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Closed End
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ACM Municipal
Securities Income
Fund
Annual Report
October 31, 2000
[GRAPHIC OMITTED]
Alliance Capital [LOGO](R)
The Investment Professional's Choice
<PAGE>
Investment Products Offered
--------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
--------------------------
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
LETTER TO SHAREHOLDERS
December 5, 2000
Dear Shareholder:
This shareholder report reviews municipal market activity and investment results
for ACM Municipal Securities Income Fund's annual reporting period ended October
31, 2000.
Investment Objective and Policies
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.
Investment Results
The Fund's total returns at net asset value (NAV) for the six- and 12-month
periods ended October 31, 2000 are shown along with the Fund's benchmark, the
Lehman Brothers Municipal Bond Index.
Over the past year, the Fund outperformed the Lehman Brothers Municipal Bond
Index. The Fund's outperformance versus the benchmark is a result of active
management and portfolio repositioning during this period of interest rate
volatility.
Market Overview
For the fiscal year ended October 31, 2000, municipal bonds delivered strong
after-tax performance both on an absolute basis and relative to other fixed
income sectors. The Lehman Brothers Municipal Bond Index outperformed its
comparable taxable bond U.S. Aggregate Bond Index by 1.89% on an after-tax
basis. The path to this perfor-
INVESTMENT RESULTS*
Periods Ended October 31, 2000
-----------------------------------------------
Total Returns
-----------------------------------------------
Since
6 Months 12 Months 5 Years Inception
-----------------------------------------------------------------------------
ACM Municipal Securities
Income Fund 8.98% 8.74% 5.71% 4.73%
-----------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index 5.73% 8.51% 5.71% 5.89%
-----------------------------------------------------------------------------
The Fund's Market Price Per Share on October 31, 2000 was $12.56.
* The Fund's investment results are total returns for the periods shown and
are based on the Fund's net asset value (NAV) as of October 31, 2000. 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 Lehman Brothers Municipal Bond Index is a total return performance
benchmark for the long-term, investment grade tax-exempt bond market. An
investor cannot invest directly in an index, and its results are not
indicative of any specific investment, including ACM Municipal Securities
Income Fund.
Additional investment results appear on pages 5-7.
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ACM MUNICIPAL SECURITIES INCOME FUND o 1
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
mance, however, has been anything but smooth. After declining in late 1999,
municipal bond prices remained in a narrow trading range for the first six
months of this year. Over the summer months, however, municipal bond prices
rebounded sharply with price gains of over 4%. We believe the rally in municipal
bond prices was caused by the strong improvement in the U.S. Treasury bond
market, the ongoing dearth of new issues, and continued demand for municipal
bonds from individual investors.
Despite the relative strength of the municipal bond market, however, municipal
bond yields are still higher than after-tax yields on comparable Treasury and
corporate bonds. We believe this yield differential makes municipal bonds one of
the most attractive investments in the fixed income markets today. Federal
Reserve policy and U.S. Treasury Department policies have significantly impacted
municipal bond prices this year. The Federal Reserve Board's three short-term
interest rate hikes over the past nine months, and the uncertainty regarding
future Federal Reserve Board policy decisions, has led to considerable market
volatility. As the summer progressed and inflationary pressures subsided,
pressure for additional rate hikes subsided. This emerging consensus among
investors that the Federal Reserve would leave short-term rates unchanged
contributed to higher prices on long-term bonds. The U.S. Treasury's ongoing
repurchase of outstanding Treasury bonds and notes has also helped bond prices,
along with reduced issuance of new government debt, because of the large federal
budget surplus.
The most significant technical factor driving the direction of municipal bond
prices has been the imbalance between supply and demand. Increased demand for
municipal bonds continues to out-strip the available supply, pushing prices of
outstanding issues higher. In the current interest rate environment, few
municipal issuers find it economic to issue new bonds to refinance older debt.
As a result, the supply of new tax-exempt bond issues year-to-date was down 20%
when compared to the first nine months of 1999. On the demand side, traditional
buyers of municipal bonds are now competing with a new group of investors
seeking to conservatively invest new wealth created from their employment or
investments in the technology sector of the economy. Despite the recent stock
market downturn, we anticipate this new source of demand for municipal debt to
remain quite strong well into the future.
The overall strong fiscal health of state and local governments has continued to
improve the credit quality of municipal bonds. Fed by record sales and income
tax collections, state and local governments have been able to strengthen their
balance sheets by paying down higher cost debt, creating "rainy day" funds and
establishing other financial controls. This improving credit trend is supported
by data from the major bond credit rating services, Moody's and Standard &
Poor's. For example, Moody's reports that municipal bond credit upgrades
outpaced downgrades six to one, on a dollar volume basis, for the first half of
2000.
