UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-5207
ACM Income Fund, Inc.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
Alliance Capital Management, L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: December 31, 2003
Date of reporting period: December 31, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
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Closed End
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[LOGO] AllianceBernstein(SM)
Investment Research and Management
ACM Income Fund
Annual Report -- December 31, 2003
Investment Products Offered
---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
---------------------------
You may obtain a description of the Fund's proxy voting policies and
procedures, without charge, upon request by visiting Alliance Capital's web
site at www.investor.alliancecapital.com or on the Securities and Exchange
Commission's web site at http://www.sec.gov, or by calling Alliance Capital at
(800) 227-4618.
AllianceBernstein Investment Research and Management, Inc. is an affiliate of
Alliance Capital Management L.P., the manager of the funds, and is a member of
the NASD.
February 15, 2004
Annual Report
This report provides management's discussion of fund performance for ACM Income
Fund (the "Fund") for the annual reporting period ended December 31, 2003.
Investment Objectives and Policies
This closed-end fund is designed to provide high current income consistent with
the preservation of capital. The Fund invests principally in U.S. government
obligations. The Fund may also invest a portion of its assets in other fixed
income securities, including those issued by foreign governments. Additionally,
the Fund may utilize other investment instruments, including options, futures,
swaps and employs leverage.
Investment Performance
The following table shows how the Fund performed over the past six- and
12-month periods ended December 31, 2003. For comparison, we have included the
performance of the Fund's benchmark, the Lehman Brothers (LB) Aggregate Bond
Index.
INVESTMENT RESULTS*
Periods Ended December 31, 2003
---------------------------------
Returns
---------------------------------
6 Months 12 Months
-------------- --------------
ACM Income Fund (NAV) 2.04% 17.66%
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Lehman Brothers
Aggregate Bond Index 0.17% 4.10%
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The Fund's Market Price per share on December 31, 2003 was $8.58. For
additional Financial Highlights, please see pages 33-34.
* The Fund's investment results are for the periods shown and are based on the
net asset value (NAV) of the Fund as of December 31, 2003. Returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. 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 each period. Past performance
is no guarantee of future results.
The unmanaged Lehman Brothers (LB) Aggregate Bond Index does not reflect fees
and expenses associated with the active management of a mutual fund portfolio.
The Index is composed of the LB Mortgage-Backed Securities Index, the LB
Asset-Backed Securities Index and the LB Government/Credit Bond Index. It
includes Treasury, agency and corporate bond issues, as well as mortgage-backed
securities. An investor cannot invest directly in an index, and its results are
not indicative of any particular investment, including ACM Income Fund.
For both the six- and 12-month periods ended December 31, 2003, the Fund
significantly outperformed its benchmark, the LB Aggregate Bond Index. The
primary contributors to outperformance relative to the benchmark were the
Fund's holdings in emerging market and high yield debt. During the year, higher
yielding asset classes posted strong performance, particularly relative to the
traditional fixed income sectors represented within the LB Aggregate Bond
Index. Also contributing to the Fund's outperformance were its country and
security
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ACM INCOME FUND o 1
selections within the emerging market allocation. While the Fund's longer
duration U.S. government holdings added to relative performance in the first
half of the year, a brightening economic outlook dampened government holdings
in the second half. The Fund's use of leverage during the year also contributed
positively to returns.
Within the emerging market sector, the Fund's holdings in Brazil, Turkey and
Russia materially helped performance as those countries far outperformed the
benchmark. According to the J.P. Morgan Emerging Markets Bond Index Plus (JPM
EMBI+), Brazil returned a strong 68.96%, Turkey returned 30.44% and Russia
returned 22.38%. (The unmanaged JPM EMBI+ is a total return index that tracks
the traded market for U.S. dollar-denominated restructured bonds; a large
percentage of the Index is made up of Brady Bonds.)
Within the high yield sector, the Fund benefited from its holdings in the cable
and wireless industry, where price levels greatly appreciated in value from
previously oversold levels. In addition, the Fund's modest holdings in the
energy sector added to relative performance. This sector languished due to
relatively overvalued levels versus the overall market during the period under
review. Specific high yield security selection also had a meaningful role in
the Fund's performance, as holdings in some of the Fund's top positions
performed extremely well. Equally important, we avoided the troubled credits
during this reporting period.
Market Review and Investment Strategy
Treasury yields reached 45-year lows in June, before beginning a gradual
reversal as the pace of economic growth quickened. Buoyed by visibly improving
fundamentals, a rebounding economy and ample liquidity, the lower-rated credit
sectors dramatically outperformed higher-quality fixed income sectors for both
periods under review. For the annual period, Treasuries posted the weakest
returns at 2.24%, with mortgage-backed securities only marginally higher at
3.07%, as measured by the LB Aggregate Bond Index. Corporate bonds posted the
highest returns among the investment grade sectors, benefiting from ongoing
improvement in corporate profitability, continued de-leveraging and a
significant improvement in earnings expectations. U.S. high yield debt was the
strongest performer for the year within all fixed income sectors, posting
returns ranging between 27% and 31%, depending on the individual index
measured. Among the drivers of the corporate high yield debt market were faster
economic growth, improving balance sheets and access to capital.
Among industries, the wireless telecommunications, utility and cable sectors
ranked among the best performers during the year; consumer non-durables ranked
among the worst. Emerging market debt also posted very strong performance for
the year, returning 28.82%, as measured by the JPM EMBI+. The emerging debt
market benefited as a result of a much improved world financial environment in
which the average central-bank pol-
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2 o ACM INCOME FUND
icy rate declined 100 basis points to just 2.65%. Supply was relatively
limited, while investor demand remained strong and global liquidity levels were
supportive. All countries represented within the JPM EMBI+ posted positive
returns with Latin countries outperforming non-Latin countries, returning
35.38% and 20.28%, respectively. Top performing individual countries included
Ecuador at 101.48%, Brazil at 68.96%, Nigeria at 40.88%, Venezuela at 38.16%
and Turkey at 30.44%.
