<PAGE>
LETTER TO SHAREHOLDERS ACM Municipal Securities Income Fund
================================================================================
December 24, 1999
Dear Shareholder:
This shareholder report reviews municipal market activity and investment results
for ACM Securities Income Fund's 12-month fiscal reporting period ended October
31, 1999.
INVESTMENT RESULTS*
Data as of October 31, 1999
Total Returns at Net Asset Value
1 Year 3 Years 5 Years
------ ------- -------
ACM Municipal
Securities
Income Fund -7.76% 3.74% 7.40%
Lipper General
and Leveraged
Muni Debt
Funds Average -6.48% 3.82% 7.26%
The Fund's Market Price Per Share on October 31, 1999 was $11.69.
* The Fund's investment results are total returns for the periods shown and
are based on the net asset value as of October 31, 1999. 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 Lipper General & Leveraged Muni Debt Funds Average represents the
performance of 46 funds for the one-year period, 44 funds for the three-year
period and 43 funds for the five-year period ended October 31, 1999. Funds in
the Lipper averages generally have similar investment objectives to the Fund,
although some may have different investment policies. An investor cannot invest
directly in an average.
MARKET OVERVIEW
Over the past year, municipal bonds performed well on a relative basis but saw
prices decline on an absolute basis. This price decline was caused by a rise in
long-term interest rates as a result of tremendous growth the US economy. This
rise in rates was not unexpected, however, given the cyclical nature of
financial markets. On a relative basis, the municipal bond market performed well
compared to the taxable fixed-income markets. Municipal yields began the year at
parity with comparable Treasury bond yields, which is historically uncommon due
to the tax-advantaged nature of municipal bonds. Over the course of the year,
the ratio of municipals to Treasuries declined from parity to approximately 95%
of long-term Treasury bond yields. As a result, the total return of most
municipal indexes was well ahead of other comparable benchmarks as of October
31, 1999 on an absolute basis as well as a tax-adjusted basis.
We attribute the strength in the municipal bond market relative to Treasuries to
two factors. First, issuance of municipal bonds was down roughly 20% on a year-
over-year basis, primarily due to the rising-rate environment making it less
attractive for issuers to refinance outstanding bonds. Second, demand for
municipals has been very strong, as investors are attracted to the high taxable-
equivalent yields of both bond funds and individual securities. Market
participants attribute this strong demand to the changing savings needs of
maturing baby boomers, and to reinvestment of gains from surging equity markets
into municipal bonds. This strong demand has been somewhat offset by pockets of
selling in the market, particularly from insurance companies raising cash to pay
catastrophe-related claims. Additional selling came from certain institutional
investors who do not benefit from the tax-free benefit of municipal bonds but
had purchased them as a total-return strategy when yield ratios were at parity
with Treasury bonds.
1
<PAGE>
ACM Municipal Securities Income Fund
================================================================================
Credit fundamentals within the municipal market continue to be strong with most
investment sectors showing improved credit quality. State and local governments
are in excellent financial condition, in most cases, due to strong local
economies that have generated increased sales tax and personal income tax
collections. The only area of weakness has been in the corporate-backed
tax-exempt sector. This sector has experienced a number of downgrades primarily
due to merger activity. Most of the issues affected have been older bonds with
relatively high coupons and short-dated call features, which minimizes the
negative price impact resulting from ratings downgrades. Merger activity and
credit-quality activity also affected the health care sector, but unlike the
corporate-backed market, these securities received credit upgrades or in some
cases outstanding bonds were called. Bonds receiving upgrades were either
pre-refunded to a specific call date or escrowed to maturity. These upgrades
created positive price appreciation in an otherwise weak market.
INVESTMENT STRATEGY
At Alliance, we are value-oriented municipal bond investors. Because we take a
longer-term view of interest rate and credit cycles, we see the recent rise in
interest rates as an excellent opportunity to reposition the portfolio. Our
repositioning strategy, similar to the repositioning we conducted in 1994 and
1995, has been to sell our older, higher coupon bonds that are subject to calls
within the next five years or less, and to purchase new bonds with attractive
coupons and ten-year call protection. In addition, we are investing cash
positions accumulated over the past year in longer-maturity issues, which we
believe offer good value in the current rate environment. This repositioning
program will help us to maintain the highest possible distribution rates going
forward and, at the same time, minimize long-term reinvestment risk consistent
with the objectives and guidelines of the Fund. We are also continuing to reap
the benefits of the pre-refunding of certain obligations held by the Fund, which
we typically sell when the full benefit of credit-quality improvement can be
realized by selling the securities. This portfolio repositioning, in addition to
helping us maintain the highest possible distribution rates, allows us to
prepare for the next phase of the interest rate cycle.
