<PAGE>
LETTER TO SHAREHOLDERS ACM Municipal Securities Income Fund
================================================================================
December 3, 1997
Dear Shareholder:
We are pleased to report municipal market activity and investment results for
ACM Municipal Securities Income Fund's fiscal reporting period ended October 31,
1997.
- --------------------------------------------------------------------------------
INVESTMENT RESULTS
Periods Ended October 31, 1997
Total Return
6 Months 12 Months
-------- ---------
ACM Municipal Securities
Income Fund 10.01% 13.24%
LIPPER RANKING
General & Leveraged Muni Debt Funds Average
1 Year 3 Years Since Inception
------ ------- ---------------
(4/29/93)
---------
#1 of 63 #9 of 62 #41 of 53
Funds Funds Funds
The Fund's investment results are total returns for the period and are based on
the net asset value as of 10/31/97. Lipper rankings are based on total returns.
- --------------------------------------------------------------------------------
Your Fund's market price per share ended the period at $14.125, a 4.94% premium
to net asset value per share of $13.460.
MARKET OVERVIEW
For the fiscal year ended October 31, 1997, municipal bonds delivered a third
consecutive year of excellent returns to investors. Following the trend
established in 1996, interest rates remained within a trading range, driven by
mild volatility in economic indicators more than by secular movement toward
significantly higher (or lower) yields. Municipal bond yield ratios, relative to
taxable investments, improved as the threat of significant tax reform subsided.
Credit ratings of municipal issuers saw a marked improvement during the year due
to higher than anticipated revenues derived from a strong domestic economy. This
stable rate and taxation environment combined with improving municipal credit
quality resulted in municipal bonds producing some of the most attractive
returns in the fixed income markets year-to-date.
During the third quarter of 1997, the pace of new issuance of municipal debt
picked up after a slow first half. The decline in interest rates during the
latter half of the year is expected to produce new issue volume exceeding 1996
levels. Demand has more than matched this supply due to reinvestment of proceeds
from maturing or called bonds, continued reallocation of stock market profits to
bonds and a surge in money from bank trust departments converting common fund
assets into mutual fund assets.
INVESTMENT STRATEGY
The ACM Municipal Securities Income Fund seeks to provide shareholders with high
current tax-free income. At the same time, the Fund is managed to maintain
relative stability of principal without sacrificing competitive returns.
The average credit quality of the Fund continues to be very high. The management
team has chosen to focus on higher quality bonds due to the yield compression
between lower quality issues and higher quality issues in the market. This
compression of yields exists for two reasons. First, the municipal bond market
is income-driven. Because of the benefit of tax exempt income, tremendous
investor demand exists with little regard for risk. Second, the ready
availability and affordability of bond insurance has led to a record number of
issues marketed with credit enhancement. This has dramatically increased the
number of high grade issues in the market. At Alliance, we believe that there is
currently better value in the high quality segment of the municipal market and
we will continue to focus on this sector until conditions change.
1
<PAGE>
ACM Municipal Securities Income Fund
================================================================================
OUTLOOK
We believe that 1998 should be another good year for fixed income investors,
although there is the possibility that inflationary pressures may begin to
surface because of strength in the domestic U.S. economy. However, we expect
interest rates to remain in a narrow range, with levels trending lower in the
future. We would consider any backup in rates as an opportunity to lock in
attractive yields and to improve portfolio call protection. Overall, we believe
that inflation will remain in check, demand for investments will be strong and
that the environment for fixed income investors will be positive.