As previously mentioned, within the high yield sector, the Fund benefited from
its exposure to certain higher risk/volatility issuers in the cable and
wireless telecommunications sectors. We maintained a sector overweighting based
on our belief that these sectors were oversold and certain better quality
issuers were punished along with the entire sector. This proved to be correct
as investors recognized the historically high spreads in a number of these
sectors. In the emerging market sector, we remained focused on Brazil, Russia
and Turkey. We increased the Fund's exposure to Brazil early in the reporting
period, as President Lula exceeded market expectations in his ability to push
forward crucial tax and social security reforms. Russia was granted investment
grade status in October by Moody's Investors Service, raising the country's
ratings two notches to Baa3. We maintained a relatively large position in
Russian sovereign debt as credit statistics continued to improve. We also
modestly added to the Fund's position in Turkey. Late in the reporting period,
Standard & Poor's raised Turkey's rating from B to B+, crediting this success
to excellent monetary policy of the Central Bank from 2001, the government's
efforts to comply with targets set by the International Monetary Fund and its
resolve to implement reforms.
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ACM INCOME FUND o 3
Performance Update
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PERFORMANCE UPDATE
ACM INCOME FUND (NAV)
GROWTH OF A $10,000 INVESTMENT
12/31/93 TO 12/31/03
ACM Income Fund (NAV): $21,855
Lehman Brothers Aggregate Bond Index: $19,576
[THE FOLLOWING TABLE WAS DEPICTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL.]
Lehman Brothers
ACM Income Fund (NAV) Aggregate Bond Index
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12/31/93 $ 10,000 $ 10,000
12/31/94 $ 8,452 $ 9,708
12/31/95 $ 10,880 $ 11,502
12/31/96 $ 12,666 $ 11,919
12/31/97 $ 14,577 $ 13,070
12/31/98 $ 13,335 $ 14,206
12/31/99 $ 12,866 $ 14,089
12/31/00 $ 15,900 $ 15,727
12/31/01 $ 16,396 $ 17,055
12/31/02 $ 18,575 $ 18,804
12/31/03 $ 21,855 $ 19,576
This chart illustrates the total value of an assumed $10,000 investment in ACM
Income Fund at net asset value (NAV) (from 12/31/93 to 12/31/03) as compared to
the performance of an appropriate index. Returns do not reflect the deduction
of taxes that a shareholder would pay on fund distributions or the redemption
of fund shares. The chart assumes the reinvestment of dividends and capital
gains. Past performance is not indicative of future results, and is not
representative of future gain or loss in capital value or dividend income.
The unmanaged Lehman Brothers (LB) Aggregate Bond Index does not reflect fees
and expenses associated with the active management of a mutual fund portfolio.
The Index is composed of the LB Mortgage-Backed Securities Index, the LB
Asset-Backed Securities Index and the LB Government/Credit Bond Index. It
includes Treasury, agency and corporate bond issues, as well as mortgage-backed
securities.
When comparing ACM Income Fund to the index shown above, you should note that
no charges or expenses are reflected in the performance of the index. An
investor cannot invest directly in an index, and its results are not indicative
of any specific investment, including ACM Income Fund.
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4 o ACM INCOME FUND
Portfolio Summary
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PORTFOLIO SUMMARY
December 31, 2003
INCEPTION DATE
8/28/87
PORTFOLIO STATISTICS
Net Assets ($mil): $1,904.9
SECURITY TYPE
64.0% U.S. Government and Sponsored Agency
21.9% Sovereign Debt Obligations
11.3% Corporate Debt Obligations [PIE CHART OMITTED]
0.5% Preferred Stock
2.3% Short-Term
All data as of December 31, 2003. The Fund's security type is expressed as a
percentage of total investments (excluding security lending collateral) and may
vary over time.
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ACM INCOME FUND o 5
Portfolio of Investments
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PORTFOLIO OF INVESTMENTS
December 31, 2003
Principal
Amount
(000) U.S. $ Value
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U.S. GOVERNMENT AND
SPONSORED AGENCY
OBLIGATIONS-92.2%
U.S. Treasury Bonds-41.7%
5.375%, 2/15/31(a) $ 570 $ 594,604
6.25%, 5/15/30(a)(b) 84,000 96,960,948
11.25%, 2/15/15(a)(b) 160,000 256,137,600
12.00%, 8/15/13(a) 82,000 113,320,228
12.50%, 8/15/14(a) 70,300 102,860,499
13.25%, 5/15/14(a) 150,000 222,996,150
--------------
792,870,029
--------------
U.S. Treasury Notes-16.1%
2.00%, 5/15/06(b) 65,000 65,033,020
2.375%, 8/15/06(b) 115,000 115,655,960
2.625%, 5/15/08(b) 50,000 49,263,700
3.625%, 1/15/08 (TIPS)(a) 57,258 63,341,720
3.875%, 2/15/13(a) 3,030 2,967,034
4.00%, 11/15/12(a) 4,664 4,620,643
4.25%, 8/15/13(a) 5,268 5,276,234
4.25%, 11/15/13(a) 346 345,730
4.375%, 8/15/12(a) 700 714,110
--------------
307,218,151
--------------
U.S. Treasury Strips-12.7%
Zero coupon, 5/15/17(a) 260,000 132,934,620
Zero coupon, 11/15/21(a) 285,350 108,959,471
--------------
241,894,091
--------------
Mortgage Related Securities-18.6%
Federal Home Loan Mortgage
Corporation
2.75%, 10/06/06(a) 30,000 29,985,000
4.05%, 6/21/05(a) 25,000 25,350,000