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2 o ACM MUNICIPAL SECURITIES INCOME FUND
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----------------------
LETTER TO SHAREHOLDERS
----------------------
Investment Strategy
Market conditions over the past year allowed us to continue pursuing our
long-held investment strategy of maximizing current income while protecting
against the risk of early redemption of bonds we hold with attractive coupon
rates. During the market downturn earlier this year, we aggressively
re-positioned the Fund's portfolio by selling shorter duration securities in
favor of bonds with equal or higher coupons, but longer periods of call
protection. For long-term investors such as ourselves, call protection is
crucial because it protects against reinvestment risk: when rates decline,
call-protected bonds restrict the ability of borrowers to pay down the debt
prior to the first optional call date. Because we actively seek out
call-protected bonds for the portfolio when interest rates are high, as interest
rates decline, the portfolio benefits from enhanced price appreciation potential
and above-market interest income. Our investment strategy relies on the premise
that over time, call protection and strong current income will deliver better
performance than alternative strategies.
A second portion of our investment strategy is to rely upon strong fundamental
research into the credit quality of the issuers of the tax-exempt securities we
purchase. By having a dedicated research capability, we are able to look beyond
the credit ratings of a given issue assigned by the rating agencies to make our
own assessment of the relative value of the offering. Our research process has
supported investment decisions to both purchase lower-rated securities with
improving credit fundamentals and to sell higher-rated securities with
deteriorating financial strength.
The third leg of our investment strategy is to take maximum advantage of price
declines in the Fund's portfolio to offset future taxable gains. Because only
the interest earned from municipal bonds is tax-exempt, we must be careful to
avoid realizing net gains from price appreciation that could cause us to include
taxable income in distributions from the Fund. To help manage the tax position
of the Fund, during market downturns we will sell, at a loss, securities which
have performed well individually but are priced below our cost. This creates a
tax-loss carry forward that we can use during strong markets to offset gains
from sales or more often, early redemptions of other bonds in the Fund.
Outlook
The outlook for the municipal bond market remains favorable. The fundamental
strength of the domestic U.S. economy will continue to benefit the fiscal health
of state and local governments. As a result, we expect to see the improving
credit quality trend in the municipal bond market continuing. On the macro
level, we anticipate that the Federal Reserve will remain vigilant in its
efforts to contain the risk of inflation. Despite rising oil prices and other
inflationary pressures, we believe that productivity improvements in the
workplace and the large savings base created by the 1990s bull market in
equities will constrain price inflation.
We anticipate that markets will remain somewhat volatile due to high oil prices,
political uncertainty and global insta-
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ACM MUNICIPAL SECURITIES INCOME FUND o 3
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----------------------
LETTER TO SHAREHOLDERS
----------------------
bility in regions such as the Middle East. However, the long-term trend towards
lower inflation and lower interest rates should continue. A broader demographic
trend that is benefiting municipal bonds is the aging of our population in a
time when life expectancies are increasing. Retirees are turning to municipal
bonds for the same reasons as younger technology entrepreneurs: safety and
tax-exempt income.
Volatility in stock market prices also contributes to individuals and financial
advisors seeking a safe haven for assets in municipal bonds. Our strategy in
managing the Fund has always been long-term in perspective. In the current
market, volatility enhances our ability to reposition the Fund's portfolio. We
view increases in interest rates as a buying opportunity. On those occasions, we
will look to improve the level of tax exempt income earned, reduce the Fund's
exposure to reinvestment risk and seek out municipal bonds with improving credit
potential.
The Alliance Municipal Income team is proud of the strong performance we have
delivered over the past 12 months and our excellent long-term investment record.
We look forward to the opportunity to serve our shareholders over the next year.
Sincerely,
John D. Carifa
Chairman and President
Susan P. Keenan
Senior Vice President
[PHOTO OMITTED] John D.
Carifa
[PHOTO OMITTED] Susan P.
Keenan
Portfolio Manager, Susan P. Keenan, also heads the Municipal Bond Department.
She has over 20 years of investment experience.
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4 o ACM MUNICIPAL SECURITIES INCOME FUND
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PERFORMANCE UPDATE
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PERFORMANCE UPDATE
ACM MUNICIPAL SECURITIES INCOME FUND (NAV)
GROWTH OF A $10,000 INVESTMENT
4/30/93* TO 10/31/00
[THE FOLLOWING WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL.]
Lehman Brothers Municipal Bond Index: $15,358
ACM Municipal Securities Income Fund [NAV]: $14,153
This chart illustrates the total value of an assumed $10,000 investment in ACM
Municipal Securities Income Fund at net asset value (NAV) (from 4/30/93 to
10/31/00) as compared to the performance of a broad-based index. The chart
assumes the reinvestment of dividends and capital gains. Past performance is not
indicative of future results, and is not representative of future gain or loss
in capital value or dividend income.
