<PAGE>
LETTER TO SHAREHOLDERS ACM Municipal Securities Income Fund
================================================================================
December 28, 1998
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,
1998.
INVESTMENT RESULTS(*)
Periods Ended October 31, 1998
Total Returns
ACM Municipal Securities Income Fund
1 Year 3 Years 5 Years
------ ------- -------
6.89% 9.59% 5.81%
General & Leveraged Muni Debt Funds Average
1 Year 3 Years 5 Years
------ ------- -------
8.43% 8.40% 6.29%
(*) The Fund's investment results are total returns for the periods and are
based on the net asset value as of October 31, 1998. All fees and expenses
related to the operation of the Fund have been deducted. Returns for the Fund
include the reinvestment of any distributions paid during the period. Past
performance is no guarantee of future results.
The General & Leveraged Muni Debt Funds Average represents the performance of 46
funds for the 1-year period and 44 funds for the 3-year period and 42 funds for
the 5-year period ended October 31, 1998. Funds in the Lipper averages generally
have similar investment objectives, although some may have different investment
policies. An investor cannot invest directly in an average.
INVESTMENT RESULTS
Your Fund is designed to provide high current income, exempt from regular income
tax. In order to meet the Fund's objective and maintain its dividend yield in a
declining interest rate environment, we do not typically sell off securities in
order to increase total return performance. Rather, we try to maintain the
portfolio's construction. Your Fund's portfolio currently consists of older,
higher yielding securities with 5 - 7 years of call protection. This call
protection ensures that the bonds in your portfolio cannot be called by their
issuer early. While this practice maintains the Fund's dividend rate (our
primary objective), and as a result, your income, it may also lessen the Fund's
net asset value. For the 12-month period ended October 31, 1998, your Fund's
performance lagged its benchmark for this reason.
Your Fund's market price per share ended the period at $14.063.
MARKET OVERVIEW
The municipal bond market had an excellent year both on an absolute basis and
relative to other sectors of the fixed income markets. The tax-exempt sector
benefited from the same macroeconomic and market forces that drove the U.S.
government bond market to levels not seen since the 1960s. Individual and
institutional investors alike chose to invest in municipal bonds because of
their sound credit quality, attractive taxable-equivalent yields, and an overall
perception that municipals offer a "safe haven" in turbulent global markets.
The absence of any significant tax reform legislation under consideration by the
U.S. Congress has also helped market stability, unlike recent years when the
Federal tax-exempt status of municipal bonds had been threatened.
Despite the strong performance of municipal bonds over the course of the past
year, the yield ratio, or relationship of municipal bond yields to Treasury
yields, has increased. Factors which have contributed to this relative
underperformance versus Treasuries include the greater size, liquidity and
overall attraction of U.S. government securities as a "safe haven" and
continuing high levels of new issuance by states and municipalities. In fact,
new supply for state and local debt issuance should reach record levels this
year. Local governments are taking advantage of the
1
<PAGE>
ACM Municipal Securities Income Fund
================================================================================
opportunity to refinance older, higher coupon debt, as well as borrowing new
money to fund infrastructure renovation and rebuilding projects.
INVESTMENT STRATEGY
Due to record low interest rates and narrow credit spreads between triple-A and
triple-B rated debt, trading activity in the Fund's portfolio has been minimal.
The Fund's performance continues to be very strong because, over the last
several years, we have aggressively worked to lock in income and call
protection.
The credit fundamentals of state and local governments continue to improve.
Through September, the strong domestic economy continued to benefit
municipalities through better than projected sales tax and personal income tax
collection, typically the largest single source of tax revenue. Empirical
evidence of this continuing improvement in credit quality is that we are now in
the twelfth consecutive quarter where municipal credit rating upgrades have
exceeded downgrades, according to both Moody's and Standard & Poor's. In
addition to the strong economy, rating agencies have recognized that many
governmental entities now have financial forecasting and planning models which
should help preserve strong credit quality through a recession, unlike the
experience of the late 1980s.
MARKET OUTLOOK
We expect that over the short-term, market volatility will continue. New
municipal debt issuance, due to dramatically lower interest rates, as well as
less overall market liquidity, due to recent losses experienced by financial
institutions, will most likely lead to downward pressure on municipal bond
prices. At Alliance, we believe that any weakness caused by fundamental or
technical changes in the market should provide an excellent buying opportunity.
Looking ahead, we believe that inflation will not be a factor, municipal credit
quality will continue to improve, and we will remain in a very positive
environment for tax exempt market investors.