4.50%, 7/15/13(a) 31,000 30,685,195
5.00%, 9/15/18(c) 4,160 4,271,155
5.00%, 5/15/20(c) 18,913 19,436,134
6.00%, 9/15/16(c) 15,705 16,343,094
6.00%, 9/15/19(c) 3,765 3,915,600
Federal National Mortgage
Association
4.00%, 8/25/13(c) 34,000 34,525,980
6.00%, 4/25/20(c) 9,685 10,108,719
6.50%, TBA 48,500 50,727,993
7.00%, 11/01/17(c) 95,201 101,794,825
Government National Mortgage
Association
5.00%, 2/20/30(c) 14,000 14,105,000
7.50%, 3/15/32(a) 12,645 13,576,788
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354,825,483
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6 o ACM INCOME FUND
Portfolio of Investments
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Principal
Amount
(000) U.S. $ Value
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Resolution Funding Corp.-3.1%
Zero coupon, 10/15/20 $ 150,000 $ 58,963,950
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Total U.S. Government and Sponsored
Agency Obligations
(cost $1,690,248,805) 1,755,771,704
--------------
SOVEREIGN DEBT OBLIGATIONS-31.5%
Argentina-0.1%
Republic of Argentina FRN
1.162%, 8/03/12(c) 1,941 1,203,420
--------------
Belize-0.0%
Government of Belize
9.50%, 8/15/12(c) 350 351,331
--------------
Brazil-8.9%
Brazilian Real Structured Note
Zero Coupon, 9/20/07(c) BRL 188,085 35,141,272
Republic of Brazil
10.125%, 5/15/27(c) $ 1,150 1,216,125
11.00%, 8/17/40(c) 24,724 27,134,590
11.25%, 7/26/07(c) 2,825 3,269,937
12.00%, 4/15/10(c) 12,850 15,484,250
12.25%, 3/06/30(c) 450 557,550
12.75%, 1/15/20(c) 12,625 16,052,687
14.50%, 10/15/09(c) 5,735 7,541,525
Republic of Brazil
C-Bonds
8.00%, 4/15/14(c) 61,478 60,482,198
Republic of Brazil DCB FRN
2.063%, 4/15/12(c) 2,550 2,309,000
--------------
169,189,134
--------------
Bulgaria-0.0%
Republic of Bulgaria
8.25%, 1/15/15 785 923,553
8.25%, 1/15/15(d) 150 176,551
--------------
1,100,104
--------------
Colombia-1.8%
Republic of Colombia
10.50%, 7/09/10(c) 650 728,000
10.75%, 1/15/13(c) 4,275 4,858,538
11.75%, 2/25/20(c) 19,100 22,967,750
Colombian Peso Structured Note
15.00%, 3/15/07(d) COP 15,237,183 5,783,400
--------------
34,337,688
--------------
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ACM INCOME FUND o 7
Portfolio of Investments
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Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Ecuador-0.8%
Republic of Ecuador
7.00%, 8/15/30(d)(e) $ 18,650 $ 14,360,500
--------------
Mexico-2.9%
Mexican Bonos
9.00%, 12/20/12(c) MXP 117,939 10,689,772
9.50%, 3/08/07(c) 328,855 31,514,212
United Mexican States
6.625%, 3/03/15(c) $ 4,475 4,642,812
11.375%, 9/15/16(c) 5,770 8,193,400
--------------
55,040,196
--------------
Panama-0.1%
Republic of Panama
9.375%, 4/01/29(c) 425 476,000
10.75%, 5/15/20(c) 775 928,062
--------------
1,404,062
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Peru-0.4%
Republic of Peru
8.75%, 11/21/33(c) 5,750 5,706,875
9.125%, 2/21/12(c) 1,375 1,540,000
9.875%, 2/06/15(c) 775 900,163
Republic of Peru FLIRB
4.50%, 3/07/17(c)(e) 50 44,750
--------------
8,191,788
--------------
Philippines-0.4%
Republic of Philippines
8.25%, 1/15/14(c) 575 570,688
9.00%, 2/15/13(c) 6,075 6,424,312
9.875%, 1/15/19(c) 550 574,750
10.625%, 3/16/25(c) 800 879,200
--------------
8,448,950
--------------
Poland-0.9%
Government of Poland
8.50%, 5/12/07(c) PLN 60,640 17,145,867
--------------
Russia-8.4%
Russian Federation
5.00%, 3/31/30(d)(e) $ 153,780 148,205,474
11.00%, 7/24/18(c) 875 1,179,062
Russian Ministry of Finance
3.00%, 5/14/06(c) 10,180 9,823,700
3.00%, 5/14/08(c) 600 537,000
3.00%, 5/14/11(c) 700 551,205
--------------
160,296,441
--------------
South Africa-0.0%
Republic of South Africa
7.375%, 4/25/12(c) 725 817,438
--------------
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8 o ACM INCOME FUND
Portfolio of Investments
-------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Turkey-4.9%
Republic of Turkey
9.875%, 3/19/08(c) $ 300 $ 343,500
11.00%, 1/14/13(c) 1,000 1,254,000
11.75%, 6/15/10(c) 475 600,875
11.875%, 1/15/30(c) 575 777,687
12.375%, 6/15/09(c) 500 638,250
Turkish Lira Structured Notes
Zero Coupon, 1/29/04(d) TRL 42,574,092,239 29,831,805
Zero Coupon, 3/04/04(d) 36,000,000,000 24,578,370
Zero Coupon, 5/06/04(d) 54,102,390,773 35,508,516
--------------
93,533,003
--------------
Ukraine-0.1%
Government of Ukraine
7.65%, 6/11/13(d) $ 150 156,750
11.00%, 3/15/07(c)(d) 1,480 1,649,994
--------------
1,806,744
--------------
Uruguay-0.2%
Republic of Uruguay
7.25%, 2/15/11(c) 500 433,750
7.50%, 3/15/15(c) 4,360 3,477,100
7.875%, 1/15/33(c)(f) 755 524,725
--------------
4,435,575
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Venezuela-1.6%
Republic of Venezuela
2.063%, 3/31/07(c) 83 79,064
5.375%, 8/07/10(d) 400 328,000
9.25%, 9/15/27(c) 20,525 18,605,912
10.75%, 9/19/13(c) 500 535,000
10.75%, 9/19/13(d) 9,720 10,327,500
--------------
29,875,476
--------------
Total Sovereign Debt Obligations
(cost $466,512,720) 601,537,717
--------------
CORPORATE DEBT
OBLIGATIONS-16.3%
Australia-0.0%
WMC Finance USA
5.125%, 5/15/13(c) 500 493,829
--------------
Brazil-0.0%
Banco Nacional De Desenvolvimento
Economico e Social
6.50%, 6/15/06(d) 150 155,625
Petrobras International Finance
9.875%, 5/09/08(c) 300 352,500
Unibanco-Uniao De Bancos
Brasileiros S.A.
