<PAGE>
LETTER TO SHAREHOLDERS ACM Managed Dollar Income Fund
================================================================================
November 13, 1998
Dear Shareholder:
This annual report provides the investment results, market review and investment
strategy for ACM Managed Dollar Income Fund for the period ended September 30,
1998. The Fund is designed for investors who seek high current income and
capital appreciation. To achieve its objective, the Fund invests primarily in
high yielding, high risk U.S. and non-U.S. fixed income securities, denominated
in U.S. dollars, that we expect to benefit from improving economic and credit
fundamentals.
INVESTMENT RESULTS
The following table shows how the Fund performed over the six- and 12-month
periods ended September 30, 1998. For comparison, we have included performance
for the JP Morgan Emerging Market Bond Index-Plus, which is a standard measure
of the performance of a basket of unmanaged emerging market debt securities, and
the First Boston High Yield Index, a standard measure of the performance of a
basket of unmanaged U.S. high-yield debt securities. We compare your Fund's
performance to a blended composite of both indices, 65% JP Morgan Emerging
Markets Bond Index-Plus and 35% First Boston High Yield Index, because this
blended composite more closely resembles the composition of your Fund.
During the past six- and 12-month periods, your Fund underperformed its
benchmark as a result of the Fund's overweight positions in Russia and
Venezuela. The debt markets of both Russia and Venezuela were among the worst
performing markets over the six- and 12-month periods ended September 30, 1998.
Also, the Fund is 25% leveraged, which exacerbated negative price movement in
the portfolio.
INVESTMENT RESULTS*
Period Ended September 30, 1998
Total Return
6 Months 12 Months
-------- ---------
ACM Managed Dollar
Income Fund -37.46% -36.22%
JP Morgan Emerging
Markets Bond Index-Plus -25.94% -25.29%
First Boston High
Yield Index -4.97% -0.53%
Composite:
65% JP Morgan Emerging
Markets Bond Index-Plus
35% First Boston High
Yield Index -18.60% -16.62%
* The Fund's investment results represent total returns and are based on the
net asset value as of September 30, 1998. All fees and expenses related to the
operation of the Fund have been deducted. Returns for the Fund include the
reinvestment of any distributions paid during the period. Past performance is
no guarantee of future results.
The JP Morgan Emerging Markets Bond Index is composed of dollar-denominated
restructured sovereign bonds; a large percentage of the index is made up of
Brady bonds. The First Boston High Yield Index is a trader priced portfolio
representing 250 sectors and constructed to mirror the high yield debt market.
The indices are unmanaged and reflect no fees or expenses. An investor cannot
invest directly in an index.
INVESTMENT STRATEGY
Over the six-month period ended September 30, 1998, we decreased our exposure to
emerging market debt and increased our holdings of U.S. high-yield corporate
securities, seeking to reduce price volatility. Within the emerging markets, we
reduced our exposure to Russian and Latin American debt as the global financial
and economic situation deteriorated. Within the U.S. high-yield corporate
sector, we selectively picked solid credits which we thought were undervalued as
a result of market turmoil.
1
<PAGE>
LETTER TO SHAREHOLDERS(continued) ACM Managed Dollar Income Fund
================================================================================
MARKET OVERVIEW
During the six-month period ended September 30, 1998, global markets suffered
from heightened concerns about recession as the financial and economic turmoil
in Asia spread to Russia and Latin America.
In the emerging markets, debt prices fell over the six-month period ended
September 30, 1998, when renewed volatility in Asia, weakness in the yen and
fiscal problems in Russia heightened investor concerns about all higher-yielding
asset classes. Investor confidence was briefly restored in July, when the
International Monetary Fund (IMF) approved an emergency loan package for the
Russian government. However, the downward fall in emerging market debt prices
resumed and accelerated in August, after the Russian government devalued the
ruble and defaulted on its domestic debt. This surprise move by the Russian
government led to a general sell-off of emerging market assets as investors
moved to lower their portfolios' risk exposure. In September, emerging market
debt prices rebounded sharply when the U.S. Federal Reserve cut interest rates.
However, investor concern then shifted to Brazil, which, like Russia, has a
fixed currency regime and deficits in both its fiscal and current accounts.
As a result of financial and economic collapse, Russia was the worst performing
debt market over the six-month period ended September 30, 1998. Ecuador was the
worst performing Latin American debt market, followed by Venezuela. The
economies of both of these Latin countries have suffered from low oil prices and
political uncertainty. In addition, Ecuador recently devalued its currency.