We appreciate your investment in ACM Municipal Securities Income Fund and look
forward to reporting future investment results.
Sincerely,
/s/ Johh 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, 1998 ACM Municipal Securities Income Fund
================================================================================
Standard Principal
& Poor's Amount
Rating(a) (000) Value
- --------------------------------------------------------------------------------
LONG TERM
MUNICIPAL BONDS-98.7%
ARIZONA-0.5%
AA Phoenix
MFHR (Woodstone &
Silver Springs)
Ser 93 Asset Guaranty
6.25%, 4/01/23 .................... $ 1,180 $ 1,251,803
-----------
CALIFORNIA-18.5%
A+ California GO
SFMR (Veterans Housing)
AMT Ser 95
6.40%, 2/01/20 .................... 11,170 11,349,614
AA- California HFA
SFMR (Homeownership
Mtg) AMT Ser 94H
7.50%, 8/01/25 .................... 7,970 8,272,143
NR Ontario Assess Dist #107
(CA Commerce Ctr So)
7.70%, 9/02/10 .................... 6,130 6,331,125
NR Orange County
Assess Dist #88-1
(Pelican Hill Proj)
Ser 92A
8.25%, 9/02/18 .................... 3,825 3,937,952
A- Placer County Res Rec.
(Wstrn Placer Wst Mgmt)
AMT Ser 94
6.75%, 7/01/14 .................... 1,800 1,987,218
AAA Sacramento
Muni Util Dist
(Elec Rev)
Ser 92A FGIC
9.071%, 8/15/18(b) ................ 2,500 2,971,651
A- Vacaville
MFHR (Vacaville
Comm Hsg)
Ser 94
7.85%, 11/01/24 ................... 4,625 5,001,011
BBB+ Westminster Redev Agy
MFHR (Rose Garden Apt)
6.75%, 8/01/24 .................... 3,300 3,503,478
----------
43,354,192
----------
Standard Principal
& Poor's Amount
Rating(a) (000) Value
- --------------------------------------------------------------------------------
COLORADO-9.3%
Baa3 Denver City & County
Arpt Rev (United Airlines)
AMT Ser 92A
6.875%, 10/01/32(c) ............... $ 20,300 $21,939,631
-----------
FLORIDA-2.3%
Aaa Brevard County HFA
SFMR (Homeownership
Mtg)
AMT FHA Ser 94
6.70%, 9/01/27(c) ................. 3,060 3,267,805
A Dade County
MFHR (Golden
Lakes Apts)
AMT Ser 97A
6.00%, 11/01/32 ................... 250 257,710
6.05%, 11/01/39 ................... 750 773,070
AAA Florida HFA
SFMR (Homeownership
Mtg.)
AMT GNMA Ser 94B
6.65%, 7/01/26 .................... 1,085 1,146,758
-----------
5,445,343
-----------
ILLINOIS-1.8%
BBB- Chicago Arpt Rev
(American Airlines)
AMT Ser 94
8.20%, 12/01/24 ................... 3,500 4,205,845
-----------
INDIANA-4.7%
Baa3 Indianapolis
Airport Rev
(United Airlines)
AMT Ser 95A
6.00%, 11/15/31(c) ................ 3,160 3,396,432
Baa2 Warrick County
PCR (So Indiana
Gas & Elec Co)
AMT Ser 93B
6.00%, 5/01/23(c) ................. 7,290 7,763,558
-----------
11,159,990
-----------
3
<PAGE>
PORTFOLIO OF INVESTMENTS(cont.) ACM Municipal Securities Income Fund
================================================================================
Standard Principal
& Poor's Amount
Rating(a) (000) Value
- --------------------------------------------------------------------------------
LOUISIANA-0.2%
Aaa Calcasieu Parish
SFMR (Mortgage Rev)
AMT GNMA/FNMA
Ser 97A
6.40%, 4/01/32(c) ................. $ 340 $ 360,937
-----------
MARYLAND-3.4%
AAA Baltimore County
MFHR (Dunfield Proj)
FHA Ser 92A
6.90%, 8/01/28 .................... 7,500 8,058,000
-----------
MASSACHUSETTS-4.0%
BBB+ Mass Hlth & Ed Fac
Auth Hosp Rev
(Jordan Hospital)
Ser 92B
6.875%, 10/01/15 .................. 1,500 1,629,510
Aaa Mass Hlth & Ed Fac
Auth Hosp Rev
(Metro West Health)
Ser 92C 6.50%,
Preref: 11/15/02(c) ............... 2,690 3,016,001