The Lehman Brothers Municipal Bond Index is a total return performance benchmark
for the long-term, investment-grade, tax-exempt bond market.
When comparing ACM Municipal Securities Income Fund to the index shown above,
you should note that no charges or expenses are reflected in the performance of
the index. An investor cannot invest directly in an index, and its results are
not indicative of any specific investment, including ACM Municipal Securities
Income Fund.
* Closest month-end after Fund's inception date of 4/29/93.
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ACM MUNICIPAL SECURITIES INCOME FUND o 5
<PAGE>
------------------
PERFORMANCE UPDATE
------------------
PERFORMANCE UPDATE
ACM MUNICIPAL SECURITIES INCOME FUND (NAV)
HISTORY OF RETURNS
YEARLY PERIODS ENDED 10/31
[THE FOLLOWING WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
ACM Municipal Securities Income Fund (NAV) --
Yearly Periods Ended 10/31
--------------------------------------------------------------------------------
ACM Municipal Lehman Brothers
Securities Income Municipal Bond
Fund (NAV) Index
--------------------------------------------------------------------------------
10/31/93* 6.39% 5.90%
10/31/94 -14.41% -4.36%
10/31/95 17.72% 14.84%
10/31/96 8.74% 5.70%
10/31/97 13.24% 8.49%
10/31/98 6.89% 8.02%
10/31/99 -7.76% -1.77%
10/31/00 8.74% 8.51%
Past performance is no guarantee of future results. The Fund's investment
results represent total returns and are based on the Fund's net asset value
(NAV). 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.
The Lehman Brothers Municipal Bond Index is a total return performance benchmark
for the long-term, investment-grade, tax-exempt bond market. An investor cannot
invest directly in an index, and its results are not indicative of the
performance for any specific investment, including ACM Municipal Securities
Income Fund.
* The Fund's return for the period ended 10/31/93 is from the Fund's inception
date of 4/29/93 through 10/31/93. The benchmark's return for the period ended
10/31/93 is from 4/30/93 through 10/31/93.
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6 o ACM MUNICIPAL SECURITIES INCOME FUND
<PAGE>
-----------------
PORTFOLIO SUMMARY
-----------------
PORTFOLIO SUMMARY
October 31, 2000
INCEPTION DATE PORTFOLIO STATISTICS
4/29/93 Net Assets ($mil): $217.1
BOND QUALITY RATING
o 9.6% AAA
o 20.1% AA [PIE CHART OMITTED]
o 37.9% A
o 32.4% BBB
HOLDINGS BY STATE
o 23.4% New York
o 21.1% Indiana
o 8.0% Ohio
o 6.9% Massachusetts
o 5.7% Minnesota [PIE CHART OMITTED]
o 5.1% Tennessee
o 5.0% Pennsylvania
o 4.9% Michigan
o 4.3% Washington
o 3.4% Rhode Island
o 3.4% West Virginia
o 2.5% Florida
o 2.4% Texas
o 1.9% Colorado
o 1.8% Illinois
o 0.2% Louisiana
All data as of October 31, 2000. The Fund's quality rating and state holdings
are expressed as a percentage of total investments and may vary over time.
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ACM MUNICIPAL SECURITIES INCOME FUND o 7
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
PORTFOLIO OF INVESTMENTS
October 31, 2000
Standard Principal
& Poor's Amount
Rating(a) (000) Value
----------------------------------------------------------------------------
Long Term Municipal Bonds - 98.2%
Colorado - 1.9%
Colorado Hsg Fin Auth
SFMR (Mortgage Rev)
AMT Ser 99A-2
6.45%, 4/01/30.................. AA+ $ 3,250 $ 3,402,945
E-470 Pub Hwy Auth
Colorado Rev Ser 00B
Zero coupon, 9/01/35............ BBB- 10,000 744,200
--------------
4,147,145
--------------
Florida - 2.5%
Collier County Rev Hlth Fac
(The Moorings Proj) Ser 94
7.00%, 12/01/19................. A- 2,000 2,052,420
Orlando FL Utilities
Water & Elec Rev Ser 93
6.57%, 10/06/17(b)(c)........... Aa2 3,315 3,374,007
--------------
5,426,427
--------------
Illinois - 1.8%
Chicago O'Hare Arpt Spl Fac
Rev (American Airlines) Ser 94
8.20%, 12/01/24................. BBB- 3,500 3,876,565
--------------
Indiana - 20.7%
Indianapolis Arpt Auth Rev
(United Airlines) AMT Ser 95A
6.50%, 11/15/31(b).............. Baa2 39,270 37,704,698
Warrick Cnty Ind Rev
Southern Ind Gas & Electric
AMT Ser 93B
6.00%, 5/01/23.................. A 7,290 7,324,044
--------------
45,028,742
--------------
Louisiana - 0.2%
Calcasieu Parish
SFMR (Mortgage Rev)
AMT GNMA/FNMA Ser 97A
6.40%, 4/01/32(b)............... Aaa 320 328,125
--------------
Massachusetts - 6.8%
Mass Health & Ed Fac
Auth Hosp Rev
