<PAGE>
Letter To Shareholders ACM Managed Dollar Income Fund, Inc.
================================================================================
November 15, 1996
Dear Shareholder:
Throughout most of 1996, U.S. bond market returns have been subdued. The market
has reacted negatively to stronger-than-expected job growth and uncertainty
about whether the Federal Reserve would raise rates to slow economic growth.
Across all major sectors of the bond market, shorter-duration securities have
outperformed longer-duration securities as interest rates for all maturities
have increased.
INVESTMENT RESULTS
In spite of sluggish domestic bond market returns, the emerging market and high
yield bond sectors continued their impressive performance over the past six
months. We are pleased to report that ACM Managed Dollar Income Fund was well
positioned to capitalize on gains in both of these sectors and posted strong
positive returns over the most recent reporting period. For the six months
ended September 30, 1996, the Fund returned 25.13% on a net asset value basis
which compared with 20.62% for its benchmark, the J.P. Morgan Emerging Markets
Bond Index. Over the 12-month period ended September 30, 1996 the Fund achieved
a total return of 40.86% on a net asset value basis compared with 37.92% for the
benchmark index.
ECONOMIC REVIEW
Rebounding from a slowdown at the end of 1995, the U.S. economy gathered steam
as 1996 progressed. Following first quarter's growth of 2.0% [as measured by
the Gross Domestic Product (GDP)] the economic resurgence gained strength during
the second quarter, led by a rapidly improving labor market. Employment gains
averaged 272,000 per month and total hours worked climbed by an annualized 5.7%.
Consumer confidence remained elevated and real household spending continued to
grow at a healthy clip. These factors combined to produce "overheated" GDP
growth for the second quarter of 4.7%.
However, the most recent data point to an economy that has slowed sharply from
its strong second quarter pace. Overall GDP growth declined to a more moderate
2.2%, dragged down by a dramatic deceleration in consumer spending. The
annualized gain in retail sales of merchandise measured only 0.4% during the
third quarter while construction spending dropped 5.8% from second quarter's
level. On the production side, industrial production growth slowed to an
annualized 4.3% (from second quarter's 6.6%), total hours worked grew by only
2.8%, and non-farm payroll growth slowed to 145,000 per month.
On the inflation front, the Commerce Department's price index for the key gross
domestic purchases aggregate (which measures prices paid on all purchases by
U.S. residents) decelerated for the second quarter in a row, rising at a
seasonally adjusted annual rate of only 1.8% in the third quarter versus 2.1% in
the second quarter and 2.3% in the first quarter. At this broadest level of
economic coverage, inflation remains very well-behaved. As a result, the
Federal Reserve has been in a holding pattern since January and is expected to
maintain that stance for the foreseeable future.
INVESTMENT OUTLOOK
Our outlook for the U.S. economy assumes that while economic growth may
temporarily bounce higher during the fourth quarter of 1996, it will moderate
again during the first half of 1997. As this occurs, recent upward pressures on
inflation should dissipate. Until clear signs of a slowing economy emerge,
concerns about inflation will keep U.S. interest rates within their recent
ranges with a tendency to move toward the lower end of the yield range.
Outside of the U.S., we continue to have a favorable outlook for emerging market
debt. However, as risk
1
<PAGE>
ACM Managed Dollar Income Fund, Inc.
================================================================================
premiums for this asset class have narrowed from their highs at the end of 1994,
we expect the pace of price appreciation of these securities to slow somewhat.
In Mexico and Argentina, the success of economic programs undertaken since the
peso devaluation two years ago has led to lower inflation, improving current
account deficits and growing investor confidence. These factors should support
higher bond prices in these markets in the future.
In Russia, current economic indicators show encouraging signs. Reserves have
increased considerably in the past two years and the current account surplus
continues to grow. We expect the impact of market-oriented reforms to be more
noticeable in 1997 and produce further spread tightening (and hence, price
appreciation) in Russian securities. Investments in emerging markets securities
are always speculative, and the risk elements in the current Russian situation
have been well publicized. However, we believe Russian sovereign debt
obligations are a compelling long-term investment opportunity. Numerous factors
lead us to this opinion, including the recent credit ratings of Russian debt by
both Moody's and Standard & Poor's, successful steps toward the restructuring of
Russia's external debt, the receding likelihood of reactionary economic policies
and the growing representation of Russia in the emerging market bond indices.
In this regard, at our recommendation the Fund's Board of Directors recently
approved an increase of up to 25% of the Fund's total assets that may be
invested in U.S. Dollar-denominated Russian sovereign debt obligations, thus
positioning the Fund to afford its shareholders greater access to this
opportunity. This puts Russia on a par, in terms of the Fund's investment
limitations, with other significant "emerging market" sovereign debt issuers:
Argentina, Brazil, Mexico, Morocco, the Philippines and Venezuela.
Polish bonds, which have experienced substantial price appreciation since
receiving an investment grade rating earlier this year, appear to be near their
peak and we have begun reducing our exposure in this market.