We appreciate your investment in ACM Municipal Securities Income Fund and look
forward to reporting future investment results.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Susan P. Keenan
Susan P. Keenan
Senior Vice President
2
<PAGE>
PORTFOLIO OF INVESTMENTS
October 31, 1997 ACM Municipal Securities Income Fund
================================================================================
Standard Principal
& Poor's Amount
Rating+ (000) Value
- --------------------------------------------------------------------------------
LONG TERM
MUNICIPAL BONDS-99.4%
ALABAMA-4.8%
AAA West Jefferson
PCR (Alabama Power)
MBIA Ser 93C
6.05%, 5/01/23 ................ $ 10,890 $ 11,163,884
------------
ARIZONA-1.8%
AA Phoenix
MFHR (Woodstone &
Silver Springs)
Ser 93 Asset Guaranty
6.25%, 4/01/23 ................ 2,145 2,238,994
AAA Yuma
MFHR (Alexandrite
Sands Apt)
AMT FHA Ser 90
7.70%, 12/01/29 ............... 1,900 1,998,135
------------
4,237,129
------------
CALIFORNIA-18.9%
AA- California HFA
SFMR (Homeownership
Mtg)
AMT Ser 94H
7.50%, 8/01/25 ................ 10,500 11,357,325
NR Novato Comm Fac
(Hamilton Field)
Ser 95
7.375%, 9/01/25 ............... 8,000 8,746,960
AAA Orange County Arpt Rev
(John Wayne Int'l)
AMT MBIA Ser 93
5.50%, 7/01/18 ................ 3,450 3,466,801
NR Orange County
Dist #88-1
(Pelican Hill Proj)
Ser 92A
8.25%, 9/02/18 ................ 3,825 3,939,674
NR Orange County Comm
Fac Dist #87-2
(Portola Hills)
Ser 91A
9.30%, 8/15/16 ................ 8,950 9,492,997
AAA Sacramento
Muni Util Dist
(Elec Rev)
Ser 92A FGIC
6.30%, 8/15/18 ................ 2,500 2,903,775
A- Vacaville
MFHR (Vacaville
Comm Hsg)
Ser 94A
7.85%, 11/01/24 ............... 2,170 2,355,079
A- Placer County Res Rec
(Wstrn Placer Wst Mgmt)
AMT Ser 94
6.75%, 7/01/14 ................ 1,800 1,927,530
------------
44,190,141
------------
COLORADO-9.5%
BB+ Denver City & County
Arpt Rev (United Airlines)
AMT Ser 92A
6.875%, 10/01/32 .............. 20,300 22,162,322
------------
FLORIDA-3.3%
Aaa* Brevard County HFA
SFMR (Homeownership
Mtg)
AMT FHA Ser 94
6.70%, 9/01/27 ................ 4,140 4,405,788
A* Dade County
MFHR (Golden
Lakes Apts)
AMT Ser 97A
6.00%, 11/01/32 ............... 250 253,195
6.05%, 11/01/39 ............... 750 759,562
AAA Florida HFA
SFMR (Homeownership
Mtg)
AMT GNMA Ser 94B
6.65%, 7/01/26 ................ 1,300 1,358,942
Aaa* Pinellas County HFA
SFMR (Homeownership
Mtg)
AMT GNMA Ser 94A
6.55%, 8/01/27 ................ 960 1,020,874
------------
7,798,361
------------
3
<PAGE>
PORTFOLIO OF INVESTMENTS (cont.) ACM Municipal Securities Income Fund
================================================================================
Standard Principal
& Poor's Amount
Rating+ (000) Value
- --------------------------------------------------------------------------------
ILLINOIS-1.8%
BBB- Chicago Arpt Rev
(American Airlines)
AMT Ser 94
8.20%, 12/01/24 ............... $ 3,500 $ 4,225,795
------------
INDIANA-4.1%
BB+ Indianapolis
Arpt Rev
(United Airlines)
AMT Ser 95A
6.50%, 11/15/31 ............... 1,900 2,034,311
AA Warrick County
PCR (So Indiana
Gas & Elec Co)
AMT Ser 93B
6.00%, 5/01/23 ................ 7,290 7,647,866
------------
9,682,177
------------
LOUISIANA-0.7%
Aaa* Calcasieu Parish