9.375%, 4/30/12(d)(e) 225 239,387
--------------
747,512
--------------
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ACM INCOME FUND o 9
Portfolio of Investments
-------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Canada-0.6%
Doman Industries, Ltd.
12.00%, 7/01/04(c) $ 3,000 $ 3,165,000
Fairfax Financial Holdings
7.375%, 4/15/18(c) 4,500 4,117,500
8.30%, 4/15/26(c) 5,000 4,650,000
--------------
11,932,500
--------------
France-0.2%
Crown European Holdings SA
10.875%, 3/01/13(c) 2,105 2,486,531
--------------
Japan-0.0%
UFJ Finance Aruba AEC
6.75%, 7/15/13(c)) 100 106,838
--------------
Kazakhstan-0.0%
Hurricane Finance BV
9.625%, 2/12/10(d) 200 227,000
Kazkommerts International BV
8.50%, 4/16/13(d) 125 131,406
--------------
358,406
--------------
Luxembourg-0.0%
Tyco International Group S.A.
6.50%, 11/21/11(c) GBP 100 178,735
--------------
Poland-0.6%
TPSA Finance BV
7.75%, 12/10/08(d) $ 10,000 11,300,000
--------------
Romania-0.3%
Mobifon Holdings BV
12.50%, 7/31/10(c) 5,205 6,037,800
--------------
Russia-0.3%
Gazprom OAO
9.625%, 3/01/13(c) 670 742,647
9.625%, 3/01/13(d) 750 830,625
Mobile Telesystems Finance S.A.
9.75%, 1/30/08(d) 2,210 2,403,375
Tyumen Oil Company
11.00%, 11/06/07(c) 675 774,103
11.00%, 11/06/07(d) 200 230,250
--------------
4,981,000
--------------
United Kingdom-0.4%
Avecia Group PLC
11.00%, 7/01/09(c) 5,625 5,090,625
British Telecommunications Plc.
7.125%, 12/15/11(c)(e) EUR 1,500 2,174,978
--------------
7,265,603
--------------
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10 o ACM INCOME FUND
Portfolio of Investments
-------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
United States-13.9%
Allied Waste North America, Inc.
Series B
10.00%, 8/01/09(c) $ 8,000 $ 8,680,000
Anchor Glass Container Corp.
11.00%, 2/15/13(c) 5,025 5,854,125
Anthem, Inc.
6.80%, 8/01/12(c) 4,000 4,525,384
AOL Time Warner, Inc.
7.70%, 5/01/32(c) 167 195,644
Berry Plastics Corp.
10.75%, 7/15/12(c) 6,820 7,885,625
Calpine Corp.
8.50%, 7/15/10(d) 5,000 4,900,000
Capital One Financial Corp.
6.25%, 11/15/13(c) 90 92,436
CBA Capital Trust I
5.805%, 12/30/49(d) 274 283,846
Charter Communications
Holdings LLC
10.75%, 10/01/09(c) 4,655 4,294,237
11.75%, 5/15/11(c)(g) 10,000 6,750,000
CIT Group, Inc.
7.75%, 4/02/12 2,000 2,366,586
Citgo Petroleum Corp.
11.375%, 2/01/11(c) 10,450 12,174,250
Citigroup, Inc.
5.625%, 8/27/12 2,000 2,114,904
Clear Channel Communications, Inc.
5.75%, 1/15/13(c) 220 230,189
Comerica Bank
8.375%, 7/15/24 2,000 2,373,120
ConocoPhillips
4.75%, 10/15/12(c) 1,525 1,534,144
Continental Airlines, Inc.
6.748%, 3/15/17(c) 63 52,367
7.875%, 7/02/18(c) 175 175,000
Delhaize America, Inc.
8.125%, 4/15/11(c) 110 127,050
Dex Media, Inc.
9.00%, 11/15/13(d) 7,000 4,970,000
Dominion Resources Capital Trust III
8.40%, 1/15/31(c) 500 598,180
Dura Operating Corp.
9.00%, 5/01/09(c) 3,000 3,015,000
Farmers Exchange Capital
7.05%, 7/15/28(d) 800 750,876
Finova Group, Inc.
7.50%, 11/15/09 17,500 10,587,500
First American Capital Trust I
8.125%, 4/15/12(c) 100 112,500
_______________________________________________________________________________
ACM INCOME FUND o 11
Portfolio of Investments
-------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Ford Motor Co.
7.45%, 7/16/31(c) $ 700 $ 709,440
Ford Motor Credit Co.
7.00%, 10/01/13(c) 156 164,821
7.375%, 2/01/11(c) 300 327,436
Freeport-McMoran Copper &
Gold, Inc.
10.125%, 2/01/10(c) 500 578,750
Fuji JGB Investment
9.87%, 12/31/49(d) 3,343 3,782,661
General Motors Acceptance Corp.
8.00%, 11/01/31(c) 99 111,506
General Motors Corp.
7.75%, 3/15/36(c)(g) 300 124,536
8.375%, 7/15/33(c) 617 718,375
Goldman Sachs Group, Inc.