In the months ahead, some factors which could impact emerging market bond prices
will be the possible resumption of the Mexican privatization program,
International Monetary Fund negotiations with the new coalition government in
Turkey, continued market reforms in Russia and expected S&P and Moody's ratings
on six to eight emerging countries' debt.
We continue to have a favorable outlook for the high yield sector but believe
additional caution will be necessary in selecting individual securities. We
currently have no major industry or sector themes driving our security
selection, but rather are looking at the market on a credit by credit basis.
Thank you for your continued interest and investment in ACM Managed Dollar
Income Fund. We look forward to reporting to you again on market activity and
the Fund's investment results in coming periods.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman
/s/ Wayne D. Lyski
Wayne D. Lyski
President
2
<PAGE>
Portfolio Of Investments
September 30, 1996 ACM Managed Dollar Income Fund, Inc.
================================================================================
<TABLE>
<CAPTION>
Principal
Amount
(000) U.S. $ Value
- ------------------------------------------------------
<S> <C> <C>
SOVEREIGN DEBT
OBLIGATIONS--72.2%
COLLATERALIZED
BRADY BONDS*--35.7%
BRAZIL--2.1%
Republic of Brazil
Par Bonds Series Z-L
5.00%, 4/15/24 (a)......... $13,000 $ 7,739,063
------------
BULGARIA--7.7%
Republic of Bulgaria
Discount Bonds FRN
6.6875%, 7/28/24........... 55,800 28,405,688
------------
ECUADOR--2.9%
Republic of Ecuador
Discount Bonds FRN
6.688%, 2/28/25............ 17,000 10,582,500
------------
MEXICO--10.1%
United Mexican States
Euro Par Bonds
Series B
6.25%, 12/31/19 (b)........ 36,000 24,952,500
Discount Notes FRN
Series D
6.453%, 12/31/19 (b)....... 15,000 12,651,563
------------
Total Mexican Securities.... 37,604,063
------------
NIGERIA--6.5%
Central Bank of Nigeria
Par Bonds
6.25%, 11/15/20 (c)........ 40,500 24,236,719
------------
VENEZUELA--6.4%
Republic of Venezuela DCB
Par Bonds Series A
6.75%, 3/31/20 (d)......... 34,000 23,630,000
------------
Total Collateralized
Brady Bonds
(cost $124,177,246)........ 132,198,033
------------
LOAN PARTICIPATIONS
& ASSIGNMENTS--6.3%
ALGERIA--2.5%
Algeria Refinanced Trust
Tranche B
Loan Assignment FRN
7.187%, 9/05/05............ $15,000 $ 9,450,000
RUSSIA--3.8%
Vneshekonombank
Loan Assignment (e)........ 20,000 13,962,500
------------
Total Loan Participations &
Assignments
(cost $20,737,255)......... 23,412,500
------------
OTHER SOVEREIGN DEBT
OBLIGATIONS--29.3%
ARGENTINA--6.6%
Republic of Argentina
FRB
6.625%, 3/31/05............ 29,400 24,613,312
------------
BRAZIL--11.0%
Republic of Brazil C Bonds
8.00%, 4/15/14 (f)......... 57,639 40,599,751
------------
BULGARIA--2.5%
Republic of Bulgaria
IAB FRN
6.6875%, 7/28/11........... 20,000 9,175,000
------------
ECUADOR--2.6%
Republic of Ecuador
PDI Bonds FRN
6.50%, 2/27/15 (g)......... 19,029 9,729,016
------------
VENEZUELA--6.6%
Republic of Venezuela
DCB FRN
6.625%, 12/18/07........... 29,500 24,438,906
------------
Total Other Sovereign
Debt Obligations
(cost $100,879,670)........ 108,555,985
------------
</TABLE>
<PAGE>
Portfolio Of Investments (continued) ACM Managed Dollar Income Fund, Inc.
================================================================================
<TABLE>
<CAPTION>
Principal
Amount
(000) U.S. $ Value
- ---------------------------------------------------------
<S> <C> <C>
SOVEREIGN DEBT RELATED--0.9%
Morgan Guaranty Trust Co.
Spread Note
U.S. Treasury Bond
5.875%, 11/15/05 vs.
Poland PDI Bonds
3.75%, 10/27/14
8.00%, 1/24/97 (h)
(cost $3,500,000)...... $ 3,500 $ 3,509,100
------------
Total Sovereign
Debt Obligations
(cost $249,294,169).... 267,675,618
------------
U.S. CORPORATE FIXED
INCOME OBLIGATIONS--47.7%
AGRICULTURE--1.4%
Trans-Resources, Inc.
11.875%, 7/01/02 (i)... 5,000 5,125,000
------------
AUTOMOBILE--1.5%
APS, Inc.
11.875%, 1/15/06....... 5,000 5,450,000
------------
BASIC INDUSTRIES--8.6%
Alpine Group, Inc.
12.25%, 7/15/03........ 4,000 4,300,000
Crain Industries, Inc.
13.50%, 8/15/05........ 5,000 5,550,000
Haynes International, Inc.
11.625%, 9/01/04....... 5,500 5,692,500
IMO Industries, Inc.