A+ Mass HFA
SFMR (Residential
Mtg)
AMT Ser 40
6.65%, 12/01/27 ................... 4,520 4,869,170
-----------
9,514,681
-----------
MICHIGAN-4.7%
AAA Detroit GO
FGIC, Ser 93
6.35%, Preref: 4/01/03 ........... 555 611,072
AA+ Michigan
Hsg Dev Auth SFMR
(Mortgage Rev)
AMT Ser 95B
7.05%, 6/1/26 ..................... 205 212,431
AAA Michigan
Hsg Dev Auth
MFHR (Rental Rev)
AMT AMBAC Ser 97A
6.10%, 10/1/33 .................... 8,400 8,918,028
Standard Principal
& Poor's Amount
Rating(a) (000) Value
- --------------------------------------------------------------------------------
AA Troy Downtown
Dev Auth
Ser 95A Asset Guaranty
6.375%, 11/01/18 .................. $ 1,255 $ 1,397,970
-----------
11,139,501
-----------
MINNESOTA-4.3%
AA+ Minnesota HFA
SFMR (Homeownership Mtg)
AMT Ser 96F
6.30%, 1/01/28 .................... 3,475 3,688,018
6.25%, 7/01/26 .................... 6,065 6,410,644
-----------
10,098,662
-----------
NEW JERSEY-2.1%
A+ New Jersey Hsg & Mtg Fin
MFHR (Sect 8)
Ser1
6.70%, 11/01/28 ................... 4,665 5,014,828
-----------
NEW YORK-3.3%
AAA New York City GO
Ser 95B 7.25%,
Preref: 8/15/04 ................... 3,465 4,088,007
AAA New York State HFA
MFHR (Erie Monroe Cty Proj)
AMT AMBAC Ser 89B
7.55%, 11/01/29 ................... 3,470 3,596,655
-----------
7,684,662
-----------
OHIO-2.1%
AAA Ohio HFA
SFMR (Mortgage Rev)
AMT GNMA Ser 95 A-2
6.625%, 3/01/26 ................... 4,555 4,858,727
-----------
RHODE ISLAND-5.0%
AA+ Rhode Island Hsg & Mtg
Fin Corp SFMR
(Homeownership Mtg)
AMT Ser 92-7A
6.75%, 10/01/25 ................... 3,700 3,928,364
AMT Ser 91-8
10.367%, 4/01/24(b) ............... 7,000 7,715,890
-----------
11,644,254
-----------
4
<PAGE>
ACM Municipal Securities Income Fund
================================================================================
Standard Principal
& Poor's Amount
Rating(a) (000) Value
- --------------------------------------------------------------------------------
SOUTH CAROLINA-1.8%
AAA Horry County Arpt Rev
(Myrtle Beach Jet Port)
AMT FSA Ser 90
7.30%, 7/01/20 .................... $ 4,000 $ 4,295,120
-----------
SOUTH DAKOTA-8.4%
A2 South Dakota
(Education Loans)
AMT Ser 98-1K
5.60%, 6/01/20(c) ................. 5,400 5,463,990
AAA South Dakota
SFMR (Homeownership Mgt)
AMT Ser 93-11
6.15%, 5/01/26 .................... 8,600 8,901,688
A2 South Dakota
(Education Loans)
AMT Ser 96-1E 6.55%,
Preref: 8/01/01(c) ................ 4,900 5,373,144
-----------
19,738,822
-----------
TENNESSEE-7.1%
Aa2 Tennessee Ed Loan
(Ed Funding South, Inc)
AMT Ser 97B
6.20%, 12/01/21(c) ................ 10,600 11,108,694
BBB Memphis Shelby
County Spec Fac
(Federal Express)
AMT Ser 93
6.20%, 7/01/14 .................... 2,000 2,138,880
AAA Metro Govt Nashville
& Davidson Cnty
Water System Rev
Ser 92 AMBAC
8.368%, 1/01/22(b) ................ 3,000 3,517,650
-----------
16,765,224
-----------
TEXAS-10.2%
BBB Alliance Arpt Auth
(Federal Express)
AMT Ser 96
6.375%, 4/01/21 ................... 14,500 15,650,140
Standard Principal
& Poor's Amount
Rating(a) (000) Value
- --------------------------------------------------------------------------------
AAA Amarillo Texas
Hosp Rev
(High Plains Baptist)
FSA Ser 92B
9.088%, 1/01/22(b) ................ $ 3,200 $ 3,811,904
BBB- Dallas - Ft. Worth
Airport (American
Airlines)
AMT Ser 92
7.25%, 11/01/30 ................... 3,985 4,380,392
-----------
23,842,436
-----------
VIRGINIA-2.6%
A+ Giles County IDR
(Hoechst-Celanese Corp.)
