 ACM Municipal Securities Income Fund, Inc.
================================================================================
ASSETS
Investments in securities, at value (cost $217,254,061....... $223,598,162
Interest receivable.......................................... 3,706,025
Deferred organization expense and other assets............... 26,075
------------
Total assets................................................. 227,330,262
------------
LIABILITIES
Due to custodian............................................. 1,283,547
Payable for investment securities purchased.................. 947,230
Advisory fee payable......................................... 93,331
Administrative fee payable................................... 27,999
Accrued expenses and other liabilities....................... 89,866
------------
Total liabilities............................................ 2,441,973
------------
NET ASSETS..................................................... $224,888,289
============
COMPOSITION OF NET ASSETS
Preferred Stock:
$.01 par value per share; 1,800 shares Preferred Stock
authorized, issued and outstanding at
$50,000 per share liquidation preference.................. $ 90,000,000
Common Stock:
$.01 par value per share; 100,000,000 shares authorized,
10,589,849 shares issued and outstanding................. 105,899
Additional paid-in capital................................... 145,512,150
Accumulated net realized loss on investments................. (17,073,861)
Net unrealized appreciation of investments................... 6,344,101
-------------
$ 224,888,289
=============
NET ASSET VALUE PER SHARE OF COMMON STOCK--$134,888,289
($224,888,289 less Preferred Stock at liquidation value
of $90,000,000) divided by 10,589,849 shares of Common
Stock outstanding.......................................... $12.74
======
- --------------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
Statement Of Operations
Year Ended October 31, 1996 ACM Municipal Securities Income Fund, Inc.
===============================================================================
INVESTMENT INCOME
Interest......................................................... $14,585,518
EXPENSES
Advisory fee...................................... $1,110,134
Administrative fee................................ 333,040
Auction Agent fee................................. 177,805
Audit and legal................................... 133,343
Custodian......................................... 122,451
Transfer agency................................... 51,143
Directors' fees................................... 33,620
Printing.......................................... 30,626
Amortization of organization expenses............. 12,078
Miscellaneous..................................... 54,223
----------
Total expenses.................................................... 2,058,463
----------
Net investment income............................................. 12,527,055
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments.................................. 3,335,681
Net change in unrealized appreciation of investments.............. (1,073,204)
----------
Net gain on investments........................................... 2,262,477
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS......................... $14,789,532
===========
STATEMENT OF CHANGES IN NET ASSETS
===============================================================================
Year Ended October 31,
1996 1995
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income............................. $ 12,527,055 $ 12,363,154
Net realized gain (loss) on investments........... 3,335,681 (11,183,658)
Net change in unrealized appreciation
(depreciation) of investments.................... (1,073,204) 22,818,057
------------ ------------
Net increase in net assets from operations........ 14,789,532 23,997,553
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Common Stock..................................... (8,994,324) (9,468,675)
Preferred Stock.................................. (3,532,731) (3,800,338)
Distributions in excess of net investment income
Common Stock..................................... (503,573) -0-
Preferred Stock.................................. (202,580) -0-
CAPITAL STOCK TRANSACTIONS
Reinvestment of dividends resulting in the issuance
of Common Stock.................................. 843,978 162,102
------------ ------------
Total increase.................................... 2,400,302 10,890,642
NET ASSETS
Beginning of year................................. 222,487,987 211,597,345
------------ ------------
End of year (including undistributed net
investment income of $296,818 at
October 31, 1995)................................ $224,888,289 $222,487,987
============ ============
- --------------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
Notes To Financial Statements
October 31, 1996 ACM Municipal Securities Income Fund, Inc.
================================================================================
NOTE A: Significant Accounting Policies
ACM Municipal Securities Income Fund, Inc. (the "Fund"), was incorporated in the
state of Maryland on February 11, 1993 and is registered under the Investment
Company Act of 1940 as a diversified, closed-end management investment company.
The following is a summary of significant accounting policies followed by the
Fund.