11.75%, 5/01/06........ 5,000 5,200,000
Unisys Corp.
12.00%, 4/15/03........ 10,750 11,126,250
------------
Total Basic Industries.. 31,868,750
BROADCASTING--1.3%
Albritton Communications Co.
9.75%, 11/30/07 (i).... 5,000 4,831,250
------------
BROADCASTING
& CABLE--3.6%
Charter Communications L.P.
11.25%, 3/15/06........ 7,000 7,227,500
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal
Amount
(000) U.S. $ Value
- ---------------------------------------------------------
<S>..................... <C> <C>
Intermedia Capital Partners
11.25%, 8/01/06 (i).... $ 6,000 $ 6,255,000
------------
Total Broadcasting & Cable 13,482,500
------------
BROADCASTING &
MEDIA--5.8%
Park Broadcasting, Inc.
11.75%, 5/01/04........ 7,000 7,980,000
Park Newspapers, Inc.
11.875%, 5/15/04 (i)... 3,000 3,420,000
Sullivan Graphics, Inc
12.75%, 8/01/05........ 4,000 3,870,000
Telemundo Group, Inc.
7.00%, 2/15/06......... 6,400 6,112,000
------------
Total Broadcasting
& Media................. 21,382,000
------------
CHEMICALS--0.8%
Uniroyal Technology Corp.
11.75%, 6/01/03........ 3,000 2,827,500
warrants, expiring
6/1/03 (j)(k)........... 30 30,000
------------
Total Chemicals......... 2,857,500
------------
ENERGY--2.4%
TransTexas Gas Corp.
11.50%, 6/15/02........ 8,500 9,052,500
------------
FOOD DISTRIBUTION--1.5%
Specialty Foods Corp.
11.125%, 10/01/02...... 6,000 5,610,000
------------
GAMING--1.7%
Casino America, Inc.
12.50%, 8/01/03........ 5,800 6,079,125
------------
GROCERIES--3.1%
Jitney-Jungle Stores of.America
12.00%, 3/01/06........ 6,000 6,397,500
Ralph's Grocery Co.
11.00%, 6/15/05........ 5,000 5,056,250
------------
Total Groceries......... 11,453,750
</TABLE> ------------
4
<PAGE>
ACM Managed Dollar Income Fund, Inc.
================================================================================
<TABLE>
<CAPTION>
Principal
Amount
(000) U.S. $ Value
- ---------------------------------------------------------------
<S> <C> <C>
LEISURE--4.6%
Alamo Rent-A-Car
11.75%, 01/31/06............ $ 5,250 $ 5,722,500
Alliance Gaming Corp.
12.875%, 6/30/03............ 6,000 6,255,000
American Skiing Co.
12.00%, 7/15/06 (i)......... 5,000 5,000,000
-----------
Total Leisure................ 16,977,500
-----------
NATURAL RESOURCES--1.8%
Royal Oak Mines, Inc.
11.00%, 8/15/06............. 6,500 6,727,500
-----------
PAPER--0.5%
Crown Paper Co.
11.00%, 9/01/05............. 2,000 1,995,000
-----------
STEEL--1.3%
Weirton Steel Corp.
11.375%, 7/01/04............ 5,000 4,850,000
-----------
TELECOMMUNICATIONS--4.3%
CAI Wireless Systems, Inc.
12.25%, 9/15/02............. 5,000 5,200,000
Dictaphone Corp.
11.25%, 8/01/05............. 6,000 5,550,000
IXC Communications Inc.
12.50%, 10/01/05 (l)........ 5,000 5,293,750
-----------
Total Telecommunications..... 16,043,750
-----------
TRANSPORTATION--2.7%
Johnstown America Industries, Inc.
11.75%, 8/15/05............. 5,000 4,525,000
</TABLE>
<TABLE>
<CAPTION>
Shares/
Contract or
Principal
Amount
(000) U.S. $ Value
- ---------------------------------------------------------------
<S>.......................... <C> <C>
Terex Corp.
13.25%, 5/01/02 (i)......... $ 5,150 $ 5,420,375
------------
Total Transportation......... 9,945,375
------------
UTILITIES--0.8%
Calpine Corp.
10.50%, 5/15/06 (i)......... 3,000 3,075,000
------------
Total U.S. Corporate Fixed
Income Obligations
(cost $169,724,525)......... 176,806,500
------------
NON-U.S. FIXED
INCOME SECURITIES--1.9%
MEXICO--1.8%
Grupo Mexicano
De Desarrollo SA
8.25%, 2/17/01 (i)
(cost $6,103,884)........... 10,000 6,500,000
------------
WARRANTS--0.1%
Renaissance Cosmetics
Warrants, expiring 8/15/01 (m)
(cost $108,950)............. 8,000 400,000
------------
OPTIONS PURCHASED--0.0%
United Mexico States
expiring October '96
@ $70.3125
(cost $360,000)............. 1 110,000
------------
TOTAL INVESTMENTS--121.8%
(cost $425,591,530)......... 451,492,118
Other assets less liabilities--(21.8%) (80,946,074)
------------
NET ASSETS--100%............. $370,546,044
============
</TABLE>
5
<PAGE>
Portfolio Of Investments (continued) ACM Managed Dollar Income Fund, Inc.