In the U.S. high-yield market, robust economic growth, low default rates and
strong demand for higher-yielding assets helped to push prices for high-yield
bonds to new highs at the beginning of the six-month period under review.
However, in July this rally came to an end when events unfolding in Russia
prompted a general flight to quality, causing the high-yield sector to end the
six-month period with the worst performance among the U.S. bond market sectors.
Up until July, the U.S. high-yield sector posted the strongest return among the
U.S. bond market sectors.
OUTLOOK
Our outlook for emerging market debt has improved recently as a concerted effort
by the Group of Seven (G7) industrial countries has been made to avert further
spread of economic and financial malaise. First, the U.S. Federal Reserve and
other G7 countries have begun easing monetary policy in an effort to lower the
risk of slower economic growth. Second, the U.S. Congress has approved
additional funding to the IMF, clearing the way for financial aid to Brazil.
Third, the Japanese yen has strengthened sharply against the U.S. dollar,
relieving pressure on exchange rates and interest rates elsewhere in Asia.
Finally, after a favorable outcome in recent presidential elections, Brazil,
with assistance from the G7, has been hastily addressing its fiscal problems,
helping to restore investor confidence in global markets.
Though these positive developments have caused a significant rebound in emerging
market debt prices recently, emerging market economies continue to be very
sensitive to global economic growth and financial market liquidity. The emerging
markets face challenging problems which require time and economic growth for
resolution. Growth in Japan, the world's second largest economy, is ultimately
crucial if the emerging countries are to resume their process of global
integration.
2
<PAGE>
ACM Managed Dollar Income Fund
================================================================================
We continue to be favorably inclined toward the high-yield sector. However, the
importance of issuer selection has sharply increased due to a slowing domestic
economy and turmoil in global markets. We will continue to review each security
using a fundamental, bottom-up approach.
Thank you for your continued interest and investment in the ACM Managed Dollar
Income Fund. We look forward to reporting to you again on market activity and
the Fund's investment results in the coming periods.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman
/s/ Wayne D. Lyski
Wayne D. Lyski
President
3
<PAGE>
PORTFOLIO OF INVESTMENTS
September 30, 1998 ACM Managed Dollar Income Fund
================================================================================
Principal
Amount
(000) U.S. $ Value
- --------------------------------------------------------------------------------
SOVEREIGN DEBT
OBLIGATIONS--49.1%
OTHER SOVEREIGN
DEBT OBLIGATIONS--19.8%
INDONESIA--1.9%
Republic of Indonesia
7.75%, 8/01/06..................... $ 7,000 $ 3,378,550
-----------
IVORY COAST--1.2%
Ivory Coast FLIRB
2.00%, 3/29/18(a).................. 10,000 2,100,000
-----------
JAMAICA--5.3%
Government of Jamaica
10.875%, 6/10/05(b)................ 12,500 9,375,000
-----------
MOROCCO--4.1%
Kingdom of Morocco
Loan Participation FRN
Series A
6.563%, 1/01/09.................... 10,000 7,250,000
-----------
RUSSIA--1.7%
Russian IAN FRN
6.625%, 12/15/15................... 829 64,241
Russian Principal Loans FRN
6.625%, 12/15/20(c)................ 47,250 2,896,425
-----------
2,960,666
-----------
SOUTH KOREA--3.3%
Republic of South Korea
8.875%, 4/15/08.................... 7,000 5,906,250
-----------
TURKEY--2.3%
Republic of Turkey
9.875%, 2/23/05(b)................. 5,000 4,075,000
-----------
Total Other Sovereign Debt
Obligations
(cost $67,252,185)................. 35,045,466
-----------
NON-COLLATERALIZED
BRADY BONDS--17.5%
ARGENTINA--6.3%
Republic of Argentina FRB