1. Security Valuation
The Fund values municipal securities at fair value based on prices provided by a
recognized pricing service which uses information with respect to transactions
in bonds, quotations from bond dealers, market transactions in comparable
securities and various relationships between securities in determining values.
If market quotations are not readily available from such pricing service, a
municipal security is valued by appraisal at its fair value as determined in
good faith by the Fund's Adviser under procedures established by the Fund's
Board of Directors. Short-term securities which mature in 60 days or less are
valued at amortized cost, which approximates market value unless this method
does not represent fair market value.
2. Organization Expenses
Organization expenses of approximately $60,000 have been deferred and are being
amortized on a straight-line basis through May, 1998.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the date the securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund amortizes premiums and
accretes discounts as adjustments to interest income.
5. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
6. Reclassification of Components of Net Assets
As of October 31, 1996, the Fund reclassified certain components of net assets.
The reclassification resulted in a net decrease in additional paid-in capital of
$409,335, and a net increase in distributions in excess of net investment income
of $409,335. This reclassification was the result of permanent book-to-tax
differences resulting from distributions in excess of net tax-exempt income.
This reclassification had no effect on net investment income, net realized gains
or net assets.
- --------------------------------------------------------------------------------
NOTE B: Advisory and Administrative Fees
Under the terms of the investment advisory agreement, the Fund pays Alliance
Capital Management L.P., (the "Adviser") an advisory fee equal to an annualized
rate of .50 of 1% of the average weekly net assets of the Fund during the month.
On November 28, 1995, the Fund entered into a Shareholder Inquiry Agency
Agreement with Alliance Fund Services, Inc. ("AFS"), an affiliate of the
Adviser, whereby the Fund reimburses AFS for costs relating to servicing phone
inquiries for the Fund. During the year ended October 31, 1996 there was no
reimbursement paid to AFS.
Under the terms of the Administration Agreement, the Fund pays Alliance Capital
Management L.P. (the "Administrator") an administration fee equal to an
annualized rate of .15 of 1% of the average weekly net assets of the Fund during
the month. The
<PAGE>
ACM Municipal Securities Income Fund, Inc.
================================================================================
Administrator has engaged Prudential Mutual Fund Management, Inc.
(the "Sub-Administrator") to act as Sub-Administrator. The Administrator, out of
its own assets, will pay the Sub-Administrator a monthly fee equal to an
annualized rate of .10 of 1% of the Fund's average weekly net assets. The Sub-
Administrator prepares financial and regulatory reports for the Fund and
provides other clerical services.
- --------------------------------------------------------------------------------
NOTE C: Investment Transactions
Purchases and sales of investment securities (excluding short term investments
and U.S. Government Securities) aggregated $391,081,799 and $392,199,857
respectively, for the year ended October 31, 1996. At October 31, 1996 the cost
of investments for Federal income tax purposes was $217,273,882. Accordingly,
gross unrealized appreciation was $6,392,086 and gross unrealized depreciation
was $67,806 resulting in net unrealized appreciation of $6,324,280.
- --------------------------------------------------------------------------------
NOTE D: Taxes
For Federal income tax purposes at October 31, 1996, the Fund had a capital loss
carry forward of $17,054,040; of which $5,956,269 expires in 2002 and
$11,097,771 expires in 2003.
- --------------------------------------------------------------------------------
NOTE E: Capital Stock
Common Stock
There are 100,000,000 shares of $0.01 par value common stock authorized. Of the
10,589,849 shares outstanding at October 31, 1996, the Adviser owned 7,200
shares. During the years ended October 31, 1996 and 1995, the Fund issued 30,590
and 15,167 shares, respectively, in connection with the Fund's dividend
reinvestment plan.
Preferred Stock
The Fund has issued and outstanding 1,800 shares of Preferred Stock, consisting
of 600 shares each of Series A, Series B and Series C, with a liquidation value
of $50,000 per share.