================================================================================
- --------------------------------------------------------------------------------
* Sovereign debt obligations issued as part of debt restructuring that are
collateralized in full as to principal due at maturity by U.S. Treasury
zero coupon obligations which have the same maturity as the Brady Bond.
(a) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at September 30, 1996.
(b) Security trades with recovery rights expiring June 30, 2003.
(c) Security trades with oil warrants expiring November 15, 2020.
(d) Security trades with oil warrants expiring April 15, 2020.
(e) Security is in default and is non-income producing.
(f) Coupon consists of 4.50% cash payment and 3.50% paid-in-kind.
(g) Coupon consists of 3.50% cash payment and 3.00% paid-in-kind.
(h) Principal amount represents par value at purchase date. The redemption
value of these securities is indexed to the spread between the referenced
treasury yield and the referenced emerging market debt yield.
(i) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
1996, these securities amounted to $39,626,625 or 10.7% of net assets.
(j) Non-income producing security.
(k) Each warrant entitles the holder to purchase one share at an exercise price
of $4.375 per share. The warrants are exercisable until June 1, 2003.
(l) Security will have an increased interest rate of 0.50% until registration
under Rule 144A of the Securities Act of 1933 becomes effective. At that
time interest will accrue at the rate shown.
(m) Each warrant entitles the holder to purchase one share at an exercise price
of $0.01 per share. The warrants are exerciseable until August 15, 2001.
Glossary of terms:
DCB - Debt Conversion Bond.
FRN - Floating Rate Note. Coupon will fluctuate based upon an interest
rate index.
Stated interest rate in effect at September 30, 1996.
FRB - Floating Rate Bond. Coupon will fluctuate based upon an interest rate
index.
Stated interest rate in effect at September 30, 1996.
IAB - Interest Arrears Bond.
PDI - Past Due Interest Bond.
See notes to financial statements.
6
<PAGE>
Statement Of Assets And Liabilities
September 30, 1996 ACM Managed Dollar Income Fund, Inc.
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $425,591,530).............. $451,492,118
Cash................................................................. 4,123,389
Interest receivable.................................................. 13,607,794
Receivable for investment securities sold............................ 2,557,015
Deferred organization expenses and other assets...................... 24,553
------------
Total assets......................................................... 471,804,869
------------
LIABILITIES
Loan payable......................................................... 96,500,000
Net unrealized depreciation of swap contract......................... 2,637,850
Interest payable..................................................... 809,936
Advisory fee payable................................................. 283,178
Administrative fee payable........................................... 56,636
Accrued expenses and other liabilities............................... 971,225
------------
Total liabilities.................................................... 101,258,825
------------
NET ASSETS............................................................ $370,546,044
============
COMPOSITION OF NET ASSETS
Common stock, at par................................................. $ 283,250
Additional paid-in capital........................................... 391,817,637
Undistributed net investment income.................................. 1,253,406
Accumulated net realized loss........................................ (46,070,987)
Net unrealized appreciation of investments and swap contract......... 23,262,738
------------
$370,546,044
============
NET ASSET VALUE PER SHARE (based on 28,325,009 shares outstanding).... $13.08
======
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
7
<PAGE>
Statement Of Operations
Year Ended September 30, 1996 ACM Managed Dollar Income Fund, Inc.
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest........................................................................................ $ 46,873,669
------------
EXPENSES
Advisory fee.................................................................................... $ 3,083,166
Administrative fee.............................................................................. 616,633
Custodian....................................................................................... 210,904
Loan origination fee and loan expenses.......................................................... 164,840
Transfer agency................................................................................. 120,773
Audit and legal................................................................................. 97,058
Reports and notices to shareholders............................................................. 27,468
Directors' fees................................................................................. 25,072
Amortization of organization expenses........................................................... 8,019
Miscellaneous................................................................................... 58,616
------------
Total expenses before interest expense.......................................................... 4,412,549
Interest expense................................................................................ 6,231,187
------------
Total expenses.................................................................................. 10,643,736
------------
Net investment income........................................................................... 36,229,933
------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND OPTIONS
Net realized gain on investment transactions................................................... 32,509,148
Net realized gain on options written........................................................... 8,020,229
Net realized gain on swap contracts............................................................ 1,549,500
Net change in unrealized depreciation of investments, options written and swap contracts....... 32,913,344
------------
Net gain on investments........................................................................ 74,992,221
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS...................................................... $111,222,154
============
</TABLE>
Statement Of Changes In Net Assets
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, 1996 September 30, 1995
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income............................................................ $ 36,229,933 $ 37,347,975
Net realized gain (loss) on investment transactions, options written and swap
contract....................................................................... 42,078,877 (48,890,891)
Net change in unrealized depreciation of investments, options written
and swap contract.............................................................. 32,913,344 25,563,387
------------ ------------
Net increase in net assets from operations....................................... 111,222,154 14,020,471
DIVIDENDS TO SHAREHOLDERS
Dividends from net investment income............................................. (35,689,077) (37,303,113)
Tax return of capital distribution............................................... -0- (465,363)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in the issuance of Common Stock.............. -0- 4,941,844
------------ ------------
Total increase (decrease)......................................................... 75,533,077 (18,806,161)
NET ASSETS
Beginning of year................................................................ 295,012,967 313,819,128
------------ ------------
End of year (including undistributed net investment income of $1,253,406
at September 30, 1996)......................................................... $370,546,044 $295,012,967
============ ============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
8
<PAGE>
Statement Of Cash Flows
Year Ended September 30, 1996 ACM Managed Dollar Income Fund, Inc.