6.1875%, 3/31/05................... 14,100 11,139,000
-----------
BRAZIL--0.6%
Republic of Brazil-C Bonds
8.00%, 4/15/14(d).................. 1,740 1,033,399
-----------
BULGARIA--6.6%
Republic of Bulgaria
IAB-FRN
6.6875%, 7/28/11................... $20,000 $ 11,700,000
-----------
ECUADOR--1.4%
Republic of Ecuador
PDI-FRN
6.625%, 2/27/15(e)................. 7,922 2,455,702
-----------
VENEZUELA--2.6%
Venezuela DCB-FRN
6.625%, 12/18/07................... 8,143 4,641,418
-----------
Total Non-Collateralized
Brady Bonds
(cost $38,321,759)................. 30,969,519
-----------
COLLATERALIZED
BRADY BONDS--11.8%
BRAZIL--3.3%
Republic of Brazil
Discount Bonds FRN
Series Z-L
6.625%, 4/15/24.................... 10,000 5,900,000
-----------
ECUADOR--1.6%
Republic of Ecuador
Par Bonds
3.50%, 2/28/25..................... 7,000 2,817,500
-----------
NIGERIA--3.2%
Nigeria Par Bonds
6.25%, 11/15/20(f)................. 10,000 5,700,000
-----------
VENEZUELA--3.7%
Venezuela Par Bonds
Series W-B
6.75%, 3/31/20..................... 5,000 3,275,000
Venezuela Discount Bonds FRN
Series W-B
6.625%, 3/31/20.................... 5,000 3,075,000
-----------
6,350,000
-----------
Total Collateralized
Brady Bonds
(cost $20,144,587)................. 20,767,500
-----------
Total Sovereign Debt
Obligations
(cost $125,718,531)................ 86,782,485
-----------
4
<PAGE>
ACM Managed Dollar Income Fund
================================================================================
Shares or
Principal
Amount
(000) U.S. $ Value
- --------------------------------------------------------------------------------
U.S. CORPORATE DEBT
OBLIGATIONS--51.8%
AGRICULTURE--2.7%
Trans-Resources, Inc.
Series B
10.75%, 3/15/08 ....................... $5,000 $4,850,000
----------
BROADCASTING &
CABLE--3.2%
Optel, Inc. Series B
13.00%, 2/15/05(g) .................... 5,500 5,610,000
warrants, expiring
1/12/99(h)(i) ......................... 8,500 255
----------
5,610,255
----------
BROADCASTING &
MEDIA--2.3%
Sullivan Graphics, Inc.
12.75%, 8/01/05 ....................... 4,000 4,010,000
----------
COMMUNICATIONS--7.6%
Dobson Wireline Company
12.25%, 6/15/08(b) .................... 5,000 4,625,000
Pathnet, Inc.
12.25%, 4/15/08(b) .................... 4,000 3,340,000
warrants, expiring
4/15/08 (h)(j) ........................ 4,000 6,000
Viatel, Inc.
11.25%, 4/15/08(b) .................... 6,000 5,400,000
----------
13,371,000
----------
CONSUMER PRODUCTS
& SERVICES--2.3%
Waterford Gaming LLC
12.75%, 11/15/03 ...................... 3,784 4,124,560
----------
ENERGY--5.1%
Continental Resources
10.25%, 8/01/08(b) .................... 5,000 4,150,000
National Energy Group, Inc.
Series D
10.75%, 11/01/06 ...................... 3,000 1,275,000
Transamerican Energy, Inc.
Series B
11.50%, 6/15/02 ....................... 6,000 3,510,000
----------
8,935,000
----------
FINANCIAL--3.3%
AMSC Acquisition Co. Inc.
Series B
12.25%, 4/01/08 ....................... $3,000 $1,740,000
Ocwen Asset Investment
11.50%, 7/01/05(b) .................... 5,000 4,025,000
----------
5,765,000
----------
GROCERY--5.2%
DiGiorgio Corp.
Series B
10.00%, 6/15/07 ....................... 5,750 5,376,250
The Pantry, Inc.
10.25%, 10/15/07 ...................... 4,000 3,900,000
----------
9,276,250
----------
HEALTHCARE--1.6%
Healthcor Holdings, Inc.
11.00%, 12/01/04 ...................... 5,000 2,775,000
----------
INDUSTRIAL--2.1%
Generac Portable Products
11.25%, 7/01/06(b) .................... 4,000 3,800,000
----------
LEISURE &
ENTERTAINMENT--1.5%
TVN Entertainment Corp.
14.00%, 8/01/08 ....................... 3,000 2,700,000
----------
METAL/MINERALS--3.3%
Acme Metals, Inc.
10.875%, 12/15/07 ..................... 6,000 1,230,000
Doe Run Resources Corp.
11.25%, 3/15/05(b) .................... 6,000 4,530,000
----------
5,760,000
----------
OIL & GAS--1.4% Panaco, Inc.
Series B
10.625%, 10/01/04 ..................... 3,000 2,415,000
----------
PETROLEUM PRODUCTS--1.5%
Chesapeake Energy Corp.