SFMR (Mortgage Rev)
AMT GNMA/FNMA
Ser 97A
6.40%, 4/01/32 ................ 1,500 1,572,945
------------
MARYLAND-3.4%
AAA Baltimore County
MFHR (Dunfield Proj)
FHA Ser 92A
6.90%, 8/01/28 ................ 7,500 8,031,150
------------
MASSACHUSETTS-5.3%
A- Mass Hlth & Ed Fac
Auth Hosp Rev
(Jordan Hospital)
Ser 92B
6.875%, 10/01/15 .............. 1,500 1,616,550
Aaa* Mass Hlth & Ed Fac
Auth Hosp Rev
(Metro West Health)
Ser 92C
6.50%, 11/15/18 ............... 2,690 3,004,892
A+ Mass HFA
SFMR (Residential
Mtg)
AMT Ser 40
6.65%, 12/01/27 ............... 4,420 4,746,461
AAA Mass HFA
SFMR (Residential
Dev)
FNMA Ser 92A
6.90%, 11/15/24 ............... 1,000 1,091,250
AA+ Mass Wtr Poll Abate
(South Essex Program)
Ser 94A
6.375%, 2/01/15 ............... 1,840 1,978,423
------------
12,437,576
------------
MICHIGAN-0.8%
AA Troy Downtown
Dev Auth
Ser 95A Asset Guaranty
6.375%, 11/01/18 .............. 1,765 1,899,317
------------
MINNESOTA-1.8%
A- Minneapolis
Cmty Dev Agy
(Common Bond Fund)
Ser 97-2
6.20%, 6/01/17 ................ 420 438,803
AA+ Minnesota HFA
SFMR (Homeownership
Mtg) AMT Ser 96F
6.30%, 1/01/28 ................ 1,240 1,301,516
AAA St. Francis GO
(Ind Sch Dist #15)
FSA Ser 95A
6.375%, 2/01/16 ............... 120 133,936
BBB South St. Paul Hosp Rev
(Healtheast Proj)
Ser 94
6.75%, 11/01/09 ............... 2,100 2,278,059
------------
4,152,314
------------
NEW HAMPSHIRE-2.2%
AAA Keene Hsg Dev Corp
MFHR (Central Square)
FHA Ser 90A
7.50%, 2/01/25 ................ 4,355 5,094,435
------------
4
<PAGE>
ACM Municipal Securities Income Fund
================================================================================
Standard Principal
& Poor's Amount
Rating+ (000) Value
- --------------------------------------------------------------------------------
NEW JERSEY-0.4%
AA Gloucester County
PCR (Mobil Oil)
Ser 93
5.625%, 12/01/28 .............. $ 1,000 $ 1,013,860
------------
NEW YORK-2.4%
BBB+ New York City GO
Ser 95B
7.25%, 8/15/19 ................ 3,465 3,959,648
AAA Troy Hsg Dev Corp
MFHR (T.U.R. Proj)
FHA Ser 90C
8.10%, 2/01/24 ................ 1,350 1,570,603
------------
5,530,251
------------
OHIO-4.3%
A Cuyahoga County
Hosp Rev (Meridia
Health Sys)
Ser 95
6.25%, 8/15/24 ................ 2,035 2,185,651
BBB Hamilton County
Hlth Fac
(Franciscan Sisters/
Providence Hosp)
Ser 92
6.875%, 7/01/15 ............... 500 532,855
Aaa* Kent MFHR
(Silver Meadows Apt Proj)
AMT GNMA Ser 95
7.15%, 12/20/26 ............... 1,100 1,218,668
AAA Ohio HFA
SFMR (Mortgage Rev)
AMT GNMA Ser 95 A-2
6.625%, 3/01/26 ............... 4,745 5,037,339
AAA Ohio HFA
SFMR (Residential Dev)
AMT GNMA Ser 97
6.15%, 3/01/29 ................ 1,000 1,057,640
------------
10,032,153
------------
PENNSYLVANIA-1.5%
BBB- Allegheny County
PCR (USX Corp)
Ser 96
6.10%, 1/15/18 ................ 1,000 1,041,070
AAA Allegheny County
Arpt Rev
(Gtr Pittsburg Int'l)
AMT FSA Ser 92B
6.625%, 1/01/22 ............... 2,285 2,459,803
------------
3,500,873
------------
RHODE ISLAND-5.1%
AA+ Rhode Island Hsg & Mtg
Fin Corp SFMR
(Homeownership Mtg)
AMT Ser 92-7A
6.75%, 10/01/25 ............... 3,970 4,213,202
AMT Ser 91-8
10.317%, 4/01/24 (a) .......... 7,000 7,698,670
------------
11,911,872
------------
SOUTH CAROLINA-1.9%..