The dividend rate on Series A is 3.45% and is effective through November 6,
1996. The dividend rate on Series B is 3.41% and is effective through November
4, 1996. The dividend rate on Series C is 3.40% and is effective through
November 6, 1996.
<PAGE>
Financial Highlights ACM Municipal Securities Income Fund, Inc.
================================================================================
<TABLE>
<CAPTION>
Selected Data For a Share of Common Stock Outstanding Throughout Each Period.
April 23, 1993(a)
to
1996 1995 1994 October 31, 1993
---- ---- ---- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............................. $ 12.59 $ 11.57 $ 14.66 $13.98(b)
-------- -------- -------- --------
Income From Investment Operations
Net investment income............................................. 1.18 1.17 1.21 .50
Net realized and unrealized gain (loss) on
investments...................................................... .22 1. 11 (2.96) .74
-------- -------- -------- --------
Net increase (decrease) in net asset value
from operations.............................................. 1.40 2.28 (1.75) 1.24
-------- -------- -------- --------
Less: Dividends And Distributions
- ---------------------------------
Dividends from net investment income:
Paid to Common Stock Shareholders............................ (.85) (.90) (.90) (.30)
Common Stock equivalent of dividends
paid to Preferred Stock Shareholders......................... (.33) (.36) (.31) (.08)
Distributions in excess of net investment
income:
Paid to Common Stock Shareholders............................ (.05) -0- -0- -0-
Common Stock equivalent of distributions
paid to Preferred Stock Shareholders......................... (.02) -0- -0- -0-
-------- -------- -------- --------
Distributions from realized capital gains:
Paid to Common Stock Shareholders............................ -0- -0- (.11) -0-
Common Stock equivalent of distributions
paid to Preferred Stock Shareholders......................... -0- -0- (.02) -0-
-------- -------- -------- --------
Total dividends and distributions................................. (1.25) (1.26) (1.34) (.38)
-------- -------- -------- --------
Preferred Stock offering costs and
underwriting discounts........................................... -0- -0- -0- (.18)
-------- -------- -------- --------
Net asset value, end of period.................................... $ 12.74 $ 12.59 $ 11.57 $ 14.66
-------- -------- -------- --------
Market value, end of period....................................... $ 12.38 $ 12.00 $ 10.25 $ 14.25
======== ======== ======== ========
Total Investment Return
- -----------------------
Total investment return based on: (c)
Market value................................................. 10.82% 26.65% (21.99)% 3.42%
Net asset value.............................................. 8.74% 17.71% (14.41)% 6.39%
Ratios/Supplemental Data
- ------------------------
Net assets, end of period (000's omitted)......................... $224,888 $222,488 $211,597 $244,069
Ratio of expenses to average net assets (d) .................. .93% .84% .77% .81%(e)
Ratio of net investment income to average net
assets (d)....................................................... 5.64% 5.77% 5.58% 4.95%(e)
Portfolio turnover rate........................................... 178% 222% 116% 79%
</TABLE>
- --------------------------------------------------------------------------------
(a) Commencement of operations.
(b) Net of offering costs of $.09.
(c) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of the 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 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 years where there is a decrease in the discount or an
increase in the premium of the market value to the net asset value from the
beginning to the end of such periods. Total investment return calculated
for a period of less than one year is not annualized.
(d) The expense ratio and net investment income ratio do not reflect the effect
of dividend and distribution payments to Preferred Stock shareholders.
(e) Annualized.
<PAGE>
Report Of Ernst & Young LLP
Independent Auditors ACM Municipal Securities Income Fund, Inc.
===============================================================================
To the Shareholders and Board of Directors
ACM Municipal Securities Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities of ACM
Municipal Securities Income Fund, Inc., including the portfolio of investments,
as of October 31, 1996, 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
October 31, 1996, 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
Municipal Securities Income Fund, Inc. at October 31, 1996, 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
December 3, 1996
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Federal Income Tax Information (unaudited)
In accordance with Federal requirements, the Fund designates substantially all
the dividends paid from investment income--net during the fiscal year ended
October 31, 1996 as "exempt-interest dividends."