Series B
9.625%, 5/01/05 ....................... 3,000 2,655,000
----------
PLASTICS--3.4%
Foamex LP
13.50%, 8/15/05 ....................... 5,000 6,068,750
----------
5
<PAGE>
PORTFOLIO OF INVESTMENTS(continued) ACM Managed Dollar Income Fund
================================================================================
Principal
Amount
(000) U.S. $ Value
- --------------------------------------------------------------------------------
RESTAURANTS--1.5%
Planet Hollywood
International
12.00%, 4/01/05 ....................... $5,000 $2,825,000
----------
TELECOMMUNICATIONS--3.8%
ICO Global Communications
15.00%, 8/01/05 ....................... 6,000 4,680,000
Iridium LLC Capital Corp.
Series C
11.25%, 7/15/05 ....................... 2,500 2,037,500
----------
6,717,500
----------
Total U.S. Corporate Debt
Obligations
(cost $113,320,192) ................... 91,658,315
----------
NON-U.S. CORPORATE
DEBT OBLIGATIONS--18.4%
ARGENTINA--3.1%
Compania Alimentos Fargo
13.25%, 8/01/08(b) .................... 3,500 2,073,750
Supercanal Holdings, SA
10.125%, 11/07/02 ..................... 3,478 3,477,624
----------
5,551,374
----------
CHINA--2.6%
Cathay International, Ltd.
13.00%, 4/15/08(b) .................... 8,000 4,680,000
----------
JAPAN--1.8%
Fuji JGB LLC
9.87%, 6/30/08(b) ..................... 7,000 3,217,699
----------
SOUTH KOREA--8.8%
Korea Electric Power Corp.
6.00%, 12/01/26 ....................... 10,000 7,906,660
Samsung Electronics Co.
8.50%, 11/01/02(b) .................... 10,000 7,550,000
----------
15,456,660
----------
TATARSTAN--0.6%
Ing Bank N.V
14.50%, 10/23/98(b) ................... 11,000 1,100,000
----------
Shares or
Principal
Amount
(000)
----------
THAILAND--1.5%
Advance Agro Public Co.
13.00%, 11/15/07(b) ................... $2,950 $2,610,750
----------
Total Non-U.S. Corporate
Debt Obligations
(cost $54,277,039) .................... 32,616,483
----------
NON-CONVERTIBLE
PREFERRED STOCK--2.7%
Nextel Communications, Inc.
Series E
11.125%
(cost $5,394,223) ..................... 5,288 4,772,420
----------
CONVERTIBLE PREFERRED
STOCK--0.1%
Viatel Inc.
Series A
(cost $178,832) ....................... 2,976 163,680
----------
WARRANTS--0.1%
American Mobile Satellite
Corp.(h)(k) ........................... 3,000 14,130
Orion Network Co.(h)(l) ................ 5,000 72,500
Primus Telecommunications
Inc.(h)(m) ............................ 7,000 35,000
Renaissance Cosmetics(h)(n) ............ 8,000 80
Uniroyal Technology(h)(o) .............. 30,000 30,000
----------
(cost $138,950) ...................... 151,710
----------
TIME DEPOSIT--2.7%
State Street Bank & Trust Co.
5.25%, 10/01/98
(cost $4,742,000) ..................... $4,742 4,742,000
----------
TOTAL INVESTMENTS--124.9%
(cost $303,769,767) ................... 220,887,093
Other assets less liabilities--(24.9%) . (43,966,726)
-----------
NET ASSETS--100% ....................... $176,920,367
============
6
<PAGE>
ACM Managed Dollar Income Fund
================================================================================
(a) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at September 30, 1998.
(b) 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,
1998, these securities amounted to $64,552,199 or, 36.5% of net assets.
(c) Coupon consists of 3.3125% cash payment and 3.3125% paid-in-kind.
(d) Coupon consists of 5.0% cash payment and 3.0% paid-in-kind.
(e) Coupon consists of 3.25% cash payment and 3.375% paid-in-kind.
(f) Security trades with detachable oil warrants expiring November 15, 2020.
(g) Consists of $5,500,000 senior notes and 5,500 shares of common stock
(h) Non-income producing security.
(i) Each warrant entitles the holder to purchase one share at an exercise price
of $0.01 per share.
(j) Each warrant entitles the holder to purchase 3.19 shares at an exercise
price of $0.01 per share.