AAA Horry County Arpt Rev
(Myrtle Beach Jet Port)
AMT FSA Ser 90
7.30%, 7/01/20 ................ 4,000 4,350,240
------------
SOUTH DAKOTA-2.1%
A* South Dakota
Student Loan Fin Corp
AMT Ser 96-1E
6.55%, 8/01/20 ................ 4,900 5,038,768
------------
TENNESSEE-7.1%
BBB Memphis Shelby
County Spec Fac
(Federal Express)
AMT Ser 93
6.20%, 7/01/14 ................ 2,000 2,085,060
AAA Metro Govt Nashville
& Davidson Cnty
Water System Rev
Ser 92 AMBAC
8.276%, 1/01/22 (a) ........... 3,000 3,372,030
Aa2* Tennessee Ed Loan
(Ed Funding South, Inc)
AMT Ser 97B
6.20%, 12/01/21 ............... 10,600 11,025,908
------------
16,482,998
------------
5
<PAGE>
PORTFOLIO OF INVESTMENTS (cont.) ACM Municipal Securities Income Fund
================================================================================
Standard Principal
& Poor's Amount
Rating+ (000) Value
- --------------------------------------------------------------------------------
TEXAS-10.1%
BBB Alliance Arpt Auth
(Federal Express)
AMT Ser 96
6.375%, 4/01/21 ............... $ 14,500 $ 15,470,485
AAA Amarillo Texas
Hosp Rev
(High Plains Baptist)
FSA Ser 92B
9.038%, 1/01/22 (a) ........... 3,200 3,761,632
BBB- Dallas - Ft. Worth
Arpt (American
Airlines)
AMT Ser 92
7.25%, 11/01/30 ............... 3,985 4,429,487
------------
23,661,604
------------
VIRGINIA-3.8%
A+ Giles County IDR
(Hoechst--Celanese Corp.)
AMT Ser 96
6.45%, 5/01/26 ................ 3,740 4,100,498
AAA Suffolk
MFHR (Prince
William Commons)
AMT FNMA Ser 95A
6.50%, 6/01/29 ................ 2,795 2,981,287
AA+ Virginia Hsg Dev Auth
SFMR (Commonwealth
Mtg) AMT Ser 94G
7.125%, 7/01/22 ............... 1,660 1,748,196
------------
8,829,981
------------
WEST VIRGINIA-2.3%
AAA West Virginia Parkways
Eco Dev (Parkway Rev)
FGIC Ser 93
7.555%, 5/16/19 (a) ........... 5,000 5,315,300
------------
TOTAL LONG TERM
MUNICIPAL BONDS
(cost $220,379,143) ........... 232,315,446
------------
SHORT TERM
MUNICIPAL NOTES-4.6%
MASSACHUSETTS-1.7%
A-1+ Mass Ed Fin Auth
Student Loan Rev
AMT Ser 97E VRDN
3.70%, 7/01/15 (b) ............ 4,000 4,000,000
------------
TEXAS-1.6%
VMIG-1* Panhandle Plains
Student Loan Rev
AMT Ser 91B VRDN
3.70%, 6/01/21 (b) ............ 3,100 3,100,000
AMT Ser 92AVRDN
3.70%, 6/01/08 (b) ............ 600 600,000
------------
3,700,000
------------
VIRGINIA-1.3%
VMIG-1* Charles City Indl Dev
Auth (Chambers Dev
Va Inc)
AMT Ser 91 VRDN
3.90%, 10/01/06 (b) ........... 3,000 3,000,000
------------
TOTAL SHORT TERM
MUNICIPAL NOTES
(cost $10,700,000) ............ 10,700,000
------------
TOTAL INVESTMENTS-104.0%
(cost $231,079,143) ........... 243,015,446
Other liabilities less assets-(4.0%) (9,374,526)
------------
NET ASSETS-100% ............... $233,640,920
============
6
<PAGE>
ACM Municipal Securities Income Fund
================================================================================
- --------------------------------------------------------------------------------
+ Unaudited.