AMT Ser 96
6.45%, 5/01/26 .................... 3,670 4,069,296
AAA Suffolk
MFHR (Prince
William Commons)
AMT FNMA Ser 95A
6.50%, 6/01/29 .................... 1,765 1,918,431
-----------
5,987,727
-----------
WEST VIRGINIA-2.4%
AAA West Virginia Parkways
Eco Dev (Parkway Rev)
FGIC Ser 93
7.626%, 5/16/19(b) ................ 5,000 5,600,850
-----------
TOTAL INVESTMENTS-98.7%
(Cost $220,599,894) ............... 231,961,235
Other assets less liabilities - 1.3% 3,034,005
-----------
NET ASSETS--100% .................. $234,995,240
===========
5
<PAGE>
PORTFOLIO OF INVESTMENTS(cont.) ACM Municipal Securities Income Fund
================================================================================
- --------------------------------------------------------------------------------
(a) Unaudited.
(b) Inverse Floater Security - Security with variable or floating interest rate
that moves in opposite direction of short-term interest rates.
(c) Moody's Rating.
Glossary of Terms:
AMBAC American Municipal Bond Assurance
Corporation
AMT Alternative Minimum Tax
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
NR Not Rated
PCR Pollution Control Revenue
SFMR Single Family Mortgage Revenue
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998 ACM Municipal Securities Income Fund
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $220,599,894) .................................................... $231,961,235
Interest receivable ........................................................................................ 3,837,495
Other assets ............................................................................................... 8,151
------------
Total assets ............................................................................................... 235,806,881
------------
LIABILITIES
Due to custodian ........................................................................................... 546,153
Advisory fee payable ....................................................................................... 98,961
Administrative fee payable ................................................................................. 35,088
Accrued expenses and other liabilities ..................................................................... 131,439
------------
Total liabilities .......................................................................................... 811,641
------------
NET ASSETS .................................................................................................. $234,995,240
============
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, 10,751,488 shares issued and outstanding ........ 107,515
Additional paid-in capital ................................................................................. 147,440,380
Distribution in excess of net investment income ............................................................ (694)
Accumulated net realized loss on investments ............................................................... (13,913,302)
Net unrealized appreciation of investment .................................................................. 11,361,341
-------------
$ 234,995,240
=============
NET ASSET VALUE PER SHARE OF COMMON STOCK--$144,995,240 ($234,995,240 less
Preferred Stock at liquidation value of $90,000,000)
divided by 10,751,488 shares of Common Stock outstanding ................................................. $13.49
======
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
7
<PAGE>
STATEMENT OF OPERATIONS
Year Ended October 31, 1998 ACM Municipal Securities Income Fund
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest............................................ $14,541,511
EXPENSES
Advisory fee........................................ $1,175,024
Administrative fee.................................. 352,507
Auction agent fee................................... 225,256
Audit and legal..................................... 99,308
Custodian........................................... 91,068
Transfer agency..................................... 53,444
Directors' fees..................................... 35,755
Printing............................................ 21,648
Amortization of organization expenses............... 5,649
Miscellaneous....................................... 38,030
----------
Total expenses...................................... 2,097,689
-----------
Net investment income............................... 12,443,822
-----------
REALIZED AND UNREALIZED GAIN (LOSS)ON INVESTMENTS
Net realized gain on investment transactions........ 1,031,923
Net change in unrealized appreciation of investments. (574,962)
-----------
Net gain on investments............................. 456,961
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS........... $12,900,783
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income................................................. $ 12,443,822 $ 12,830,510
Net realized gain on investment transactions.......................... 1,031,923 2,128,635
Net change in unrealized appreciation (depreciation) of investments... (574,962) 5,592,202
------------ ------------
Net increase in net assets from operations............................ 12,900,783 20,551,347
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Common Stock........................................................ (9,255,074) (9,554,156)
Preferred Stock..................................................... (3,188,748) (3,276,354)
Distributions in excess of net investment income
Common Stock........................................................ (220,563) (4,030)
Preferred Stock..................................................... -0- (1,379)
CAPITAL STOCK TRANSACTIONS
Reinvestment of dividends resulting in the issuance of Common Stock... 1,117,922 1,037,203
------------ ------------
Total increase........................................................ 1,354,320 8,752,631
NET ASSETS
Beginning of year..................................................... 233,640,920 224,888,289
------------ ------------
End of year........................................................... $234,995,240 $233,640,920
============ ============
- ------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1998 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 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 are generally
valued at the last reported sale price or if there was no sale on such a 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 are valued at the mean of the
closing bid and ask prices 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. Organization Expenses
Organization expenses of approximately $60,000 were deferred and 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 regulation 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.