(k) Each warrant entitles the holder to purchase 3.75749 shares at an exercise
price of $12.51 per share. Expires 4/01/08.
(l) Each warrant entitles the holder to purchase .8463 shares at an exercise
price of $0.01 per share. Expires 1/15/07.
(m) Each warrant entitles the holder to purchase 1.74513 shares at an exercise
price of $9.075 per share. Expires 8/01/04.
(n) Each warrant entitles the holder to purchase one share at an exercise price
of $0.01 per share. Expires 8/31/06.
(o) Each warrant entitles t he holder to purchase one share at an exercise price
of $4.375 per share. Expires 6/01/03.
Glossary of Terms:
DCB --Debt Conversion Bond
FLIRB--Front Loaded Interest Reduction Bond
FRB --Floating Rate Bond
FRN --Floating Rate Note
IAB --Interest Arrears Bond
IAN --Interest Arrears Note
PDI --Past Due Interest
See notes to financial statements.
7
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998 ACM Managed Dollar Income Fund
================================================================================
ASSETS
Investments in securities, at value (cost $303,769,767) ...... $220,887,093
Cash ......................................................... 620,252
Interest receivable .......................................... 9,254,273
Receivable for investment securities sold .................... 150,000
Deferred organization expenses and other assets .............. 97,864
------------
Total assets ................................................ 231,009,482
------------
LIABILITIES
Loan payable ................................................ 50,500,000
Dividend payable ............................................ 2,432,515
Payable for investment securities purchased ................. 631,899
Advisory fee payable ........................................ 158,031
Interest payable ............................................ 110,055
Administrative fee payable .................................. 31,610
Accrued expenses and other liabilities ...................... 225,005
------------
Total liabilities ........................................... 54,089,115
------------
NET ASSETS ................................................... $176,920,367
============
COMPOSITION OF NET ASSETS
Common stock, at par ........................................ $ 216,224
Additional paid-in capital .................................. 294,059,695
Undistributed net investment income ......................... 1,169,785
Accumulated net realized loss on investment transactions .... (35,612,908)
Net unrealized depreciation of investments and other assets . (82,912,429)
------------
$176,920,367
============
NET ASSET VALUE PER SHARE (based on 21,622,359 shares outstanding) $8.18
=====
- --------------------------------------------------------------------------------
See notes to financial statements.
8
<PAGE>
STATEMENT OF OPERATIONS
Year Ended September 30, 1998 ACM Managed Dollar Income Fund
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest ...................................... $39,454,120
Dividends ..................................... 304,223
-----------
$ 39,758,343
EXPENSES
Advisory fee .................................. $ 2,780,963
Administrative fee ............................ 556,191
Audit and legal ............................... 97,874
Reports and notices to shareholders ........... 90,439
Custodian ..................................... 88,355
Loan fees ..................................... 47,715
Transfer agency ............................... 37,724
Registration fees ............................. 32,340
Directors' fees ............................... 29,901
Amortization of organization expenses ......... 7,997
Miscellaneous ................................. 25,963
-----------
Total expenses before interest expense ........ 3,795,462
Interest expense .............................. 5,687,083
-----------
Total expenses ................................ 9,482,545
-------------
Net investment income ......................... 30,275,798
-------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investment transactions .. (31,929,017)
Net change in unrealized appreciation of
investments and other assets ................ (103,671,471)
-------------
Net loss on investments ....................... (135,600,488)
-------------
NET DECREASE IN NET ASSETS FROM OPERATIONS ...... $(105,324,690)
=============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income ....................................... $ 30,275,798 $37,544,476
Net realized gain (loss) on investment transactions ......... (31,929,017) 68,475,490
Net change in unrealized appreciation
of investments and other assets ........................... (103,671,471) (2,503,696)
------------ -----------
Net increase (decrease) in net assets from operations ....... (105,324,690) 103,516,270
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ..................................... (33,486,944) (34,785,980)
Net realized gain on investments .......................... (25,704,945) -0-
------------ -----------
Net decrease in net assets resulting from
dividends & distributions to shareholders ............. (59,191,889) (34,785,980)
Common Stock Transactions:
Tender offer resulting in the redemption of
7,081,253 shares of Common Stock......................... -0- (102,761,893)
Reinvestment of dividends resulting in the issuance
of Common Stock.......................................... 4,922,505 -0-
------------ -----------
Total decrease ............................................ (159,594,074) (34,031,603)
NET ASSETS
Beginning of year ......................................... 336,514,441 370,546,044
------------ -----------
End of year (including undistributed net investment income
of $1,169,785 and $4,450,601, respectively) ............. $176,920,367 $336,514,441
============ ============
- --------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
9
<PAGE>
STATEMENT OF CASH FLOWS
For the Year Ended September 30, 1998 ACM Managed Dollar Income Fund