* Moody's or Fitch Rating.
(a) Inverse Floater Security--Security with variable or floating interest rate
that moves in opposite direction of short-term interest rates.
(b) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specific date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as
the prime interest rate). This instrument is payable on demand and is
secured by letters of credit or other credit support agreements from major
banks.
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
MBIA - Municipal Bond Investors Assurance
MFHR - Multi-Family Housing Revenue
NR - Rating not applied for
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
7
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997 ACM Municipal Securities Income Fund
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $231,079,143) .......................................... $ 243,015,446
Receivable for investment securities sold ........................................................ 8,282,445
Interest receivable .............................................................................. 3,956,783
Deferred organization expense and other assets ................................................... 75,761
-------------
Total assets ..................................................................................... 255,330,435
-------------
LIABILITIES
Due to custodian ................................................................................. 675,593
Payable for investment securities purchased ...................................................... 20,490,862
Advisory fee payable ............................................................................. 96,805
Administrative fee payable ....................................................................... 29,041
Accrued expenses and other liabilities ........................................................... 397,214
-------------
Total liabilities ................................................................................ 21,689,515
-------------
NET ASSETS ......................................................................................... $ 233,640,920
=============
COMPOSITION OF NET ASSETS
Preferred Stock:
$.01 par value per share; 3,600 shares Preferred Stock authorized, issued and outstanding at
$25,000 per share liquidation preference ...................................................... $ 90,000,000
Common Stock:
$.01 par value per share; 100,000,000 shares authorized, 10,669,867 shares issued and outstanding 106,699
Additional paid-in capital ....................................................................... 146,548,553
Distributions in excess of net investment income ................................................. (45)
Accumulated net realized loss on investments ..................................................... (14,950,590)
Net unrealized appreciation of investments ....................................................... 11,936,303
=============
$ 233,640,920
=============
NET ASSET VALUE PER SHARE OF COMMON STOCK--$143,640,920
($233,640,920 less Preferred Stock at liquidation value of $90,000,000)
divided by 10,669,867 shares of Common Stock outstanding ....................................... $ 13.46
=======
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
8
<PAGE>
STATEMENT OF OPERATIONS
Year Ended October 31, 1997 ACM Municipal Securities Income Fund
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest........................................................... $ 14,960,957
EXPENSES
Advisory fee....................................................... $1,136,344
Administrative fee................................................. 340,902
Auction Agent fee.................................................. 225,248
Audit and legal.................................................... 118,389
Custodian.......................................................... 109,720
Transfer agency.................................................... 60,446
Printing........................................................... 40,385
Directors' fees.................................................... 35,235
Amortization of organization expenses.............................. 12,045
Miscellaneous...................................................... 51,733
----------
Total expenses..................................................... 2,130,447
------------
Net investment income.............................................. 12,830,510
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions....................... 2,128,635
Net change in unrealized appreciation of investments............... 5,592,202
------------
Net gain on investments............................................ 7,720,837
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS........................... $ 20,551,347
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------
1997 1996
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income ............................................. $ 12,830,510 $ 12,527,055
Net realized gain on investment transactions ...................... 2,128,635 3,335,681
Net change in unrealized appreciation (depreciation) of investments 5,592,202 (1,073,204)
------------- -------------
Net increase in net assets from operations ........................ 20,551,347 14,789,532
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Common Stock ..................................................... (9,554,156) (8,994,324)
Preferred Stock .................................................. (3,276,354) (3,532,731)
Distributions in excess of net investment income
Common Stock ..................................................... (4,030) (503,573)
Preferred Stock .................................................. (1,379) (202,580)
CAPITAL STOCK TRANSACTIONS
Reinvestment of dividends resulting in the issuance of Common Stock 1,037,203 843,978
------------- -------------
Total increase .................................................... 8,752,631 2,400,302
NET ASSETS
Beginning of year ................................................. 224,888,289 222,487,987
------------- -------------
End of year ....................................................... $ 233,640,920 $ 224,888,289
============= =============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1997 ACM Municipal Securities Income Fund
================================================================================
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 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 any, 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.