(Caritas Christi) Ser 99A
5.75%, 7/01/28.................. BBB 10,450 8,765,774
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8 o ACM MUNICIPAL SECURITIES INCOME FUND
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------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Standard Principal
& Poor's Amount
Rating(a) (000) Value
----------------------------------------------------------------------------
Massachusetts - continued
Mass Health & Ed Fac
Auth Hosp Rev
(New England Med Ctr)
MBIA Ser 94
5.78%, 7/01/18(c)............... AAA $ 5,000 $ 4,707,800
Mass Indl Fin Agy Rev
(Heights Crossing)
AMT FHA Ser 95
6.15%, 2/01/35.................. AAA 1,200 1,219,464
--------------
14,693,038
--------------
Michigan - 4.8%
Saginaw Mich Hosp Fin Auth
(Covenant Med Ctr) Ser 00F
6.50%, 7/01/30.................. A 10,400 10,502,336
--------------
Minnesota - 5.6%
Bass Brook Pollution Ctl Rev
(Minnesota Pwr & Light Co) Ser 92
6.00%, 7/01/22.................. A 2,250 2,217,623
Golden Valley
(Covenant Retirement Cmntys)
Ser 99A
5.50%, 12/01/29................. A- 3,750 3,327,637
Minnesota Agric & Econ Dev
(Fairview Health)
Rev Hlth Care Sys Ser 00A
6.375%, 11/15/29................ A 5,000 5,096,600
South St Paul MN Rev
Hsg & Redev Auth Hosp
(Healtheast Proj) Ser 94
6.75%, 11/01/09................. BBB- 1,520 1,463,623
--------------
12,105,483
--------------
New York - 23.0%
Chautauqua NY Rev
Securitization Tobacco Settlement
Corp Ser 00
6.75%, 7/01/40(b)............... A+ 8,200 8,225,256
Nassau County
Tobacco Settlement Corp Ser 99
6.60%, 7/15/39.................. A- 10,100 10,243,016
New York City
Indl Dev Agy Rev
Terminal One Group
AMT Ser 94
6.125%, 10/01/24................ A- 10,700 10,800,045
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ACM MUNICIPAL SECURITIES INCOME FUND o 9
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Standard Principal
& Poor's Amount
Rating(a) (000) Value
----------------------------------------------------------------------------
New York - continued
New York City
Indl Dev Agy Rev
British Airways Plc. Ser 98
5.25%, 12/01/32(b).............. A2 $11,100 $ 9,595,062
New York City
Tobacco Settlement Corp
Ser 99-1
6.375%, 7/15/39(b).............. Aa3 10,975 10,965,891
--------------
49,829,270
--------------
Ohio - 7.9%
Cuyahoga County
Hosp Facs Rev Ser 00
7.50%, 1/01/30.................. BBB 6,050 6,333,503
Ohio Hsg Fin Agy Mtg Rev
(Residential Mortgage)
Ser 97 AMT GNMA
6.15%, 3/01/29(b)............... Aaa 6,400 6,490,624
Ohio State Wtr Dev Auth
Solid Waste Disposal (North Star)
Ser 95 AMT
6.45%, 9/01/20.................. A- 4,075 4,201,366
--------------
17,025,493
--------------
Pennsylvania - 4.9%
Pennsylvania Hsg Fin Agy
SFMR (Mortgage Rev)
AMT Ser 68A
6.15%, 10/01/30................. AA+ 7,000 7,119,490
Philadelphia PA Rev
Hospitals & Higher Ed Facs
(Temple Univ Hosp) Ser 93A
6.625%, 11/15/23................ BBB 3,250 3,034,330
Pittsburgh PA Urban Redev Auth
SFMR (Mortgage Rev)
AMT Ser 95A
7.15%, 10/01/27................. AAA 520 543,254
--------------
10,697,074
--------------
Rhode Island - 3.3%
Rhode Island Hsg & Mtg
Fin Corp SFMR (Homeowner Mtg)
AMT Ser 91-8
9.67%, 4/01/24(c)............... AA+ 7,000 7,268,100
--------------
Tennessee - 5.0%
Tennessee Ed Loan
South Inc Tenn Educ Fdg
Ser 97B AMT
6.20%, 12/01/21(b).............. Aa2 10,600 10,788,044
--------------
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10 o ACM MUNICIPAL SECURITIES INCOME FUND
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------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Standard Principal
& Poor's Amount
Rating(a) (000) Value
----------------------------------------------------------------------------
Texas - 2.3%
Lower Colorado Riv Auth
Texas Pollution Ctl Rev
(Samsung Austin Semiconductor)
AMT Ser 00
6.95%, 4/01/30.................. BBB- $5,000 $ 5,078,000
--------------
Washington - 4.2%
Pilchuck Dev Pub Corp
Spec Fac (BF Goodrich) AMT Ser 93
6.00%, 8/01/23.................. A- 9,500 9,201,415
--------------
West Virginia - 3.3%
West Virginia Pkwys Econ
Dev & Tourism Auth FGIC Ser 93
7.04%, 5/16/19(c)............... AAA 7,100 7,193,862
--------------
Total investments - 98.2%
(Cost $202,527,491)............. 213,189,119
Other assets less liabilities - 1.8% 3,952,654
--------------
Net Assets - 100%.................. $ 217,141,773
==============
(a) Unaudited.