================================================================================
<TABLE>
<S> <C> <C>
INCREASE (DECREASE) IN CASH FROM OPERATING ACTIVITIES:
Interest and dividends received ................ $ 38,401,084
Interest expense paid .......................... (5,720,251)
Operating expenses paid ........................ (4,154,619)
-------------
Net increase in cash from operating activities .. $ 28,526,214
INVESTING ACTIVITIES:
Purchases of long-term investments ............. (749,839,411)
Proceeds from disposition of long-term
investments ................................... 793,240,348
Sales of short-term investments, net ........... 30,029,469
-------------
Net increase in cash from investing activities .. 73,430,406
FINANCING ACTIVITIES(a):
Cash dividends and distributions paid .......... (51,836,869)
Repayment for borrowings ....................... (49,500,000)
-------------
Net decrease in cash from financing activities . (101,336,869)
-------------
Net increase in cash ........................... 619,751
Cash at beginning of year ...................... 501
-------------
Cash at end of year ............................ $ 620,252
=============
- --------------------------------------------------------------------------------
RECONCILIATION OF NET DECREASE IN NET ASSETS FROM
OPERATIONS TO NET INCREASE IN CASH FROM OPERATING
ACTIVITIES:
Net decrease in net assets from operations ..... $(105,324,690)
ADJUSTMENTS:
Decrease in interest receivable ................ $ 789,128
Accretion of bond discount ..................... (2,146,387)
Decrease in accrued expenses and other assets .. (359,157)
Decrease in interest payable ................... (33,168)
Net loss on investments ........................ 135,600,488
-------------
Total adjustments .............................. 133,850,904
-------------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES .. $ 28,526,214
=============
- --------------------------------------------------------------------------------
</TABLE>
(a) Non-cash financing activities not included herein consist of reinvestment of
dividends and distributions. See notes to financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1998 ACM Managed Dollar Income Fund
================================================================================
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 financial statements have been prepared in conformity
with generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. Security Valuation
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are generally
valued at the last reported sale price or, if there was no sale on such 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, and securities listed on a
foreign securities exchange whose operations are similar to the United States
over-the-counter market and securities listed on a national securities exchange
whose primary market is believed to be over-the-counter are valued at the mean
of the closing bid and asked price 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. Listed put and call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that day, such
securities will be valued at the closing bid prices on that day.
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 substantially all
of its investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. Investment Income and Investment Transactions
Interest income is accrued daily. 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 discount as an adjustment to interest income.
5. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gains distributions are determined in accordance with federal
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences do not require such
reclassification.
During the current fiscal year, permanent differences primarily due to book to
tax differences on accrual of income, resulted in a net decrease in
undistributed net investment income and a net decrease in accumulated net
realized loss on investment transactions. This reclassification had no effect on
net assets.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS(continued) ACM Managed Dollar Income Fund
================================================================================
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.
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Adviser, the Fund reimburses AFS for
costs relating to servicing phone inquiries for the Fund. The Fund reimbursed
AFS $7,555 during the year ended September 30, 1998.
Under the terms of an 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 certain 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 $723,562,045 and
$779,938,683, respectively, for the year ended September 30, 1998. There were no
purchases or sales of U.S. government or government agency obligations for the
year ended September 30, 1998.
At September 30, 1998, the cost of investments for federal income tax purposes
was $304,955,191. Accordingly, gross unrealized appreciation of investments was
$4,162,807 and gross unrealized depreciation of investments was $88,230,905,
resulting in net unrealized depreciation of $84,068,098.
1. Options Transactions
For hedging and investment 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
premiums 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 received 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 received 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.
There were no transactions in options written for the year ended September 30,
1998.
12
<PAGE>
ACM Managed Dollar Income Fund
================================================================================
2. 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 debt
instruments and for investment purposes. 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 net unrealized
appreciation or depreciation on interest rate swap contracts.
At September 30, 1998 the Fund had no outstanding interest rate swap contracts.