================================================================================
<TABLE>
<S> <C> <C>
INCREASE (DECREASE) IN CASH FROM OPERATING ACTIVITIES:
Interest and dividends received......................... $ 40,836,446
Interest expense paid................................... (5,961,285)
Operating expenses paid................................. (4,356,108)
---------------
Net increase in cash from operating activities.......... $ 30,519,053
INVESTING ACTIVITIES:
Purchases of long-term investments...................... (1,779,400,599)
Proceeds from disposition of long-term investments...... 1,741,223,386
Proceeds from disposition of short-term investments, net 30,853,170
---------------
Net decrease in cash from investing activities.......... (7,324,043)
FINANCING ACTIVITIES*:
Cash dividends and distributions paid................... (35,689,077)
Proceeds from borrowings................................ 18,500,000
Repayment of borrowings................................. (2,500,000)
---------------
Net decrease in cash from financing activities.......... (19,689,077)
-------------
Net increase in cash.................................... 3,505,933
Cash at beginning of year............................... 617,456
-------------
Cash at end of year..................................... $ 4,123,389
=============
- -----------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM
OPERATIONS TO NET INCREASE IN CASH FROM OPERATING
ACTIVITIES:
Net increase in net assets from operations.............. $ 111,222,154
ADJUSTMENTS:
Increase in interest receivable......................... $ (3,374,375)
Accretion of bond discount.............................. (3,489,098)
Increase in accrued expenses............................ 882,691
Increase in interest payable............................ 269,902
Net gain on investments................................. (74,992,221)
---------------
Total adjustments....................................... (80,703,101)
-------------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES........... $ 30,519,053
=============
</TABLE>
- --------------------------------------------------------------------------------
* Non-cash financing activities not included herein consist of reinvestment of
dividends and distributions.
See notes to financial statements.
9
<PAGE>
Notes To Financial Statements
September 30, 1996 ACM Managed Dollar Income Fund, Inc.
================================================================================
NOTE A: Significant Accounting Policies
ACM Managed Dollar Income Fund, Inc. (the "Fund") was incorporated under the
laws of the State of Maryland on August 10, 1993 and is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. 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 valued at the
last sale price on such exchange on the day of valuation or, if there was no
sale on such day, the last bid price quoted on such day. Listed securities not
traded and securities traded in the over-the-counter market, including listed
debt securities whose primary market is believed to be over-the-counter, are
valued at the mean between the most recent quoted bid and asked prices provided
by the principal market makers. Publicly traded sovereign debt obligations are
typically traded internationally on the over-the-counter market. Due to the
nature of the markets for sovereign debt obligations, quotations from several
sources are obtained so that the Fund's portfolio investments are not generally
priced by a single source. Readily marketable sovereign debt obligations and
fixed income securities may be valued on the basis of prices provided by a
pricing service when such prices are believed by the Adviser to reflect the fair
value of such securities. Options are valued at market value or fair value using
methods determined by the Board of Directors. Securities for which market
quotations are not readily available are valued in good faith at fair value
using methods determined by the Board of Directors. Securities which mature in
60 days or less are valued at amortized cost, which approximates market value,
unless this method does not represent fair value.
2. Organization Expenses
Organization expenses of approximately $40,000 were deferred and are being
amortized on a straight-line basis through October 1998.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. Investment Income and Investment Transactions
Interest income is accrued daily. Dividend income is recorded on the ex-dividend
date. Investment transactions are accounted for on the date the investments are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts as adjustments to interest income.
5. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
6. Reclassification of Components of Net Assets
During the year the Fund reclassified certain components of net assets. The
reclassification resulted in a net increase to undistributed net investment
income and a corresponding decrease to accumulated net realized loss on
investments of $712,550. This reclassification was the result of permanent book
to tax differences in the classification of short term capital gains as ordinary
income. Net assets were not affected by the reclassification.
- --------------------------------------------------------------------------------
NOTE B: Advisory and Administrative Fees
Under the terms of the Investment Advisory Agreement, the Fund pays Alliance
Capital Management, L.P. (the "Adviser") an advisory fee equal to an annualized
rate of .75 of 1% of the average adjusted weekly net assets of the Fund during
the month.
10
<PAGE>
ACM Managed Dollar Income Fund, Inc.