(b) Moody's or Fitch Rating. (Unaudited.)
(c) Inverse Floater Security - Security with variable or floating interest rate
that moves in opposite direction of short-term interest rates.
Glossary of Terms:
AMT - Alternative Minimum Tax
FGIC - Financial Guaranty Insurance Company
FHA - Federal Housing Administration
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
MBIA - Municipal Bond Investors Service
SFMR - Single Family Mortgage Revenue
See notes to financial statements.
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ACM MUNICIPAL SECURITIES INCOME FUND o 11
<PAGE>
-----------------------------------
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
Assets
Investments in securities, at value (cost $202,527,491) ...... $ 213,189,119
Interest receivable .......................................... 4,392,089
Other assets ................................................. 8,431
-------------
Total assets ................................................. 217,589,639
-------------
Liabilities
Due to custodian ............................................. 250,825
Advisory fee payable ......................................... 88,658
Administrative fee payable ................................... 27,322
Accrued expenses and other liabilities ....................... 81,061
-------------
Total liabilities ............................................ 447,866
-------------
Net Assets ................................................... $ 217,141,773
=============
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,
10,859,181 shares issued and outstanding .................. 108,592
Additional paid-in capital ................................... 147,509,756
Accumulated net realized loss on investments ................. (31,138,203)
Net unrealized appreciation on investments ................... 10,661,628
-------------
$ 217,141,773
=============
Net Asset Value Per Share of Common Stock --
$127,141,773 ($217,141,773 less Preferred Stock at
liquidation value of $90,000,000) divided by 10,859,181
shares of Common Stock outstanding) ....................... $11.71
======
See notes to financial statements.
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12 o ACM MUNICIPAL SECURITIES INCOME FUND
<PAGE>
-----------------------
STATEMENT OF OPERATIONS
-----------------------
STATEMENT OF OPERATIONS
Year Ended October 31, 2000
Investment Income
Interest...................................... $ 14,129,922
Expenses
Advisory fee.................................. $ 1,062,794
Administrative fee............................ 318,838
Auction Agent fee............................. 225,873
Custodian..................................... 98,370
Audit and legal............................... 88,832
Printing...................................... 55,368
Directors' fees............................... 34,000
Transfer agency............................... 28,830
Miscellaneous................................. 60,945
-------------
Total expenses................................ 1,973,850
------------
Net investment income......................... 12,156,072
------------
Realized and Unrealized Gain (Loss) on
Investments
Net realized loss on investment transactions.. (9,889,773)
Net change in unrealized appreciation/depreciation
on investments............................. 11,654,720
------------
Net gain on investments....................... 1,764,947
------------
Net Increase in Net Assets from Operations.... $ 13,921,019
============
See notes to financial statements
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ACM MUNICIPAL SECURITIES INCOME FUND o 13
<PAGE>
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
STATEMENT OF CHANGES
IN NET ASSETS
Year Ended Year Ended
October 31, October 31,
2000 1999
============ =============
Increase (Decrease) In Net Assets from
Operations
Net investment income ........................ $ 12,156,072 $ 12,012,284
Net realized loss on investment
transactions .............................. (9,889,773) (7,335,128)
Net change in unrealized
appreciation/depreciation on
investments ............................... 11,654,720 (12,354,433)
------------ ------------
Net increase (decrease) in net assets from
operations ................................ 13,921,019 (7,677,277)
Dividends to Shareholders from
Net investment income
Common Stock .............................. (8,445,094) (9,087,452)
Preferred Stock ........................... (3,710,978) (2,924,832)
Distributions in excess of net investment
income
Common Stock .............................. (974,350) (295,690)
Reinvestment of dividends resulting in the
issuance of Common Stock .................. 501,540 839,647
------------ ------------
Total increase (decrease) .................... 1,292,137 (19,145,604)
Net Assets
Beginning of period .......................... 215,849,636 234,995,240
------------ ------------
End of period ................................ $217,141,773 $215,849,636
============ ============
See notes to financial statements.