- --------------------------------------------------------------------------------
NOTE D: Capital Stock
There are 300,000,000 shares of $.01 par value capital stock authorized. Of the
21,622,359 shares of Common Stock outstanding at September 30, 1998, the Adviser
owned 7,100 shares.
During the year ended September 30, 1998, the Fund issued 378,603 shares in
connection with the dividend reinvestment plan, and for the year ended September
30, 1997, the Fund did not issue shares in connection with the dividend
reinvestment plan.
During the year ended September 30, 1997, the Fund purchased and retired
7,081,253 shares of its outstanding common stock for $14.49 per share pursuant
to a tender offer.
- --------------------------------------------------------------------------------
NOTE E: Bank Borrowing
The Fund entered into a Revolving Credit Agreement with Citibank, N.A. which was
renewed on March 23, 1998. The maximum credit available is $95,000,000 and the
amount outstanding as of September 30, 1998 was $50,500,000 with an interest
rate of 6.04%. 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, 1998 was approximately $88,026,027 with a related weighted average
annualized interest rate of 6.46%. The Fund is also obligated to pay Citibank,
N.A. a facility fee computed at the rate of .125 of 1% per annum on the average
daily unused portion of the revolving credit.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS(continued) ACM Managed Dollar Income Fund
================================================================================
NOTE F: Concentration of Risk
Investing in securities of foreign companies and foreign governments involves
special risks which include the possibility of future adverse political and
economic developments which could adversely affect the value of such securities.
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.
14
<PAGE>
FINANCIAL HIGHLIGHTS ACM Managed Dollar Income Fund
================================================================================
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Year Ended
September 30, October 22, 1993(a)
------------------------------------------ to
1998 1997 1996 1995 September 30, 1994
------ ------ ------ ------ ------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $15.84 $13.08 $10.42 $11.29 $14.04(b)
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net investment income .................... 1.41 1.45(c) 1.27 1.32 1.13
Net realized and unrealized gain (loss) on
investment transactions ................ (6.30) 2.62 2.65 (.85) (2.66)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value
from operations ........................ (4.89) 4.07 3.92 .47 (1.53)
------ ------ ------ ------ ------
LESS: DIVIDENDS AND DISTRIBUTIONS
- ---------------------------------
Dividends from net investment income ..... (1.56) (1.31) (1.26) (1.32) (1.13)
Distributions in excess of net
investment income ...................... -0- -0- -0- -0- (.02)
Distributions of net realized
gains on investments ................... (1.21) -0- -0- -0- -0-
Tax return of capital distribution ....... -0- -0- -0- (.02) (.07)
------ ------ ------ ------ ------
Total dividends and distributions ........ (2.77) (1.31) (1.26) (1.34) (1.22)
------ ------ ------ ------ ------
Net asset value, end of period ........... $ 8.18 $15.84 $13.08 $10.42 $11.29
====== ====== ====== ====== ======
Market value, end of period .............. $9.3125 $15.00 $11.75 $9.875 $11.25
======= ====== ====== ====== ======
TOTAL RETURN(d)
- ---------------
Total investment return based on:
Market value ............................. (23.44)% 40.87% 33.53% .92% (11.94)%
Net asset value .......................... (36.22)% 33.64% 40.86% 6.11% (11.62)%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets, end of period (000's omitted) $176,920 $336,514 $370,546 $295,013 $313,819
Ratio of expenses to average net assets .. 2.56% 2.36% 2.59% 2.83% 1.78%(e)
Ratio of expenses to average net assets
excluding interest expense(f) .......... 1.03% 1.01% 1.07% 1.17% 1.07%(e)
Ratio of net investment income to
average net assets ..................... 8.19% 8.00% 8.79% 10.56% 8.54%(e)
Portfolio turnover rate .................. 208% 274% 443% 344% 225%
</TABLE>
- --------------------------------------------------------------------------------
(a) Commencement of operations.
(b) Net of offering costs of $.06.
(c) Based on average shares outstanding.
(d) 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
each 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 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 one year is not annualized.
(e) Annualized.
(f) Net of interest expense of 1.53%, 1.35%, 1.52%, 1.66% and .71%,
respectively, on loan outstanding (see Note E).
15
<PAGE>
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ACM Managed Dollar Income Fund
================================================================================
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. (the "Fund"), including the portfolio of
investments, as of September 30, 1998, 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, 1998, 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, 1998, 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 10, 1998
16
<PAGE>
ADDITIONAL INFORMATION ACM Managed Dollar Income Fund
================================================================================
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 17 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-certificated 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.