MARKET OUTLOOK
Through the end of 1999, we expect that the fixed-income market in general and
the municipal bond market in particular will be in a period of uncertainty. In
addition to the usual concerns of changes in credit quality, supply factors, and
the overall direction of long-term interest rates, the unknown impact of Y2K on
financial markets will create an atmosphere of uncertainty and caution for this
calendar year-end. We view this phenomenon as temporary, and we believe that any
resulting market weakness will create an excellent buying opportunity.
The Alliance Municipal Income team is proud of the strong relative performance
we have delivered in fiscal year 1999 and our excellent long-term investment
record. We look forward to the opportunity to continue to serve our shareholders
over the next year.
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, 1999 ACM Municipal Securities Income Fund
================================================================================
Standard Principal
& Poor's Amount
Rating(a) (000) Value
- --------------------------------------------------------------------------------
LONG TERM
MUNICIPAL BONDS--99.6%
CALIFORNIA--8.6%
NR Ontario Assess Dist #107
(CA Commerce Ctr So)
7.70%, 9/02/10............... $ 6,130 $ 6,316,413
AAA Palm Springs California
Zero Coupon, 4/15/21......... 34,975 9,479,274
AAA Sacramento Muni Util Dist
(Elec Rev)
Ser 92 FGIC
9.38%, 8/15/18(b)............ 2,500 2,661,475
----------
18,457,162
----------
COLORADO--14.9%
Baa3 Denver City & County
Arpt Rev
(United Airlines)
AMT Ser 92A
6.88%, 10/01/32 (c).......... 32,075 32,105,149
----------
FLORIDA--6.7%
A Collier County Rev
(Whistlers Green Apts)
5.45%, 6/01/39............... 5,040 4,497,898
A Dade County MFHR
(Golden Lakes Apts)
AMT Ser 97A
6.00%, 11/01/32 (c).......... 250 243,353
6.05%, 11/01/39 (c).......... 750 733,433
A Miami Dade County
(Financial Auth)
6.20%, 10/01/39.............. 5,145 4,974,289
A+ Palm Beach Florida
(Dev Rev)
Ser 96
6.63%, 12/01/26.............. 4,000 4,045,880
----------
14,494,853
----------
ILLINOIS--7.5%
BBB- Chicago Arpt Rev
(American Airlines)
Ser 94
8.20%, 12/01/24.............. 3,500 3,930,185
Baa2 Chicago Ill. O'Hare
(United Airlines)
Ser A
5.35%, 9/01/16 (c)........... $ 4,500 $ 3,937,185
Aaa Chicago Rev
Single Family Mortgage (c)
5.75%, 1/01/29............... 6,000 3,660,600
6.30%, 9/01/29............... 2,000 2,084,320
6.45%, 9/01/29............... 2,590 2,733,175
----------
16,345,465
----------
INDIANA--1.4%
Baa2 Indianapolis Airport Rev
(Federal Express Corp)
AMT Ser 98
5.50%, 5/01/29 (c)........... 3,500 3,026,800
----------
LOUISIANA--0.2%
Aaa Calcasieu Parish
SFMR (Mortgage Rev)
AMT GNMA/FNMA
Ser 97A
6.40%, 4/01/32 (c)........... 340 342,122
----------
MAINE--4.7%
BBB+ Jay Maine Environmental
(International Paper)
Ser 99A
6.25%, 9/01/23............... 2,300 2,238,682
BBB+ Jay Maine Solid Waste
(International Paper)
Ser 99B
6.20%, 9/01/19............... 8,000 7,812,080
----------
10,050,762
----------
MARYLAND--3.7%
AA Baltimore County
MFHR (Dunfield Proj)
FHA Ser 92A
6.90%, 8/01/28............... 7,500 7,881,150
----------
MASSACHUSETTS--15.2%
BBB Mass Hlth & Ed Fac
Auth Hosp Rev
(Caritas Christi)
5.75%, 7/01/28............... 16,940 13,940,773
3
<PAGE>