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-to-tax differences, resulting from distributions in excess
of net tax-exempt income, resulted in a net decrease in additional paid-in
capital and a corresponding increase in distributions in excess of net
investment income. This reclassification had no effect on net assets.
- --------------------------------------------------------------------------------
NOTE B: Advisory and Administrative Fees
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 .50 of 1% of the average 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 $955 during the year ended October 31, 1997.
Under the terms of an 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 Administrator has engaged Prudential Mutual Fund Management, Inc.
(the "Sub-Administrator") to act as Sub-Administrator. The Administrator, out of
its
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cont.) ACM Municipal Securities Income Fund
================================================================================
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 $214,276,839 and $202,333,146,
respectively, for the year ended October 31, 1997. There were no purchases or
sales of U.S. government and government agency obligations for the year ended
October 31, 1997.
At October 31, 1997 the cost of the investments for Federal income tax purposes
was $231,097,836. Accordingly, gross unrealized appreciation was $11,958,627 and
gross unrealized depreciation was $41,017 resulting in net unrealized
appreciation of $11,917,610.
- --------------------------------------------------------------------------------
NOTE D: Taxes
For Federal income tax purposes at October 31, 1997, the Fund had a capital loss
carry forward of $14,926,533; of which $3,828,762 expires in the year 2002 and
$11,097,771 expires in the year 2003.
- --------------------------------------------------------------------------------
NOTE E: Capital Stock
Common Stock
There are 100,000,000 shares of $0.01 par value Common Stock authorized. Of the
10,669,867 shares outstanding at October 31, 1997, the Adviser owned 7,200
shares. During the years ended October 31, 1997 and 1996, the Fund issued 80,018
and 30,590 shares, respectively, in connection with the Fund's dividend
reinvestment plan.
Preferred Stock
The Fund has issued and outstanding 3,600 shares of Preferred Stock, consisting
of 1,200 shares each of Series A, Series B and Series C, with a liquidation
value of $25,000 per share.
The dividend rate on Series A is 3.55% and is effective through November 5,
1997. The dividend rate on Series B is 3.65% and is effective through November
3, 1997. The dividend rate on Series C is 3.60% and is effective through
November 6, 1997.
11
<PAGE>
FINANCIAL HIGHLIGHTS ACM Municipal Securities Income Fund
================================================================================
Selected Data For a Share of Common Stock Outstanding Throughout Each Period.