================================================================================
On November 28, 1995, the Fund entered into a Shareholder Inquiry Agency
Agreement with Alliance Fund Services, Inc. ("AFS"), an affiliate of the
Investment Adviser, whereby the Fund reimburses AFS for costs relating to
servicing phone inquiries for the Fund. During the year ended September 30, 1996
there was no reimbursement paid to AFS.
Under the terms of the Administration Agreement, the Fund pays Princeton
Administrators, L.P. (the "Administrator") a monthly fee equal to the annualized
rate of .15 of 1% of the Fund's average adjusted weekly net assets. The
Administrator prepares financial and regulatory reports for the Fund and
provides clerical and other services.
- --------------------------------------------------------------------------------
NOTE C: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments,
options and U.S. Government Securities) aggregated $1,753,713,212 and
$1,770,927,373, respectively, for the year ended September 30, 1996. At
September 30, 1996 the cost of securities, for federal income tax purposes was
$426,282,872. Accordingly, gross unrealized appreciation of investments was
$27,317,697 and gross unrealized depreciation of investments was $2,108,451,
resulting in net unrealized appreciation of $25,209,246.
For federal income tax purposes, the Fund had a capital loss carryforward at
September 30, 1996 of approximately $36,026,439 which will expire in
2003.
Options Transactions
For investment and hedging purposes, the Fund purchases and writes (sells) put
and call options on U.S. and foreign government securities that are traded on
U.S. and foreign securities exchanges and over-the-counter markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk of
loss of premium and change in market value should the counterparty not perform
under the contract. Put and call options purchased are accounted for in the same
manner as portfolio securities. The cost of securities acquired through the
exercise of call options is increased by premiums paid. The proceeds from
securities sold through the exercise of put options are decreased by the premium
paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from options
written. The difference between the premium and the amount paid on effecting a
closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase transaction, as a realized loss. If a call option is exercised,
the premium is added to the proceeds from the sale of the underlying security in
determining whether the Fund has realized a gain or loss. If a put option is
exercised, the premium reduces the cost basis of the security purchased by the
Fund. In writing an option, the Fund bears the market risk of an unfavorable
change in the price of the security underlying the written option. Exercise of
an option written by the Fund could result in the Fund selling or buying a
security at a price different from the current market value.
Transactions in options written for the year ended September 30, 1996 were as
follows:
<TABLE>
<CAPTION>
Number of
Options Written Contracts Premium
----------- ---------
<S> <C> <C>
Options outstanding at
beginning of year 165 $ 1,441,276
Options written 165 379,500
Options terminated in
closing transactions (330) (1,820,776)
---- -----------
Options outstanding at
September 30, 1996 0 $ 0
==== ===========
</TABLE>
11
<PAGE>
Notes To Financial Statements (continued) ACM Managed Dollar Income Fund, Inc.
================================================================================
NOTE D: Interest Rate Swap Agreements
The Fund enters into interest rate swaps on sovereign debt obligations to
protect itself from interest rate fluctuations on the underlying floating rate
debt instruments. A swap is an agreement that obligates two parties to exchange
a series of cash flows at specified intervals based upon or calculated by
reference to changes in specified prices or rates for a specified amount of an
underlying asset. The payment flows are usually netted against each other, with
the difference being paid by one party to the other.
Risks may arise as a result of the failure of another party to the swap contract
to comply with the terms of the swap contract. The loss incurred by the failure
of a counterparty is generally limited to the net interest payment to be
received by the Fund, and/or the termination value at the end of the contract.
Therefore the Fund considers the creditworthiness of each counterparty to a swap
contract in evaluating potential credit risk. Additionally, risks may arise from
unanticipated movements in interest rates or in the value of the underlying
securities.
The Fund records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid in the interest
period. Net interest received or paid on these contracts is recorded as interest
income (or as an offset to interest income). Fluctuations in the value of swap
contracts are recorded for financial statement purposes as unrealized
appreciation or depreciation on interest rate swap contracts.
At September 30, 1996 the Fund had outstanding an interest rate swap contract as
follows:
<TABLE>
<CAPTION>
Payments Made Payments Received
by the Fund by the Fund
----------------------------- ------------------------
Unrealized
Termination Notional Notional Appreciation
Counterparty Date Amount Rate Amount Rate (Depreciation)
- ------------ ----------- ----------- --------------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Morgan 01/01/09 $25,000,000 Floating-LIBOR+ $25,000,000 Fixed-6.61% $(2,637,850)
Guaranty plus .8125%
</TABLE>
+ LIBOR - London Interbank Offered Rate.
- --------------------------------------------------------------------------------
NOTE E: Capital Stock
There are 300,000,000 shares of $.01 par value capital stock authorized. Of the
28,325,009 shares of Common Stock outstanding at September 30, 1996, the Adviser
owned 7,100 shares.
During the year ended September 30, 1996, the Fund did not issue shares in
connection with the dividend reinvestment plan. During the year ended September
30, 1995, the Fund issued 530,592 shares in connection with the Fund's dividend
reinvestment plan.