PORTFOLIO OF INVESTMENTS(cont.) ACM Municipal Securities Income Fund
================================================================================
Standard Principal
& Poor's Amount
Rating(a) (000) Value
- --------------------------------------------------------------------------------
BBB+ Mass Hlth & Ed Fac
Auth Hosp Rev
(Jordan Hospital)
Ser 92B
6.88%, 10/01/15............. $ 1,500 $ 1,551,795
A Mass Hlth & Ed Fac
Auth Hosp Rev
(Metro West Health)
Ser 92C, Pre-refunded
6.50%, 11/15/02 (c)......... 2,690 2,898,260
AAA Massachusetts HFA
SFMR
(Residential Mortgage)
6.90%, 11/15/24............. 2,500 2,647,550
AAA Massachusetts Port Auth
MBIA
(US Air)
AMT Ser 96A
5.88%, 9/01/23.............. 1,900 1,823,468
AAA Massachusetts
Turnpike Auth
AMBAC Ser 99A
5.00%, 1/01/39.............. 12,000 9,964,440
----------
32,826,286
----------
MICHIGAN--1.9%
AAA Michigan Hsg Dev Auth
MFHR (Rental Rev)
6.10%, 10/01/33............. 4,000 3,994,040
----------
MINNESOTA--3.6%
AAA Minneapolis & St. Paul
Metarpts Commn
5.63%, 1/01/16.............. 7,920 7,678,360
----------
MISSISSIPPI--1.1%
Aaa Mississippi Hsg Corp
SFMR
(Mortgage Rev)
AMT GNMA Ser 99A-7
5.25%, 6/01/31 (c).......... 2,250 2,284,448
----------
NEW YORK--3.7%
AAA New York
(Municipal Water
Finance Auth)
4.75%, 6/15/25.............. $ 1,000 $ 820,530
AAA Troy Hsg Dev Corp
(Mortgage Rev)
8.10%, 2/1/24............... 7,085 7,341,207
----------
8,161,737
----------
PENNSYLVANIA--8.1%
AA+ Pennsylvania Hsg Fin Agy
SFMR
(Home Mortgage)
MBIA Ser 66A
5.65%, 4/01/29.............. 8,050 7,494,953
AAA Philadelphia Airport Rev
AMT
6.10%, 6/15/25.............. 10,000 10,005,200
----------
17,500,153
----------
RHODE ISLAND--3.4%
AA+ Rhode Island Hsg & Mtg
Fin Corp
(Homeownership Mtg)
AMT Ser 91
10.22%, 4/01/24 (b)......... 7,000 7,379,890
----------
SOUTH DAKOTA--2.7%
AAA South Dakota SFMR
(Homeownership Mtg)
AMT Ser 93
6.15%, 5/01/26.............. 6,000 6,005,520
----------
TENNESSEE--6.4%
AAA Metro Govt Nashville
& Davidson Cnty
Water System Rev
AMBAC Ser 92 Pre-refunded
8.32%, 2/01/02 (b).......... 3,000 3,313,710
Aa2 Tennessee Ed Loan
(Ed Funding South, Inc)
AMT Ser 97B
6.20%, 12/01/21 (c)......... 10,600 10,574,030
----------
13,887,740
----------
4
<PAGE>
PORTFOLIO OF INVESTMENTS (cont.) ACM Municipal Securities Income Fund
================================================================================
Standard Principal
& Poor's Amount
Rating(a) (000) Value
- --------------------------------------------------------------------------------
TEXAS--3.6%
AAA Amarillo Hosp Rev
(High Plains Baptist)
FSA Ser 92B, Pre-refunded
9.20%, 1/01/02 (b)............ $ 3,200 $ 3,594,208
BBB- Dallas - Ft. Worth Airport
(American Airlines)
AMT Ser 92
7.25%, 11/01/30............... 3,985 4,213,420
----------
7,807,628
----------
WEST VIRGINIA--2.2%
AAA West Virginia Parkways
Eco Dev (Parkway Rev)
FGIC Ser 93
7.54%, 5/16/19 (b)............. $ 5,000 $ 4,795,550
----------
TOTAL INVESTMENTS--99.6%
(Cost $216,017,907) 215,024,815
Other assets less
liabilities--0.4%.............. 824,821
-------
NET ASSETS--100% $215,849,636
============
- --------------------------------------------------------------------------------
(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 or Fitch's rating (unaudited).