<TABLE>
<CAPTION>
Year Ended October 31, April 23, 1993(a)
----------------------------------------------------------- to
1997 1996 1995 1994 October 31, 1993
----------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $12.74 $12.59 $11.57 $14.66 $13.98(b)
----------- ----------- ----------- ----------- -----------
Income From Investment Operations
- ---------------------------------
Net investment income ....................... 1.20 1.18 1.17 1.21 .50
Net realized and unrealized gain (loss)
on investment transactions ............... .72 .22 1.11 (2.96) .74
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net asset value
from operations .......................... 1.92 1.40 2.28 (1.75) 1.24
----------- ----------- ----------- ----------- -----------
Less: Dividends And Distributions
- ---------------------------------
Dividends from net investment income:
Paid to Common Stock shareholders ........ (.89) (.85) (.90) (.90) (.30)
Common Stock equivalent of dividends
paid to Preferred Stock shareholders ... (.31) (.33) (.36) (.31) (.08)
Distributions in excess of net investment
income:
Paid to Common Stock shareholders ...... -0- (.05) -0- -0- -0-
Common Stock equivalent of distributions
paid to Preferred Stock shareholders -0- (.02) -0- -0- -0-
Distributions from realized capital gains:
Paid to Common Stock Shareholders ........ -0- -0- -0- (.11) -0-
Common Stock equivalent of distributions
paid to Preferred Stock Shareholders ... -0- -0- -0- (.02) -0-
----------- ----------- ----------- ----------- -----------
Total dividends and distributions ........... (1.20) (1.25) (1.26) (1.34) (.38)
----------- ----------- ----------- ----------- -----------
Preferred Stock offering costs and
underwriting discounts ................... -0- -0- -0- -0- (.18)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period .............. $13.46 $12.74 $12.59 $11.57 $14.66
----------- ----------- ----------- ----------- -----------
Market value, end of period ................. $14.12 $12.38 $12.00 $10.25 $14.25
=========== =========== =========== =========== ===========
Total Investment Return
- -----------------------
Total investment return based on: (c)
Market value ............................. 22.34% 10.82% 26.65% (21.99)% 3.42%
Net asset value .......................... 13.24% 8.74% 17.71% (14.41)% 6.39%
Ratios/Supplemental Data
- ------------------------
Net assets, end of period (000's omitted) ... $233,641 $224,888 $222,488 $211,597 $244,069
Ratio of expenses to average net assets (d) .94% .93% .84% .77% .81%(e)
Ratio of net investment income to average
net assets (d) ........................... 5.64% 5.64% 5.77% 5.58% 4.95%(e)
Portfolio turnover rate ..................... 90% 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.
12
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ACM Municipal Securities Income Fund
================================================================================
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, 1997, 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, 1997, 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, 1997, 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 4, 1997
- --------------------------------------------------------------------------------
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, 1997 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 1997 calendar year, early in 1998.
13
<PAGE>
ADDITIONAL INFORMATION ACM Municipal Securities 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.
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, 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 correspondents concerning the Plan should be
directed to the Agent at State Street Bank and Trust Company, P.O. Box 366,
Boston, Massachusetts 02101.
14
<PAGE>
ACM Municipal Securities 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 Susan P. Keenan, a Senior Vice President of the Fund.
15
<PAGE>
ACM Municipal Securities Income Fund
================================================================================
BOARD OF DIRECTORS
John D. Carifa, Chairman and President
Ruth Block
David H. Dievler
James R. Greene
Dr. James M. Hester
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 M. 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
PREFERRED STOCK:
DIVIDEND PAYING AGENT,
TRANSFER AGENT AND REGISTRAR
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
SUB-ADMINISTRATOR
Prudential Mutual Fund Management, LLC
Gateway Center Three
Newark, NJ 07102-4077
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
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
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 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.
16
<PAGE>
ACM Municipal Securities Income Fund
Summary of General Information
The Fund
ACM Municipal Securities Income Fund 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, each Sunday in The New York
Times and each Saturday in Barron's 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 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 Municipal Securities Income Fund
1345 Avenue of the Americas
New York, New York 10105
Alliance Capital [LOGO]
(R)These registered service marks used under license from the owner, Alliance
Capital Management, L.P.
MSIAR
ACM
----------------------------
MUNICIPAL
----------------------------
SECURITIES
----------------------------
INCOME FUND
----------------------------
Annual Report
October 31, 1997
[LOGO] Alliance(R)