On November 28, 1995, the Fund entered into a Shareholder Inquiry Agency
Agreement with Alliance
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS(cont.) ACM Municipal Securities Income Fund
================================================================================
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, 1998 there was no reimbursement paid to AFS.
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, LLC
(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 $139,560,314 and $150,524,456,
respectively, for the year ended October 31, 1998. There were no purchases or
sales of U.S. government and government agency obligations for the year ended
October 31, 1998.
At October 31, 1998 the cost of the investments for Federal income tax purposes
was $220,614,719. Accordingly, gross unrealized appreciation was $11,458,767 and
gross unrealized depreciation was $112,251 resulting in net unrealized
appreciation of $11,346,516.
- --------------------------------------------------------------------------------
NOTE D: Taxes
For Federal income tax purposes at October 31, 1998, the Fund had a capital loss
carry forward of $13,898,478; of which $2,800,707 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
10,751,488 shares outstanding at October 31, 1998, the Adviser owned 7,200
shares. During the year ended October 31, 1998, and the year ended October 31,
1997, the Fund issued 81,621 and 80,018 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 3.25% and is effective through November 5,
1998. The dividend rate on Series B is 3.30% and is effective through November
3, 1998. The dividend rate on Series C is 3.10% and is effective through
November 6, 1998.
10
<PAGE>
FINANCIAL HIGHLIGHTS ACM Municipal Securities Income Fund
================================================================================
Selected Data For a Share of Common Stock Outstanding Throughout Each Year.
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........ $ 13.46 $ 12.74 $ 12.59 $ 11.57 $ 14.66
Income From Investment Operations
Net investment income ..................... 1.16 1.20 1.18 1.17 1.21
Net realized and unrealized gain (loss)
on investment transactions .............. .04 .72 .22 1.11 (2.96)
Net increase (decrease) in net asset value
from operations ......................... 1.20 1.92 1.40 2.28 (1.75)
Less: Dividends And Distributions
Dividends from net investment income:
Paid to Common Stock shareholders ....... (.86) (.89) (.85) (.90) (.90)
Common Stock equivalent of dividends
paid to Preferred Stock shareholders .. (.29) (.31) (.33) (.36) (.31)
Distributions in excess of net investment
income:
Paid to Common Stock shareholders ..... (.02) -0- (.05) -0- -0-
Common Stock equivalent of distributions
paid to Preferred Stock shareholders .. -0- -0- (.02) -0- -0-
Distributions from realized capital gains:
Paid to Common Stock shareholders ....... -0- -0- -0- -0- (.11)
Common Stock equivalent of distributions
paid to Preferred Stock shareholders .. -0- -0- -0- -0- (.02)
Total dividends and distributions ......... (1.17) (1.20) (1.25) (1.26) (1.34)
Net asset value, end of year .............. $ 13.49 $ 13.46 $ 12.74 $ 12.59 $ 11.57
Market value, end of year ................. $ 14.06 $ 14.12 $ 12.38 $ 12.00 $ 10.25
Total Investment Return
Total investment return based on: (a)
Market value ............................ 6.19% 22.34% 10.82% 26.65% (21.99)%
Net asset value ......................... 6.89% 13.24% 8.74% 17.71% (14.41)%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) ... $234,995 $233,641 $224,888 $222,488 $211,597
Ratio of expenses to average net assets (b) .89% .94% .93% .84% .77%
Ratio of net investment income to average
net assets (b) .......................... 5.30% 5.64% 5.64% 5.77% 5.58%
Portfolio turnover rate ................... 60% 90% 178% 222% 116%
</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 the
year 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 the
year.
(b)The expense ratio and net investment income ratio do not reflect the effect
of dividend and distribution payments to Preferred Stock shareholders.
11
<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. (the "Fund"), including the portfolio of
investments, as of October 31, 1998, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998, by correspondence with the custodian . 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, 1998, 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 indicted periods in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
New York, New York
December 9, 1998
- --------------------------------------------------------------------------------
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, 1998 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 1998 calendar year, early in 1999.