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
HFA Housing Finance Authority
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
SFMR Single Family Mortgage Revenue
See notes to financial statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999 ACM Municipal Securities Income Fund
================================================================================
ASSETS
Investments in securities, at value (cost $216,017,907) .... $215,024,815
Cash ....................................................... 405,625
Receivable for investment securities sold .................. 3,803,245
Interest receivable ........................................ 3,210,129
-----------
Total assets ............................................... 222,443,814
-----------
LIABILITIES
Payable for investment securities purchased ................ 6,415,925
Advisory fee payable ....................................... 94,165
Administrative fee payable ................................. 33,649
Accrued expenses and other liabilities ..................... 50,439
-----------
Total liabilities .......................................... 6,594,178
-----------
NET ASSETS ................................................. $215,849,636
============
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,
10,815,006 shares issued and outstanding ............... 108,150
Additional paid-in capital ................................. 147,983,008
Accumulated net realized loss on investments ............... (21,248,430)
Net unrealized depreciation of investment .................. (993,092)
-----------
$215,849,636
============
NET ASSET VALUE PER SHARE OF COMMON STOCK
($215,849,636 less Preferred Stock at liquidation value of
$90,000,000 divided by 10,815,006 shares of Common Stock
outstanding) ............................................ $11.64
======
- --------------------------------------------------------------------------------
See notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year Ended October 31, 1999 ACM Municipal Securities Income Fund
=====================================================================================================
<S> <C> <C>
INVESTMENT INCOME
Interest.......................................................... $14,052,590
EXPENSES
Advisory fee...................................................... $ 1,153,526
Administrative fee................................................ 346,058
Auction agent fee................................................. 225,256
Audit and legal................................................... 57,792
Custodian......................................................... 111,346
Transfer agency................................................... 42,525
Printing.......................................................... 29,075
Directors' fees................................................... 25,105
Miscellaneous..................................................... 49,623
------
Total expenses.................................................... 2,040,306
---------
Net investment income............................................. 12,012,284
----------
REALIZED AND UNREALIZED GAIN (LOSS)ON INVESTMENTS
Net realized loss on investment transactions...................... (7,335,128)
Net change in unrealized appreciation/depreciation
of investments.................................................... (12,354,433)
-----------
Net loss on investments........................................... (19,689,561)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS......................... $(7,677,277)
===========
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
======================================================================================================
Year Ended October 31,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income............................................. $ 12,012,284 $ 12,443,822
Net realized gain (loss) on investment transactions............... (7,335,128) 1,031,923
Net change in unrealized appreciation/depreciation of investments. (12,354,433) (574,962)
------------ ------------
Net increase (decrease) in net assets from operations............. (7,677,277) 12,900,783
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Common Stock.................................................... (9,087,452) (9,255,074)
Preferred Stock................................................. (2,924,832) (3,188,748)
Distributions in excess of net investment income
Common Stock.................................................... (295,690) (220,563)
CAPITAL STOCK TRANSACTIONS
Reinvestment of dividends resulting in the issuance of
Common Stock...................................................... 839,647 1,117,922
------------ ------------
Total increase (decrease)......................................... (19,145,604) 1,354,320
NET ASSETS
Beginning of year................................................. 234,995,240 233,640,920
------------ ------------
End of year....................................................... $215,849,636 $234,995,240
============ ============
- ---------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1999 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 reporting 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. 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.
3. 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.
4. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gains distributions are determined in accordance with
federal tax 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 Fund Services, Inc. ("AFS"), an affiliate of the
Adviser, whereby the Fund reimburses AFS for costs relating to servicing phone
inquiries for the Fund.