5.70%, 9/01/12 2,900 3,052,972
HCA Inc.
6.25%, 2/15/13(c) 175 179,441
7.58%, 9/15/25(c) 630 659,178
7.69%, 6/15/25(c) 355 375,640
Hilcorp Energy I LP
10.50%, 9/01/10(d) 4,250 4,675,000
Household Finance Corp.
4.75%, 7/15/13(c) 880 857,500
Huntsman ICI Chemicals LLC
10.125%, 7/01/09(c) 7,500 7,762,500
J.P. Morgan Chase
5.75%, 1/02/13(c) 2,100 2,218,318
6.625%, 3/15/12 1,400 1,566,463
MeriStar Hospitality Corp.
10.50%, 6/15/09(c) 4,120 4,490,800
Merrill Lynch & Co.
6.00%, 2/17/09(c) 100 110,053
Nextel Partners, Inc.
12.50%, 11/15/09(c)(e) 8,084 9,417,860
Nortek, Inc.
10.00%, 5/15/11(d)(e)(g) 15,020 10,927,050
Northrop Grumman Corp.
7.75%, 2/15/31(c) 2,950 3,598,519
ON Semiconductor Corp.
12.00%, 3/15/10(c) 5,005 5,993,488
Paxson Communications Corp.
12.25%, 1/15/09(c)(g) 7,000 6,177,500
Pemex Project
9.125%, 10/13/10(c) 500 596,250
Pliant Corp.
13.00%, 6/01/10(c) 7,625 7,015,000
Progress Energy, Inc.
6.85%, 4/15/12(c) 370 413,150
Qwest Services Corp.
14.00%, 12/15/14(d) 19,907 25,431,193
_______________________________________________________________________________
12 o ACM INCOME FUND
Portfolio of Investments
-------------------------------------------------------------------------------
Shares or
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Resolution Performance Products LLC
13.50%, 11/15/10(c) $ 6,575 $ 5,753,125
Rite Aid Corp.
11.25%, 7/01/08(c) 5,220 5,846,400
Rural Cellular Corp.
9.75%, 1/15/10(c) 13,000 12,772,500
Six Flags, Inc.
9.75%, 4/15/13(c) 11,005 11,637,788
Sprint Capital Corp.
8.75%, 3/15/32(c) 7,000 8,298,584
Swift & Co.
10.125%, 10/01/09(c) 6,580 7,007,700
Trump Casino Holdings LLC
11.625%, 3/15/10(c) 5,085 4,868,888
TRW Automotive, Inc.
11.00%, 2/15/13(c) 3,650 4,316,125
Universal City Development Partners
11.75%, 4/01/10(d) 2,525 2,966,875
Venetian Casino Resort LLC
11.00%, 6/15/10(c) 6,000 6,990,000
Verizon Global Funding Corp.
7.375%, 9/01/12(c) 1,440 1,671,896
7.75%, 6/15/32 1,215 1,433,547
Williams Cos. Inc. Series A
7.50%, 1/15/31(c) 4,025 4,095,437
--------------
264,337,228
--------------
Total Corporate Debt Obligations
(cost $281,104,792) 310,225,982
--------------
NON-CONVERTIBLE PREFERRED
STOCKS-0.8%
CSC Holdings, Inc.
Series H
11.75%(c) 11,891 1,239,637
Series M
11.125%(c) 128,938 13,570,725
--------------
Total Non-Convertible
Preferred Stocks
(cost $6,269,099) 14,810,362
--------------
CONVERTIBLE PREFERRED
STOCK-0.0%
Citizens Utilities Trust
5.00%(c)
(cost $67,600) 1,300 66,645
--------------
_______________________________________________________________________________
ACM INCOME FUND o 13
Portfolio of Investments
-------------------------------------------------------------------------------
Shares or
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
WARRANTS(h)-0.0%
Central Bank of Nigeria
Warrants, expiring 11/15/20 4,500 $ 0
Republic of Venezuela
Warrants, expiring 4/15/20 1,785 0
--------------
Total Warrants
(cost $0) 0
--------------
SHORT-TERM INVESTMENTS-3.3%
Repurchase Agreement-2.9%
Greenwich Capital Markets Inc.
0.93%, dated 12/31/03, due
1/02/04 in the amount of
$56,002,893 (collateralized by
$52,425,000 FNMA, 5.00%, due
1/15/07, value $57,143,250) $ 56,000 56,000,000
--------------
U.S. Treasury Bill-0.4%
Zero Coupon, 4/22/04(i) 7,000 6,978,004
--------------
Total Short-Term Investments
(amortized cost $62,978,004) 62,978,004
--------------
Total Investments Before Security
Lending Collateral-144.1%
(cost $2,507,181,020) 2,745,390,414
--------------
INVESTMENT OF CASH
COLLATERAL FOR
SECURITIES LOANED*-3.7%
Short-Term Investment
UBS Private Money Market Fund, LLC
1.02%
(cost $69,794,680) 69,794,680 69,794,680
--------------
Total Investments-147.8%
(cost $2,576,975,700) 2,815,185,094
Other assets less liabilities-(47.8)% (910,332,046)
--------------
Net Assets-100% $1,904,853,048
==============
_______________________________________________________________________________
14 o ACM INCOME FUND
Portfolio of Investments
-------------------------------------------------------------------------------
FINANCIAL FUTURES CONTRACTS SOLD (see Note C)
Value at
Number of Expiration Original December 31, Unrealized
Type Contracts Month Value 2003 Depreciation
-------------------------------------------------------------------------------------------
U.S. Treasury Note March
5 Year Futures 4,960 2004 $546,455,072 $553,660,000 $(7,204,928)
10 Year Swap March
Futures 780 2004 84,166,178 85,580,625 (1,414,447)
-----------
$(8,619,375)
-----------
FORWARD EXCHANGE CURRENCY CONTRACTS (see Note C)
U.S. $
Contract Value on U.S. $ Unrealized
Amount Origination Current Appreciation/
(000) Date Value (Depreciation)
-----------------------------------------------------------------------------------
BUY CONTRACT
Euro, settling 2/27/04 7,867 $ 9,728,321 $ 9,896,095 $ 167,774
SALE CONTRACTS
Mexican Peso,
settling 3/16/04 442,667 39,084,156 38,983,285 100,871
Polish Zloty,
settling 1/15/04 66,944 17,551,981 17,901,508 (349,527)
_______________________________________________________________________________
ACM INCOME FUND o 15
Portfolio of Investments
-------------------------------------------------------------------------------
CREDIT DEFAULT SWAP CONTRACTS (see Note C)
Notional Unrealized
Swap Counterparty Amount Interest Termination Appreciation/
Referenced Obligation (000) Rate Date (Depreciation)
---------------------------------------------------------------------------------------------
BUY CONTRACTS:
Citigroup Global Markets, Inc.