12
<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.
13
<PAGE>
ADDITIONAL INFORMATION(cont.) 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 bylaws 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.
- --------------------------------------------------------------------------------
YEAR 2000 AND EURO (UNAUDITED)
Many computer systems and applications in use today process transactions using
two digit date fields for the year of the transaction, rather than the full four
digits. If these systems are not modified or replaced, transactions occurring
after 1999 could be processed as year "1900", which could result in processing
inaccuracies and computer system failures. This is commonly known as the Year
2000 problem. In addition to the Year 2000 problem, the European Economic and
Monetary Union has established a single currency, the Euro Currency ("Euro")
that will replace the national currency of certain European countries effective
January 1, 1999. Computer systems and applications must be adapted in order to
be able to process Euro sensitive information accurately beginning in 1999.
Should any of the computer systems employed by the Fund's major service
providers fail to process Year 2000 or Euro related information properly, that
could have a significant negative impact on the Fund's operations and the
services that are provided to the Fund's shareholders. In addition, to the
extent that the operations of issuers of securities held by the Fund are
impaired by the Year 2000 problem or Euro, or prices of securities held by the
Fund decline as a result of real or perceived problems relating to the Year 2000
or the Euro, the value of the Fund's shares may be materially affected.
With respect to the Year 2000, the Fund has been advised that the Adviser,
("Alliance") began to address the Year 2000 issue several years ago in
connection with the replacement or upgrading of certain computer systems and
applications. During 1997, Alliance began a formal Year 2000 initiative, which
established a structured and coordinated process to deal with the Year 2000
issues on its domestic and international computer systems and applications.
Currently, management of Alliance expects that the required modifications for
the majority of its significant systems and applications that will be in use on
January 1, 2000, will be completed and tested by the end of 1998. Full
integration testing of these systems and testing of interfaces with third-party
suppliers will continue through 1999. At this time, management of Alliance
believes that the costs associated with resolving this issue will not have a
material adverse effect on its operations or on its ability to provide the level
of services it currently provides to the Fund.
With respect to the Euro, the Fund has been advised that Alliance has
established a project team to assess changes that will be required in connection
with the introduction of the Euro. Alliance reports that its project team has
assessed all systems, including those developed or managed internally, as well
as those provided by vendors, in order to determine the modifications that will
be required to process accurately transactions denominated in Euro after 1998.
At this time, management of Alliance expects that the required modifications
for the introduction of
14
<PAGE>
ADDITIONAL INFORMATION (cont.) ACM Municipal Securities Income Fund
================================================================================
the Euro will be completed and tested before the end of 1998. Management of
Alliance believes that the costs associated with resolving this issue will not
have a material adverse effect on its operations or on its ability to provide
the level of services it currently provides to the Fund.
The Fund and Alliance have been advised by the Fund's Transfer Agent and
Custodian that they are also in the process or reviewing their systems with the
same goals. As of the date of this report the Fund and Alliance have no reason
to believe that the Transfer Agent and Custodian will be unable to achieve these
goals.
- --------------------------------------------------------------------------------
Supplemental Proxy Information
The Annual Meeting of Shareholders of the ACM Municipal Securities Income Fund,
Inc. was held on Thursday, May 28, 1998. The description of each proposal and
number of shares voted at the meeting are as follows:
<TABLE>
<CAPTION>
Shares Shares Voted
Voted For Without Authority
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect directors: Class One Nominees
(term expires in 2001)
John H. Dobkin 8,599,740 116,425
Clifford L. Michel 8,616,828 99,337
Donald J. Robinson 8,617,343 98,822
Class Two Nominee
(term expires in 1999)
William H. Foulk, Jr. 8,617,008 99,157
</TABLE>
<TABLE>
<CAPTION>
Shares Shares Shares Voted
Voted For Voted Against Abstain
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP
as the Fund's independent auditors for the Fund's
fiscal year ending October 31, 1999: 8,570,272 71,472 74,421
</TABLE>
15
<PAGE>
ACM Municipal Securities Income Fund
================================================================================
BOARD OF DIRECTORS
John D. Carifa, Chairman and President
Ruth Block
David H. Dievler
John H. Dobkin
William H. Foulk, Jr.
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
Juan J. Rodriquez, 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 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 provide high current income exempt from regular federal
income tax. The Fund invests substantially all of its assets in investment grade
municipal 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)
(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, 1998
Alliance(R)
- --------------------------------------------------------------------------------