8
<PAGE>
ACM Municipal Securities Income Fund
================================================================================
During the year ended October 31, 1999 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 Investments 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 $678,543,975 and $675,306,826,
respectively, for the period ended October 31, 1999. There were no purchases or
sales of U.S. government and government agency obligations for the period ended
October 31, 1999. At October 31, 1999 the cost of the investments for Federal
income tax purposes was $216,892,342. Accordingly, gross unrealized appreciation
was $2,518,043 and gross unrealized depreciation was $4,385,570 resulting in net
unrealized depreciation of $1,867,527.
- --------------------------------------------------------------------------------
NOTE D: Taxes
For Federal income tax purposes at October 31, 1999, the Fund had a capital loss
carry forward of $20,373,997; of which $2,800,707 expires in 2002, $11,097,771
expires in 2003 and $6,475,519 expires in 2007.
- --------------------------------------------------------------------------------
NOTE E: Capital Stock
Common Stock
There are 100,000,000 shares of $0.01 par value common stock authorized. Of the
10,815,006 shares outstanding at October 31, 1999, the Adviser owned 7,200
shares. During the years ended October 31, 1999 and 1998, the Fund issued 63,518
and 81,621 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 3.60% and is effective through November 3,
1999. The dividend rate on Series B is 3.25% and is effective through November
2, 1999. The dividend rate on Series C is 3.85% and is effective through
November 4, 1999.
9
<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,
-----------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........................ $13.49 $13.46 $12.74 $12.59 $11.57
------ ------ ------ ------ ------
Income From Investment Operations
- ---------------------------------
Net investment income..................................... 1.11 1.16 1.20 1.18 1.17
Net realized and unrealized gain (loss)
on investment transactions............................. (1.82) .04 .72 .22 1.11
------ ------ ------ ------ ------
Net increase (decrease) in net asset value
from operations........................................ (.71) 1.20 1.92 1.40 2.28
------ ------ ------ ------ ------
Less: Dividends And Distributions
- ---------------------------------
Dividends from net investment income:
paid to Common Stock shareholders...................... (.84) (.86) (.89) (.85) (.90)
Common Stock equivalent of dividends
Paid to Preferred Stock shareholders................. (.27) (.29) (.31) (.33) (.36)
Distributions in excess of net investment income:
Paid to Common Stock shareholders...................... (.03) (.02) -0- (.05) -0-
Common Stock equivalent of distributions:
Paid to Preferred Stock shareholders................... -0- -0- -0- (.02) -0-
------ ------ ------ ------ ------
Total dividends and distributions......................... (1.14) (1.17) (1.20) (1.25) (1.26)
------ ------- ------- ------- -------
Net asset value, end of year.............................. $11.64 $13.49 $13.46 $12.74 $12.59
====== ======= ======= ======= =======
Market value, end of year................................. $11.69 $14.06 $14.12 $12.38 $12.00
====== ======= ======= ======= =======
Total Investment Return
- -----------------------
Total investment return based on: (a)
Market value........................................... (11.14)% 6.19% 22.34% 10.82% 26.65%
Net asset value........................................ (7.76)% 6.89% 13.24% 8.74% 17.71%
Ratios/Supplemental Data
- ------------------------
Net assets, end of year (000's omitted)................... $215,850 $234,995 $233,641 $224,888 $222,488
Ratio of expenses to average net assets (b)............... .88% .89% .94% .93% .84%
Ratio of net investment income to average net assets (b).. 5.21% 5.30% 5.64% 5.64% 5.77%
Portfolio turnover rate................................... 292% 60% 90% 178% 222%
- --------------------------------------------------------------------------------------------------------------------------
</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.
10
<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, 1999, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1999, 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, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicted periods in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
New York, New York
December 9, 1999
================================================================================
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, 1999 as "exempt-interest dividends".
11
<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 (the
"Dividend Shares"). State Street Bank and Trust Company (the "Agent") will act
as agent for participants under the Plan. Shareholders whose shares are held in
the name of a broker or nominee should contact such broker or nominee to
determine whether or how they may participate in the Plan.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will issue new
shares at the greater of net asset value or 95% of the then current market
price.