Republic of Hungary
4.50%, 2/06/13 10,250 0.50% 11/26/13 $ (19,578)
Deutsche Bank AG
Republic of Peru
9.875%, 2/06/15 500 3.90 9/20/08 (21,350)
JP Morgan Chase
Republic of Venezuela DCB
2.125%, 12/18/07 750 5.00 9/20/04 (22,725)
SALE CONTRACTS:
Citigroup Global Markets, Inc.
Federal Republic of Brazil
12.25%, 3/06/30 3,000 6.35 8/20/05 226,500
Citigroup Global Markets, Inc.
Republic of Turkey
11.875%, 1/15/30 1,100 7.30 8/13/08 224,081
Citigroup Global Markets, Inc.
Republic of Turkey
11.875%, 1/15/30 550 6.45 9/05/08 88,693
Deutsche Bank AG
Federal Republic of Brazil
12.25%, 3/06/30 2,900 17.85 2/06/08 1,495,530
Deutsche Bank AG
Federal Republic of Brazil
12.25%, 3/06/30 1,000 14.50 3/08/08 399,200
JP Morgan Chase
Federal Republic of Brazil C-Bonds
8.00%, 4/15/14 1,500 8.60 9/20/08 324,900
JP Morgan Chase
Federal Republic of Brazil C-Bonds
8.00%, 4/15/14 1,500 9.05 9/20/13 473,100
JP Morgan Chase
Federal Republic of Brazil
8.00%, 4/15/14 500 9.34 9/20/13 167,550
JP Morgan Chase
Republic of Venezuela DCB
2.125%, 12/18/07 750 7.70 9/20/06 71,100
JP Morgan Chase
Russian Federation
5.00%, 3/31/30 1,000 3.20 6/25/13 46,600
JP Morgan Chase
Russian Federation
5.00%, 3/31/30 1,000 3.20 6/26/13 46,600
UBS AG
Federal Republic of Brazil
11.00%, 8/17/40 600 8.80 9/20/13 171,240
_______________________________________________________________________________
16 o ACM INCOME FUND
Portfolio of Investments
-------------------------------------------------------------------------------
REVERSE REPURCHASE AGREEMENTS (see Note C)
Interest
Broker Rate Maturity Amount
-------------------------------------------------------------------------------
Greenwich Capital Markets 0.83% 1/28/04 $ 49,437,842
Greenwich Capital Markets 1.00 1/28/04 70,280,856
Merrill Lynch 0.75 1/29/04 115,936,043
Merrill Lynch 0.77 1/29/04 64,784,694
Merrill Lynch 1.02 1/29/04 131,116,154
-------------
$ 431,555,589
-------------
* See Note E for securities lending information.
(a) Positions, or portion thereof, with an aggregate market value of
$1,014,299,954 have been segregated to collateralize the loan outstanding.
(b) Positions, or portion thereof, with an aggregate market value of
$432,531,929 have been segregated to collateralize reverse repurchase
agreements.
(c) Positions, or portion thereof, with an aggregate market value of
$763,260,533 have been segregated to collateralize open forward exchange
currency contracts.
(d) Security is 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 December 31, 2003,
the aggregate market value of these securities amounted to $345,112,029 or
18.1% of net assets.
(e) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at December 31, 2003.
(f) Pay-In-Kind (PIK) Payments.
(g) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective until
final maturity.
(h) Non-income producing security.
(i) Position, with a market value of $6,978,004 has been segregated to
collateralize margin requirements for the open futures contracts.
Currency Abbreviations:
BRL - Brazilian Real
COP - Colombian Peso
EUR - Euro
GBP - Great British Pound
MXP - Mexican Peso
PLN - Polish Zloty
TRL - Turkish Lira
Glossary of Terms
DCB - Debt Conversion Bond
FLIRB - Front Loaded Interest Rate Bond
FNMA - Federal National Mortgage Association
FRN - Floating Rate Note
TBA - (To Be Assigned) - Securities are purchased on a forward commitment with
an approximate principal amount (generally +/- 1.0%) and no definite maturity
date. The actual principal amount and maturity date will be determined upon
settlement when the specific mortgage pools are assigned.
TIPS - Treasury Inflation Protected Security
See notes to financial statements.