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14 o ACM MUNICIPAL SECURITIES INCOME FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
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 accounting
principles generally accepted in the United States, 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 original issue 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 regulations and may differ from those determined in accordance with
accounting principles generally accepted in the United States. To the extent
these differences are permanent, such amounts are reclassified within the
capital accounts
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ACM MUNICIPAL SECURITIES INCOME FUND o 15
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
based on their federal tax basis treatment; temporary differences do not require
such reclassification.
During the current fiscal year, permanent differences, primarily due to tax
reclassification of distributions, resulted in a net decrease in distributions
in excess of net investment income and a corresponding decrease in additional
paid-in capital. 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
period.
On November 28, 1995, the Fund entered into a Shareholder Inquiry Agency
Agreement with Alliance Fund Services, Inc. ("AFS"), an affiliate of the
Adviser, whereby the Fund reimburses AFS for costs relating to servicing phone
inquiries for the Fund. During the year ended October 31, 2000, 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 period. 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 $757,884,907 and $761,975,656,
respectively, for the year ended October 31, 2000. There were no purchases or
sales of U.S. government and government agency obligations for the year ended
October 31, 2000.
At October 31, 2000, the cost of investments for federal income tax purposes was
$202,996,752. Accordingly, gross unrealized appreciation of investments was
$10,256,998 and gross unrealized depreciation of investments was $64,631
resulting in net unrealized appreciation of $10,192,367.
NOTE D
Taxes
For Federal income tax purposes at October 31, 2000, the Fund had a capital loss
carry forward of $30,668,943; of which $2,800,708 expires in 2002, $11,097,771
expires in 2003, $6,475,518 expires in 2007 and $10,294,946 expires in the year
2008.
NOTE E
Capital Stock
Common Stock
There are 100,000,000 shares of $0.01 par value common stock authorized. At
October 31, 2000, 10,859,181 shares
--------------------------------------------------------------------------------
16 o ACM MUNICIPAL SECURITIES INCOME FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
were outstanding. During the years ended October 31, 2000, and 1999, the Fund
issued 44,175 and 63,518 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 was 3.75%, effective through November 2, 2000. The
dividend rate on Series B was 4.13%, effective through October 31, 2000. The
dividend rate on Series C was 4.15%, effective through November 3, 2000.
--------------------------------------------------------------------------------
ACM MUNICIPAL SECURITIES INCOME FUND o 17
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Year Ended October 31,
2000 1999 1998 1997 1996
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......................... 11.64 13.49 13.46 12.74 12.59
----------------------------------------------------------------
Income From Investment Operations
Net investment income ........................................ 1.12 1.11 1.16 1.20 1.18
Net realized and unrealized gain (loss) on
investment transactions .................................... .16 (1.82) .04 .72 .22
----------------------------------------------------------------
Net increase (decrease) in net asset value
from operations ............................................ 1.28 (.71) 1.20 1.92 1.40
----------------------------------------------------------------
Less: Dividends and Distributions
Dividends from net investment income:
Paid to Common Stock shareholders .......................... (.78) (.84) (.86) (.89) (.85)
Common Stock equivalent of dividends
paid to Peferred Stock shareholders ...................... (.34) (.27) (.29) (.31) (.33)
Distributions in excess of net investment
income:
Paid to Common Stock shareholders .......................... (.09) (.03) (.02) -0- (.05)
Common Stock equivalent of distributions
paid to Preferred Stock shareholders ....................... -0- -0- -0- -0- (.02)
----------------------------------------------------------------
Total dividends and distributions............................. (1.21) (1.14) (1.17) (1.20) (1.25)
----------------------------------------------------------------
Net asset value, end of period................................ $11.71 $11.64 $13.49 $13.46 $12.74
================================================================
Market value, end of period................................... $12.56 $11.69 $14.06 $14.12 $12.38
================================================================
Total Investment Return
Total investment return based on:(a)
Market value................................................ 16.16% (11.14)% 6.19% 22.34% 10.82%
Net asset value............................................. 8.74% (7.76)% 6.89% 13.24% 8.74%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)..................... $217,142 $215,850 $234,995 $233,641 $224,888
Ratio of expenses to average net assets:(b)
Based on Common Stock....................................... 1.61% 1.45% 1.45% 1.55% 1.56%
Based on Common and
Preferred Stocks............................................ .93% .88% .89% .94% .93%
Ratio of net investment income to average
net assets:(b)
Based on Common Stock....................................... 9.92% 8.54% 8.58% 9.35% 9.49%
Based on Common and
Preferred Stocks............................................ 5.72% 5.21% 5.30% 5.64% 5.64%
Portfolio turnover rate....................................... 360% 292% 60% 90% 178%
</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 period reported. Dividends and distributions, if any, are assumed
for purposes of this calculation, to be reinvested at prices obtained
under the Fund's dividend reinvestment plan. Generally, total investment
return based on net asset value will be higher than total investment
return based on market value in periods where there is an increase in the
discount or a decrease in the premium of the market value to net asset
value from the beginning to the end of such periods. Conversely, total
investment return based on net asset value will be lower than total
investment return based on market value in periods where there is a
decrease in the discount or an increase in the premium of the market value
to the net asset value from the beginning to the end of the year. Total
investment return calculated for a period of less than one year is not
annualized.