(ii) If the shares of Common Stock are trading at a discount from net asset
value at the time of valuation, the Agent will receive the dividend or
distribution in cash and apply it to the purchase of the Fund's shares of Common
Stock in the open market on the New York Stock Exchange or elsewhere, for the
participants' accounts. Such purchases will be made on or shortly after the
payment date for such dividend or distribution and in no event more than 30 days
after such date except where temporary curtailment or suspension of purchase is
necessary to comply with Federal securities laws. If, before the Agent has
completed its purchases, the market price exceeds the net asset value of a share
of Common Stock, the average purchase price per share paid by the Agent may
exceed the net asset value of the Fund's shares of common stock, resulting in
the acquisition of fewer shares than if the dividend or distribution had been
paid in shares issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of the
participant, and each shareholder's proxy will include those shares purchased or
received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average cost,
including brokerage commissions, of any shares purchased in the open market plus
the cost of any shares issued by the Fund.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent to
written notice of the change sent to participants in the Plan at least 90 days
before the record date for such dividend or distribution. The Plan may also be
amended or terminated by the Agent on at least 90 days' written notice to
participants in the Plan. All correspondents
12
<PAGE>
ACM Municipal Securities Income Fund
================================================================================
concerning the Plan should be directed to the Agent at State Street Bank and
Trust Company, P.O. Box 366, Boston, Massachusetts 02101.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or 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. Kennan, a Senior Vice President of the Fund.
- --------------------------------------------------------------------------------
Year 2000
Many computer systems and applications that process transactions use two-digit
date fields for the year of a transaction, rather than the full four digits. If
these systems are not modified or replaced, transactions occurring after 1999
could be processed as year "19XX," which could result in processing inaccuracies
and computer system failures at or after the year 2000. The Fund and its major
service providers, including Alliance, utilize a number of computer systems and
applications that have been either developed internally or licensed from third-
party suppliers. In addition, the Fund and its major service providers,
including Alliance, are dependent on third party suppliers for certain systems
applications and for electronic receipt of information critical to their
business. Should any of the computer systems employed by the Fund or its major
service providers, including Alliance, fail to process year 2000 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.
To the extent that the operations of issuers of securities held by the Fund are
impaired by the year 2000 problem, the value of the Fund's shares may be
materially affected. In addition, for the Fund's investments in foreign markets,
it is possible that foreign companies and markets will not be as prepared by
2000 as domestic companies and markets.
The Year 2000 issue is a high priority for the Fund and Alliance. During 1977,
Alliance began a formal Year 2000 initiative, which established a structured and
coordinated process to deal with the Year 2000 issue. As part of its initiative,
Alliance established a Year 2000 project office to manage the Year 2000
initiative, focusing on both information technology and non-information
technology systems. The Year 2000 project office meets periodically with the
Audit Committee of the Board of Directors of Alliance Capital Management
Corporation, Alliance's general partner, and with Alliance's executive
management to review the status of the Year 2000 efforts. Alliance has also
retained the services of a number of consulting firms which have expertise in
advising and assisting with regard to Year 2000 issues. Alliance reports that by
June 30, 1998 Alliance had completed its inventory and assessment of its
domestic and international computer systems and applications, identified mission
critical systems (those systems where loss of their function would result in
immediate stoppage or significant impairment to core business units) and
nonmission critical systems and determined which of these systems is not Year
2000 compliant. All third-party suppliers of mission critical computer systems
applications and nonmission critical systems were contacted to verify whether
their systems and applications will be year 2000 compliant and their responses
are being evaluated. All of those contacted have responded and have informed
Alliance that their systems and applications are or will be Year 2000 compliant.
All mission and nonmission critical systems supplied by third parties have been
tested.
13
<PAGE>
ADDITIONAL INFORMATION (cont.) ACM Municipal Securities Income Fund
================================================================================
Alliance expects all testing will be completed before the end of 1999.
Alliance has remediated, replaced or retired all of its non-compliant mission
critical systems and nonmission critical systems and applications that can
affect the Fund. After each system has been remediated, it is tested with 19XX
dates to determine if it still performs its intended business function
correctly. Next, each system undergoes a simulation test using dates occurring
after December 31, 1999. Inclusive of the replacement and retirement of some of
its systems, Alliance has completed these testing phases for all mission
critical systems and nonmission critical systems. Integrated systems tests were
conducted to verify that the systems would continue to work together. Full
integration testing of all mission critical and nonmission critical systems is
complete. Testing of interfaces with third-party suppliers has been completed.