- --------------------------------------------------------------------------------
NOTE F: Bank Borrowing
The Fund entered into a Revolving Credit Agreement with Citibank, N.A. which was
reviewed on March 29, 1996. The maximum credit available is $100,000,000 and the
amount outstanding as of September 30, 1996 was $96,500,000 with an average
interest rate of 6.14%. Interest payments on current borrowings are based on the
London Interbank Offered Rate plus a premium. The average daily amount of the
loan outstanding during the year ended September 30, 1996 was approximately
$90,043,716 with a related weighted average annualized interest rate of 6.92%.
The Fund is also obligated to pay Citibank, N.A. a facility fee computed at the
rate of .15 of 1% per annum on the full $100,000,000 available.
12
<PAGE>
ACM Managed Dollar Income Fund, Inc.
================================================================================
NOTE G: Concentration of Risk
Investing in securities of foreign companies and foreign governments involves
special risks which include revaluation of currencies and future adverse
political and economic developments. Moreover, securities of many foreign
companies and foreign governments and their markets may be less liquid and their
prices more volatile than those of comparable U.S. companies and the United
States Government. The Fund invests in the sovereign debt obligations of
countries that are considered emerging market countries at the time of purchase.
Therefore, the Fund is susceptible to governmental factors and economic and debt
restructuring developments adversely affecting the economies of these emerging
market countries. In addition, these debt obligations may be less liquid and
subject to greater volatility than debt obligations of more developed countries.
13
<PAGE>
Financial Highlights ACM Managed Dollar Income Fund, Inc.
================================================================================
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Year Ended
September 30, October 22, 1993*
----------------- to
1996 1995 September 30, 1994
------ ------ ------------------
<S> <C> <C> <C>
Net asset value, beginning of period......................... $10.42 $11.29 $14.04(a)
------ ------ ------
Income From Investment Operations
- ---------------------------------
Net investment income........................................ 1.27 1.32 1.13
Net realized and unrealized gain (loss) on
investments and options written............................. 2.65 (.85) (2.66)
------ ------ ------
Net increase (decrease) in net asset value from operations... 3.92 .47 (1.53)
------ ------ ------
Less: Dividends and Distributions
- ---------------------------------
Dividends from net investment income......................... (1.26) (1.32) (1.13)
Distributions in excess of net investment income............. -0- -0- (.02)
Tax return of capital distribution........................... -0- (.02) (.07)
------ ------ ------
Total distributions.......................................... (1.26) (1.34) (1.22)
------ ------ ------
Net asset value, end of period............................... $13.08 $10.42 $11.29
------ ------ ------
Market value, end of period.................................. $11.75 $9.875 $11.25
====== ====== ======
Total Return (b)
- ----------------
Total investment return based on:
Market value................................................. 33.53% 0.92% (11.94)%
Net asset value.............................................. 40.86% 6.11% (11.62)%
Ratios/Supplemental Data
- ------------------------
Net assets, end of year (000's omitted)...................... $370,546 $295,013 $313,819
Ratio of expenses to average net assets...................... 2.59% 2.83% 1.78%(c)
Ratio of expenses to average net assets excluding interest
expense..................................................... 1.07% 1.17% 1.07%(c)
Ratio of net investment income to average net assets......... 8.79% 10.56% 8.54%(c)
Portfolio turnover rate...................................... 443% 344% 225%
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations.
(a) Net of offering costs of $.06.
(b) 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 the 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 the 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 such periods. Total investment return calculated for
a period of less than year is not annualized.
(c) Annualized.
14
<PAGE>
Report Of Ernst & Young LLP
Independent Auditors ACM Managed Dollar Income Fund, Inc.
================================================================================
To the Shareholders and Board of Directors
ACM Managed Dollar Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities of ACM
Managed Dollar Income Fund, Inc., including the portfolio of investments, as of
September 30, 1996, and the related statements of operations and cash flows for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of ACM
Managed Dollar Income Fund, Inc. at September 30, 1996, the results of its
operations and its cash flows for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated periods, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
November 8, 1996
15
<PAGE>
Additional Information ACM Managed Dollar Income Fund, Inc.
================================================================================
Shareholders whose shares are registered in their own names may elect to be
participants in the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
pursuant to which dividends and capital gain distributions to shareholders will
be paid in or reinvested in additional shares of the Fund. State Street Bank and
Trust Company (the "Agent") will act as agent for participants under the Plan.
Shareholders whose shares are held in the name of a broker or nominee should
contact such broker or nominee to determine whether or how they may participate
in the Plan.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will
issue new shares at the greater of net asset value or 95% of the then
current market price.