(b) The expense ratio and net investment income ratio do not reflect the
effect of dividend and distribution payments to Preferred Stock
shareholders.
--------------------------------------------------------------------------------
18 o ACM MUNICIPAL SECURITIES INCOME FUND
<PAGE>
-----------------------------
REPORT OF ERNST AND YOUNG LLP
INDEPENDENT AUDITORS
-----------------------------
REPORT OF ERNST AND YOUNG LLP
INDEPENDENT AUDITORS
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, 2000, 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 auditing standards generally accepted
in the United States. 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, 2000, 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, 2000, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated periods in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst and Young LLP
New York, New York
December 12, 2000
FEDERAL INCOME TAX INFORMATION
(unaudited)
In accordance with federal requirements, the Fund designates $12,892,396 of
dividends paid during the fiscal year ended October 31, 2000 as "exempt-interest
dividends".
--------------------------------------------------------------------------------
ACM MUNICIPAL SECURITIES INCOME FUND o 19
<PAGE>
----------------------
ADDITIONAL INFORMATION
----------------------
ADDITIONAL INFORMATION
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 broker or nominee should contact such broker or nominee to determine
whether or how they may participate in the Plan.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will issue new
shares at the greater of net asset value or 95% of the then current market
price.
(ii) If the shares of Common Stock are trading at a discount from net asset
value at the time of valuation, the Plan Agent will receive the dividend or
distribution in cash and apply it to the purchase of the Fund's shares of Common
Stock in the open market on the New York Stock Exchange or elsewhere, for the
participants' accounts. Such purchases will be made on or shortly after the
payment date for such dividend or distribution and in no event more than 30 days
after such date except where temporary curtailment or suspension of purchase is
necessary to comply with Federal securities laws. If, before the Plan agent has
completed its purchases, the market price exceeds the net asset value of a share
of Common Stock, the average purchase price per share paid by the Plan agent may
exceed the net asset value of the Fund's shares of Common Stock, resulting in
the acquisition of fewer shares than if the dividend or distribution had been
paid in shares issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of the
participant, and each shareholder's proxy will include those shares purchased or
received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average cost,
including brokerage commissions, of any shares purchased in the open market plus
the cost of any shares issued by the Fund.
--------------------------------------------------------------------------------
20 o ACM MUNICIPAL SECURITIES INCOME FUND
<PAGE>
----------------------
ADDITIONAL INFORMATION
----------------------
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent to
written notice of the change sent to participants in the Plan at least 90 days
before the record date for such dividend or distribution. The Plan may also be
amended or terminated by the Agent on at least 90 days' written notice to
participants in the Plan. All correspondence concerning the Plan should be
directed to the Agent at State Street Bank and Trust Company, P.O. Box 366,
Boston, Massachusetts 02101.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change of
control of the Fund, (iii) no material changes in the principal risk factors
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.
--------------------------------------------------------------------------------
ACM MUNICIPAL SECURITIES INCOME FUND o 21
<PAGE>
----------------------------
GLOSSARY OF INVESTMENT TERMS
----------------------------
GLOSSARY OF INVESTMENT TERMS
basis point
One basis point equals 0.01%.
benchmark
A standard by which a fund's performance can be measured. A benchmark is usually
an unmanaged index, such as the Standard & Poor's 500 Stock Index or the Lehman
Brothers Aggregate Bond Index.
bond
Bonds are issued by governments or corporations when they need to raise cash.
Bonds are sold, or issued, to investors and have a maturity date, which is the
date the issuer is obligated to repay the investor for the principal, or face
amount, of the bond. Bonds also pay interest until maturity. Bonds are also
called fixed-income securities.
credit rating
Credit ratings are issued by independent organizations, such as the Standard &
Poor's Ratings group or Moody's Investors Service. These groups attempt to
assess the likelihood that the issuer of the bond will be able to make timely
payments of principal and interest on the bond, based on such factors as the
issuer's financial condition and any collateral securing these obligations.