_______________________________________________________________________________
ACM INCOME FUND o 17
Statement of Assets & Liabilities
-------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
December 31, 2003
ASSETS
Investments in securities, at value (cost $2,576,975,700--
including investment of cash collateral for securities
loaned of $69,794,680) $ 2,815,185,094(a)
Cash 66,944
Interest and dividends receivable 41,370,348
Unrealized appreciation on credit default swap contracts 3,735,094
Unrealized appreciation on forward exchange
currency contracts 268,645
Prepaid expenses 39,688
---------------
Total assets 2,860,665,813
---------------
LIABILITIES
Reverse repurchase agreements 431,555,589
Loan payable 400,000,000
Payable for collateral received on securities loaned 69,794,680
Payable for investment securities purchased 50,515,950
Advisory fee payable 1,368,258
Payable for variation margin on futures contracts 741,875
Loan interest payable 684,435
Unrealized depreciation on forward exchange
currency contracts 349,527
Administrative fee payable 260,913
Unrealized depreciation on credit default swap contracts 63,653
Accrued expenses 477,885
---------------
Total liabilities 955,812,765
---------------
Net Assets $ 1,904,853,048
===============
COMPOSITION OF NET ASSETS
Capital stock, at par $ 2,270,738
Additional paid-in capital 2,119,595,746
Distributions in excess of net investment income (32,025,412)
Accumulated net realized loss on investment and
foreign currency transactions (418,186,232)
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 233,198,208
---------------
$ 1,904,853,048
===============
NET ASSET VALUE PER SHARE
(based on 227,073,766 shares outstanding) $8.39
=====
(a) Includes securities on loan with a value of $66,506,888 (see Note E).
See notes to financial statements.
_______________________________________________________________________________
18 o ACM INCOME FUND
Statement of Operations
-------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 2003
INVESTMENT INCOME
Interest $ 203,040,799
Dividends 806,667 $ 203,847,466
-------------
EXPENSES
Advisory fee 15,753,531
Administrative fee 2,845,210
Custodian 580,491
Printing 504,106
Transfer agency 375,095
Registration 177,063
Audit and legal 167,765
Directors' fees 20,219
Miscellaneous 115,376
-------------
Total expenses before interest 20,538,856
Interest expense 10,513,177
-------------
Total expenses 31,052,033
-------------
Net investment income 172,795,433
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT AND FOREIGN CURRENCY
TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 56,633,790
Futures contracts (11,642,288)
Written options 9,677
Swap contracts (440,570)
Foreign currency transactions 8,413,340
Net change in unrealized
appreciation/depreciation of:
Investments 77,333,464
Futures contracts (1,715,556)
Written options (7,000)
Swap contracts 3,671,441
Foreign currency denominated
assets and liabilities (760,564)
-------------
Net gain on investment and foreign
currency transactions 131,495,734
-------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 304,291,167
=============
See notes to financial statements.
_______________________________________________________________________________
ACM INCOME FUND o 19
Statement of Changes in Net Assets
-------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, December 31,
2003 2002
============== ==============
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 172,795,433 $ 200,052,459
Net realized gain (loss) on investment
and foreign currency transactions 52,973,949 (120,290,580)
Net change in unrealized
appreciation/depreciation
of investments and foreign
currency denominated assets
and liabilities 78,521,785 136,284,119
-------------- --------------
Net increase in net assets from
operations 304,291,167 216,045,998
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income (195,843,523) (191,884,640)
Tax return of capital -0- (15,245,936)
CAPITAL STOCK TRANSACTIONS
Reinvestment of dividends resulting in the
issuance of Common Stock 11,241,411 11,353,634
-------------- --------------
Total increase 119,689,055 20,269,056
NET ASSETS
Beginning of period 1,785,163,993 1,764,894,937
-------------- --------------
End of period $1,904,853,048 $1,785,163,993
============== ==============
See notes to financial statements.
_______________________________________________________________________________
20 o ACM INCOME FUND
Statement of Cash Flows
-------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
Year Ended December 31, 2003
INCREASE (DECREASE) IN CASH FROM
OPERATING ACTIVITIES:
Interest and dividends received $ 154,001,287
Interest expense paid (10,174,433)
Operating expenses paid (20,384,932)
-------------
Net increase in cash from
operating activities $ 123,441,922
INVESTING ACTIVITIES:
Purchases of long-term investments (7,158,725,876)
Proceeds from disposition of
long-term investments 6,931,228,171
Proceeds from disposition of short-term
investments, net 305,911,769
Premiums received on written options 19,000
Variation margin paid on
futures contracts 1,137,188
-------------
Net increase in cash from
investing activities 79,570,252
FINANCING ACTIVITIES*:
Cash dividends paid (184,602,112)
Due to custodian (177,711)
Proceeds from reverse
repurchase agreements (18,165,407)
-------------
Net decrease in cash from
financing activities (202,945,230)
-------------
Net increase in cash 66,944
Cash at beginning of period -0-
-------------
Cash at end of period $ 66,944
=============
-------------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE IN NET
ASSETS FROM OPERATIONS TO NET INCREASE
IN CASH FROM OPERATING ACTIVITIES:
Net increase in net assets from
operations $ 304,291,167
ADJUSTMENTS:
Decrease in interest and
dividends receivable $ 948,738
Accretion of bond discount and
amortization of bond premium (50,794,917)
Increase in interest payable 338,744
Increase in accrued expenses 153,924
Net realized gain on investment and
foreign currency transactions (52,973,949)
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities (78,521,785)
-------------
Total adjustments (180,849,245)
-------------
NET INCREASE IN CASH FROM OPERATING
ACTIVITIES $ 123,441,922
=============
* Non-cash financing activities not included herein consist of reinvestment of
dividends.
See notes to financial statements.
_______________________________________________________________________________
ACM INCOME FUND o 21
Notes to Financial Statements
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
NOTE A
Significant Accounting Policies
ACM Income Fund, Inc. (the "Fund") 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 accounting
principles generally accepted in the United States, 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
In accordance with Pricing Policies adopted by the Board of Directors of the
Fund (the "Pricing Policies") and applicable law, portfolio securities are
valued at current market value or at fair value. The Board of Directors has
delegated to Alliance Capital Management, L.P. (the "Adviser"), subject to the
Board's continuing oversight, certain responsibilities with respect to the
implementation of the Pricing Policies. Pursuant to the Pricing Policies,
securities for which market quotations are readily available are valued at
their current market value. In general, the market value of these securities is
determined as follows:
Securities listed on a national securities exchange or on a foreign securities
exchange are valued at the last sale price at the close of the exchange or
foreign securities exchange. If there has been no sale on such day, the
securities are valued at the mean of the closing bid and asked prices on such
day. If no bid or asked prices are quoted on such day, then the security is
valued in good faith at fair value in accordance with the Pricing Policies.