(ii) If the shares of Common Stock are trading at a discount from net asset
value at the time of valuation, the Plan Agent will receive the dividend
or distribution in cash and apply it to the purchase of the Fund's shares
of Common Stock in the open market on the New York Stock Exchange or
elsewhere, for the participants' accounts. Such purchases will be made on
or shortly after the payment date for such dividend or distribution and
in no event more than 30 days after such date except where temporary
curtailment or suspension of purchase is necessary to comply with Federal
securities laws. If, before the Plan agent has completed its purchases,
the market price exceeds the net asset value of a share of Common Stock,
the average purchase price per share paid by the Plan agent may exceed
the net asset value of the Fund's shares of Common Stock, resulting in
the acquisition of fewer shares than if the dividend or distribution had
been paid in shares issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of the
participant, and each shareholder's proxy will include those shares purchased or
received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average cost,
including brokerage commissions, of any shares purchased in the open market plus
the cost of any shares issued by the Fund.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent to
written notice of the change sent to participants in the Plan at least 90 days
before the record date for such dividend or distribution. The Plan may also be
amended or terminated by the Agent on at least 90 days' written notice to
participants in the Plan. All correspondence concerning the Plan should be
directed to the Agent at State Street Bank and Trust Company, P.O. Box 366,
Boston, Massachusetts 02101.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and 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 Wayne D. Lyski, the President of the Fund.
16
<PAGE>
ACM Managed Dollar Income Fund, Inc.
================================================================================
Supplemental Proxy Information (Unaudited)
The Annual Meeting of Shareholders of the ACM Managed Dollar Income Fund, Inc.
was held on January 23, 1996. The description of each proposal and number of
shares voted at the meeting are as follows:
<TABLE>
<CAPTION>
Shares Shares Voted
Voted For Without Authority
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect directors Class Two Directors
(term expires in 1999)
John H. Dobkin 26,657,257 786,349
William H. Foulk, Jr. 26,671,683 771,923
James M. Hester 26,670,579 773,027
</TABLE>
<TABLE>
<CAPTION>
Shares Shares Voted Shares Voted
Voted For Against Abstain
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP
as the Fund's independent auditors for the Fund's
fiscal year ending September 30, 1996: 26,804,736 210,090 428,780
---------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
ACM Managed Dollar Income Fund, Inc.
================================================================================
<TABLE>
<S> <C>
Board Of Directors
John D. Carifa, Chairman William H. Foulk, Jr./(1)/
Ruth Block/(1)/ Dr. James M. Hester/(1)/
David H. Dievler/(1)/ Clifford L. Michel/(1)/
John H. Dobkin/(1)/ Donald J. Robinson/(1)/
Robert C. White/(1)/
Officers
Wayne D. Lyski, President Edmund P. Bergan, Jr., Secretary
Kathleen A. Corbet, Senior Vice President Mark D. Gersten, Treasurer & Chief Financial Officer
Paul J. DeNoon, Vice President Joseph J. Mantineo, Controller
Vicki L. Fuller, Vice President
Wayne C. Tappe, Vice President
ADMINISTRATOR INDEPENDENT AUDITORS
Princeton Administrators, L.P. Ernst & Young LLP
P.O. Box 9095 787 Seventh Avenue
Princeton, NJ 08543-9095 New York, NY 10019
CUSTODIAN, DIVIDEND PAYING AGENT, LEGAL COUNSEL
TRANSFER AGENT AND REGISTRAR Seward & Kissel
State Street Bank & Trust Company One Battery Park Plaza
225 Franklin Street New York, NY 10004
Boston, MA 02110
</TABLE>
- --------------------------------------------------------------------------------
/(1)/ Member of the Audit Committee
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 Managed Dollar Income Fund, Inc. for their information. This
is not a prospectus, circular or representation intended for use in the purchase
of shares of the Fund or any securities mentioned in this report.
18
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ACM Managed Dollar Income Fund, Inc.
Summary of General Information
The Fund
ACM Managed Dollar Income Fund, Inc. is a closed-end management investment
company investing substantially all of its assets in U.S. and non-U.S. fixed
income securities denominated in U.S. dollars. The Fund is designed for
investors who seek high current income and capital appreciation over a period of
years from investing in a portfolio of high yield, high risk U.S. and non-U.S.
fixed income securities which the Fund's investment adviser expects to benefit
from improving economic and credit fundamentals.
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. The Fund's NYSE
trading symbol is "ADF." 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 Funds." Additional information
about the Fund is available by calling 800-221-5672.
Dividend Reinvestment Plan
Pursuant to the Fund's Dividend Reinvestment Plan shareholders whose shares are
registered in their own names may elect to have all distributions reinvested
automatically in additional shares of the Fund by State Street Bank & Trust
Company, as agent under the Plan. Shareholders whose shares are held in the name
of a broker or nominee should contact the broker or nominee for details. All
distributions to investors who elect not to participate in the Plan will be paid
by check mailed directly to the record holder by or under the direction of State
Street Bank & Trust Company. For a copy of the Plan Brochure, please call State
Street Bank and Trust Company at 800-219-4218.
ACM Managed Dollar Income Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
[LOGO OF ALLIANCE CAPITAL APPEARS HERE]
Investing without the Mystery./(TM)/
(R)These registered service marks used under license from the owner,
Alliance Capital Management L.P.
MDIAR
ACM
-------------------
Managed
-------------------
Dollar
-------------------
Income Fund
-------------------
Annual Report
September 30, 1996
ALLIANCE
Investing without the Mystery./(TM)/