17
<PAGE>
ADDITIONAL INFORMATION(continued) ACM Managed Dollar Income Fund
================================================================================
YEAR 2000 AND EURO (UNAUDITED)
Many computer systems and applications in use today process transactions using
two digit date fields for the year of the transaction, rather than the full four
digits. If these systems are not modified or replaced, transactions occurring
after 1999 could be processed as year "1900," which could result in processing
inaccuracies and computer system failures. This is commonly known as the year
2000 problem. In addition to the Year 2000 problem, the European Economic and
Monetary Union has established a single currency, the Euro Currency ("Euro")
that will replace the national currency of certain European countries effective
January 1, 1999. Computer systems and applications must be adapted in order to
be able to process Euro sensitive information accurately beginning in 1999.
Should any of the computer systems employed by the Fund's major service
providers fail to process Year 2000 or Euro related information properly, that
could have a significant negative impact on the Fund's operations and the
services that are provided to the Fund's shareholders. In addition, to the
extent that the operations of issuers of securities held by the Fund are
impaired by the Year 2000 problem or Euro, or prices of securities held by the
Fund decline as a result of real or perceived problems relating to the Year 2000
or the Euro, the value of the Fund's shares may be materially affected.
With respect to the Year 2000, the Fund has been advised that the Adviser,
("Alliance") began to address the Year 2000 issue several years ago in
connection with the replacement or upgrading of certain computer systems and
applications. During 1997, Alliance began a formal Year 2000 initiative, which
established a structured and coordinated process to deal with the Year 2000
issues on its domestic and international computer systems and applications.
Currently, management of Alliance expects that the required modifications for
the majority of its significant systems and applications that will be in use on
January 1, 2000, will be completed and tested by the end of 1998. Full
integration testing of these systems and testing of interfaces with third-party
suppliers will continue through 1999. At this time, management of Alliance
believes that the costs associated with resolving this issue will not have a
material adverse effect on its operations or on its ability to provide the level
of services it currently provides to the Fund.
With respect to the Euro, the Fund has been advised that Alliance has
established a project team to assess changes that will be required in connection
with the introduction of the Euro. Alliance reports that its project team has
assessed all systems, including those developed or managed internally, as well
as those provided by vendors, in order to determine the modifications that will
be required to process accurately transactions denominated in Euro after 1998.
At this time, management of Alliance expects that the required modifications for
the introduction of the Euro will be completed and tested before the end of
1998. Management of Alliance believes that the costs associated with resolving
this issue will not have a material adverse effect on its operations or on its
ability to provide the level of services it currently provides to the Fund.
The Fund and Alliance have been advised by the Fund's Transfer Agent and
Custodian that they are also in the process or reviewing their systems with the
same goals. As of the date of this report the Fund and Alliance have no reason
to believe that the Transfer Agent and Custodian will be unable to achieve these
goals.
18
<PAGE>
ACM Managed Dollar Income Fund
================================================================================
BOARD OF DIRECTORS
John D. Carifa, Chairman
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
Wayne D. Lyski, President
Kathleen A. Corbet, Senior Vice President
Paul J. DeNoon, Vice President
Vicki L. Fuller, Vice President
Wayne C. Tappe, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Juan J. Rodriguez, Controller
ADMINISTRATOR
Princeton Administrators, L.P.
P.O. Box 9095
Princeton, NJ 08543-9095
CUSTODIAN, DIVIDEND PAYING AGENT,
TRANSFER AGENT AND REGISTRAR
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
LEGAL COUNSEL
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
- --------------------------------------------------------------------------------
(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 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.
19
<PAGE>
ACM Managed Dollar Income Fund
Summary of General Information
The Fund
ACM Managed Dollar Income Fund 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."
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 questions concerning Shareholder account
information, or if you would like a brochure describing the Dividend
Reinvestment Plan, please call State Street Bank and Trust Company at
1-800-219-4218.
ACM Managed Dollar Income Fund
1345 Avenue of the Americas
New York, New York 10105
AllianceCapital [LOGO](R)
(R) These registered service marks used under license from the owner, Alliance
Capital Management L.P.
MDISR
- -------------------------------------------------------------------------------
ACM
---------------------
Managed
---------------------
Dollar
---------------------
Income Fund
---------------------
Annual Report
September 30, 1998
- -------------------------------------------------------------------------------
Alliance(R)
- -------------------------------------------------------------------------------