As required by Federal regulations, shareholders will receive notification of
their portion of the Fund's taxable ordinary dividends and capital gains
distributions paid (if any) for the 1996 calendar year, early in 1997.
<PAGE>
Additional Information ACM Municipal Securities Income Fund, Inc.
================================================================================
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 Plan 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 Plan 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 Plan 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
<PAGE>
ACM Municipal Securities Income Fund, Inc.
================================================================================
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 Susan P. Keenan, a Senior Vice
President of the Fund.
- --------------------------------------------------------------------------------
Supplemental Proxy Information
The Annual Meeting of Shareholders of The ACM Municipal Securities Income Fund,
Inc. was held on May 24, 1996. The description of each proposal and number of
shares voted at the meeting are as follows:
Shares
Voted For
- --------------------------------------------------------------------------------
1. To elect directors Class Two Directors
(term expires in 1999)
David H. Dievler 8,391,856
James M. Hester 8,391,856
Hon. James D. Hodgson 8,391,856
Shares Shares Voted
Voted For Against
- --------------------------------------------------------------------------------
2. To ratify the selection
of Ernst & Young LLP
as the Fund's independent
auditors for the Fund's
fiscal year ending
October 31, 1996: 8,422,000 31,365
<PAGE>
ACM Municipal Securities Income Fund, Inc.
================================================================================
BOARD OF DIRECTORS
John D. Carifa, Chairman and President
Ruth Block
David H. Dievler
James R. Greene
Dr. James M. Hester
Hon. James D. Hodgson
Clifford L. Michel
Donald J. Robinson
Robert C. White
OFFICERS
Kathleen A. Corbet, Senior Vice President
Susan P. Keenan, Senior Vice President
Wayne D. Lyski, Senior Vice President
David U. Dowden, Vice President
Terrance Hults, Vice President
William E. Oliver, Vice President
Edmund P. Bergen, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Joseph J. Mantineo, Controller
ADMINISTRATOR
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
SUB-ADMINISTRATOR
Prudential Mutual Fund Management, LLC
Gateway Center Three
Newark, NJ 07102-4077
COMMON STOCK:
DIVIDEND PAYING AGENT,
TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
CUSTODIAN
The Bank of New York
48 Wall Street
New York, NY 10286
PREFERRED STOCK:
DIVIDEND PAYING AGENT,
TRANSFER AGENT AND REGISTRAR
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
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 Municipal Securities Income Fund, Inc. 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>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ACM Municipal Securities Income Fund, Inc.
Summary of General Information
The Fund
ACM Municipal Securities Income Fund, Inc. is a closed-end management investment
company designed to obtain the highest level of current tax exempt income,
consistent with what the Fund's investment adviser considers to be prudent
investment risk, that is available from a portfolio of high-quality municipal
debt securities.
Shareholder Information
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction Section of newspapers each day, under the
designation "ACMMSI." The Fund's NYSE trading symbol is "AMU." Weekly
comparative net asset value (NAV) and market price information about the Fund is
published each Monday in The Wall Street Journal, Sunday in The New York Times
and Saturday in Barron's and other newspapers in a table called "Closed-End Bond
Funds." Additional information about the Fund is available by calling 1-800-247-
4154.
Dividend Reinvestment Plan
A Dividend Reinvestment Plan provides automatic reinvestment of dividends and
capital gains in additional Fund shares. For a copy of the Plan Brochure, please
write to the Plan Agent, State Street Bank & Trust Company P.O. Box 8200,
Boston, MA 02266-8200 or call 1-800-426-5523.
ACM Municipal Securities Income Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
AllianceCapital[Logo]
Investing without the Mystery.(SM)
(R)These registered service marks used under license from the owner,
Alliance Capital Management, L.P.
MSIAR
ACM
- -----------
Municipal
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Securities
- -----------
Income Fund
Annual Report
October 31, 1996
Alliance[Logo]
Investing without the Mystery.(SM)