Alliance reports that it has completed an inventory of its facilities and
related technology applications and has substantially completed and tested these
systems. Alliance reports that it anticipates that these systems will be fully
operable in the year 2000. Alliance has deferred certain other planned
information technology projects until after the Year 2000 initiative is
completed. Such delay is not expected to have a material adverse effect on
Alliance's financial condition or results of operations. Alliance, with the
assistance of a consulting firm, has developed Year 2000 specific contingency
plans with emphasis on mission critical functions. These plans seek to provide
alternative methods of processing in the event of a failure.
The current cost to Alliance of the Year 2000 initiative is approximately $45
million. These costs consist principally of modification and testing and costs
to develop formal Year 2000 specific contingency plans. These costs, which will
generally be expensed as incurred, will be funded from Alliance's operations and
the issuance of debt. Through September 30, 1999, Alliance had incurred
approximately $41.0 million of costs related to the Year 2000 initiative. At
this time, management of Alliance believes that the costs associated with
resolving the year 2000 issue will not have a material adverse effect on
Alliance's results of operations, liquidity or capital resources.
There are many risks associated with Year 2000 issues, including the risks that
the computer systems and applications used by the Fund and its major service
providers will not operate as intended and that the systems and applications of
third-party providers to the Fund and its service providers will not be Year
2000 compliant. Likewise, there can be no assurance the compliance schedules
outlined above will be met or that the actual cost incurred will not exceed
current cost estimates. Should the significant computer systems and applications
used by the Fund or its major service providers, or the systems of their
important third-party suppliers, be unable to process date-sensitive information
accurately after 1999, the Fund and its services providers may be unable to
conduct their normal business operations and to provide shareholders with
required services. In addition, the Fund and its service providers may incur
unanticipated expenses, regulatory actions and legal liabilities. The Fund and
Alliance cannot determine which risks, if any, are most reasonably likely to
occur or the effects of any particular failure to be Year 2000 compliant.
Certain statements provided by Alliance in this section entitled "Year 2000," as
such statements relate to Alliance, are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. To the fullest
extent permitted by law, the foregoing Year 2000 discussion is a "Year 2000
Readiness Disclosure" within the meaning of The Year 2000 Information and
Readiness Disclosure Act, 15 U.S.C. Sec. 1 (1998).
14
<PAGE>
ACM Municipal Securities Income Fund
================================================================================
<TABLE>
<S> <C>
BOARD OF DIRECTORS William H. Foulk, Jr. (1)
John D. Carifa, Chairman and President Dr. James M. Hester (1)
Ruth Block (1) Clifford L. Michel (1)
David H. Dievler (1) Donald J. Robinson (1)
John H. Dobkin (1) Robert C. White (1)
OFFICERS Terrance Hults, Vice President
Kathleen A. Corbet, Senior Vice President William E. Oliver, Vice President
Susan P. Keenan, Senior Vice President Edmund P. Bergen, Jr., Secretary
Wayne D. Lyski, Senior Vice President Mark D. Gersten, Treasurer & Chief Financial Officer
David M. Dowden, Vice President Juan J. Rodriquez, Controller
ADMINISTRATOR PREFERRED STOCK:
Alliance Capital Management L.P. DIVIDEND PAYING AGENT,
1345 Avenue of the Americas TRANSFER AGENT AND REGISTRAR
New York, NY 10105 IBJ Whitehall Bank & Trust Company
One State Street
New York, NY 10004
SUB-ADMINISTRATOR INDEPENDENT AUDITORS
Prudential Mutual Fund Management, LLC Ernst & Young LLP
Gateway Center Three 787 Seventh Avenue
Newark, NJ 07102-4077 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
</TABLE>
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.
(1) Members of Audit Committee
15
<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.
MSIAR1099
ACM
- --------------------------------------------------------------------------------
MUNICIPAL
- --------------------------------------------------------------------------------
SECURITIES
- --------------------------------------------------------------------------------
INCOME FUND
- --------------------------------------------------------------------------------
Annual Report
October 31, 1999
Alliance Capital [LOGO](R)