Ratings typically range from AAA, which is the highest rating, to D, which is
the lowest.
index
A compilation of securities of similar types of companies that is used to
measure the investment performance of securities within that specific market. An
index is often used as a benchmark for a mutual fund. An investor cannot invest
directly in an index.
net asset value (NAV)
The value of a mutual fund's total assets, minus its liabilities, divided by the
number of shares outstanding.
portfolio
The collection of securities that make up a fund's or an investor's investments.
yield
The rate of return on an asset, usually referring to dividend or interest
payments, expressed as a percentage of current market price.
--------------------------------------------------------------------------------
22 o ACM MUNICIPAL SECURITIES INCOME FUND
<PAGE>
----------------
ALLIANCE CAPITAL
----------------
ALLIANCE CAPITAL
The Investment Professional's Choice
Alliance Capital is a leading global investment management firm with nearly $474
billion in assets under management. In recognition of our far-reaching
investment capabilities, Alliance Capital has been selected by employee benefit
plans for 38 of the FORTUNE 100 companies and public retirement funds in 35
states as well as by hundreds of foundations, endowments and foreign
institutions. By sharing this institutional money management experience with
millions of mutual fund investors as well, Alliance stands out as a "manager of
choice" for thousands of investment professionals around the world.
At Alliance Capital, we place a premium on investment research. We carefully
select securities based on our proprietary research, conducted by over 585
investment professionals in 28 investment offices worldwide. Our commitment to
this process means that our mutual fund shareholders have their portfolios
managed by the same experienced analysts and portfolio managers who manage the
pension funds of some of America's largest institutional in vestors.
All information on Alliance Capital is as of 10/2/00.
--------------------------------------------------------------------------------
ACM MUNICIPAL SECURITIES INCOME FUND o 23
<PAGE>
------------------
BOARD OF DIRECTORS
------------------
BOARD OF DIRECTORS
John D. Carifa, Chairman and President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
William H. Foulk, Jr.(1)
Dr. James M. Hester(1)
Clifford L. Michel(1)
Donald J. Robinson(1)
Robert C. White(1)
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. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Juan J. Rodriguez, Controller
Administrator
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
Sub-Administrator
Prudential Investments Fund
Management LLC
Gateway Center Three
100 Mulberry Street
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
Preferred Stock:
Dividend Paying Agent,
Transfer Agent And Registrar
The Bank of New York
100 Church Street
New York, NY 10286
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time
to time shares of its Common Stock in the open market.
This report, including the financial statements therein, 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) Member of the Audit Committee
-------------------------------------------------------------------------------
24 o ACM MUNICIPAL SECURITIES INCOME FUND
<PAGE>
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
Domestic Equity Funds
Balanced Shares
Conservative Investors Fund
Disciplined Value Fund
Growth & Income Fund
Growth Fund
Growth Investors Fund
Health Care Fund
Premier Growth Fund
Quasar Fund
Real Estate Investment Fund
Technology Fund
The Alliance Fund
Utility Income Fund
Global & International Equity Funds
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Biotechnology Portfolio
Premier Portfolio
Technology Portfolio
Fixed Income Funds
Corporate Bond Portfolio
Global Dollar Government Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
North American Government Income Trust
Quality Bond Portfolio
U.S. Government Portfolio
Municipal Income Funds
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
Closed-End Funds
All-Market Advantage Fund
The Austria Fund
ACM Government Income Fund
ACM Government Opportunity Fund
The Korean Investment Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
The Southern Africa Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
Alliance also offers AFD Exchange Reserves, which serves as the money market
fund exchange vehicle for the Alliance mutual funds.
To obtain a prospectus for any Alliance Capital fund, call your investment
professional, or call Alliance at (800) 227-4618.
--------------------------------------------------------------------------------
ACM MUNICIPAL SECURITIES INCOME FUND o 25
<PAGE>
------------------------------
SUMMARY OF GENERAL INFORMATION
------------------------------
SUMMARY OF GENERAL
INFORMATION
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 nalue (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 (800) 219-4218.
--------------------------------------------------------------------------------
26 o ACM MUNICIPAL SECURITIES INCOME FUND
<PAGE>
NOTES
--------------------------------------------------------------------------------
ACM MUNICIPAL SECURITIES INCOME FUND o 27
<PAGE>
NOTES
--------------------------------------------------------------------------------
28 o ACM MUNICIPAL SECURITIES INCOME FUND
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ACM Municipal Securities Income Fund
1345 Avenue of the Americas
New York, NY 10105
Alliance Capital [LOGO](R)
The Investment Professional's Choice
(R) These registered service marks used under license from the owner, Alliance
Capital Management L.P.
CODE - TK