Securities listed on more than one exchange are valued by reference to the
principal exchange on which the securities are traded; securities not listed on
an exchange but traded on The Nasdaq Stock Market, Inc. ("NASDAQ") are valued
in accordance with the NASDAQ Official Closing Price; listed put or call
options 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; open
futures contracts and options thereon are valued using the closing settlement
price or, in the absence of such a price, the most recent quoted bid price. If
there are no quotations available for the day of valuations, the last available
closing settlement price is used; securities traded in the over-the-counter
market, (but excluding securities traded on NASDAQ) are valued at the mean of
the current bid and asked prices as reported by the National Quotation Bureau
or other comparable sources; U.S. Government securities and other debt
instruments having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or by amortizing
their fair value as of the 61st day prior to maturity if their
_______________________________________________________________________________
22 o ACM INCOME FUND
Notes to Financial Statements
-------------------------------------------------------------------------------
original term to maturity exceeded 60 days; fixed-income securities, including
mortgage backed and asset backed securities, may be valued on the basis of
prices provided by a pricing service or at a price obtained from one or more of
the major broker/dealers. In cases where broker/dealer quotes are obtained, the
Pricing Policies provide that the Adviser may establish procedures whereby
changes in market yields or spreads are used to adjust, on a daily basis, a
recently obtained quoted price on a security; and OTC and other derivatives are
valued on the basis of a quoted bid price or spread from a major broker/dealer
in such security. Securities for which market quotations are not readily
available are valued at fair value in accordance with the Pricing Policies.
2. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute 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.
3. 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
securities are purchased or sold. Investment gains and losses are determined on
the identified cost basis. The Fund accretes discounts as adjustments to
interest income. Additionally, the Fund amortizes premiums on debt securities
for financial statement reporting purposes only.
4. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at the rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent amounts actually received or paid.
Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of unrealized appreciation and depreciation of investments and
foreign currency denominated assets and liabilities.
_______________________________________________________________________________
ACM INCOME FUND o 23
Notes to Financial Statements
-------------------------------------------------------------------------------
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 conformity with
accounting principles generally accepted in the United States. 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.
6. Repurchase Agreements
The Fund's custodian or designated subcustodian will take control of securities
as collateral under repurchase agreements and determine on a daily basis that
the value of such securities are sufficient to cover the value of the
repurchase agreements. If the seller defaults and the value of collateral
declines, or if bankruptcy proceedings are commenced with respect to the seller
of the security, realization of collateral by the Fund may be delayed or
limited.
NOTE B
Advisory, Administrative Fees and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Fund pays the Adviser
a monthly advisory fee in an amount equal to the sum of 1/12th of .30 of 1% of
the Fund's average weekly net assets up to $250 million, 1/12th of .25 of 1% of
the Fund's average weekly net assets in excess of $250 million, and 5.25% of
the Fund's daily gross income (i.e., income other than gains from the sale of
securities and foreign currency transactions or gains realized from options and
futures contracts less interest on money borrowed by the Fund) accrued by the
Fund during the month. However, such monthly advisory fee shall not exceed in
the aggregate 1/12th of 1% of the Fund's average weekly net assets during the
month (approximately 1% on an annual basis).
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Global
Investor Services, Inc. ("AGIS"), a wholly-owned subsidiary of the Adviser, the
Fund reimburses AGIS for costs relating to servicing phone inquiries on behalf
of the Fund. During the year ended December 31, 2003, the Fund reimbursed AGIS
$13,060 for such costs.
Under the terms of an Administrative Agreement, the Fund pays its
Administrator, UBS Global Asset Management (US) Inc. ("UBS Global AM"), a
monthly fee equal to the annual rate of .18 of 1% of the Fund's average weekly
net assets up to $100 million, .16 of 1% of the Fund's next $200 million of
average weekly net assets, and .15 of 1% of the Fund's average weekly net
assets in excess of $300 million. Such fee is accrued daily and paid monthly.
UBS Global AM is an indirect wholly-owned asset management subsidiary of UBS
AG. UBS Global AM prepares financial and regulatory reports for the Fund and
provides other administrative services.
_______________________________________________________________________________
24 o ACM INCOME FUND
Notes to Financial Statements
-------------------------------------------------------------------------------
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended December 31, 2003 were as follows:
Purchases Sales
============== ==============
Investment securities (excluding
U.S. government securities) $1,061,438,752 $ 890,937,820
U.S. government securities 5,677,176,706 5,833,626,894
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation (excluding foreign currency contracts,
futures and swap contracts) are as follows:
Cost $2,619,993,784
==============
Gross unrealized appreciation $ 205,050,621
Gross unrealized depreciation (9,859,311)
--------------
Net unrealized appreciation $ 195,191,310
==============
1. Financial Futures Contracts
The Fund may buy or sell financial futures contracts for the purpose of hedging
its portfolio against adverse affects of anticipated movements in the market.
The Fund bears the market risk that arises from changes in the value of these
financial instruments and the imperfect correlation between movements in the
price of the future contracts and movements in the price of the securities
hedged or used for cover.
At the time the Fund enters into a futures contract, the Fund deposits and
maintains as collateral an initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
Risks may arise from the potential inability of a counterparty to meet the
terms of the contract. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the time it was closed.
2. Forward Exchange Currency Contracts
The Fund may enter into forward exchange currency contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings, to hedge certain firm purchase and sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the differ-
_______________________________________________________________________________
ACM INCOME FUND o 25
Notes to Financial Statements
-------------------------------------------------------------------------------
ence between the original contract and the closing of such contract would be
included in net realized gain or loss on foreign currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or other liquid assets in a separate account of the Fund having a value at
least equal to the aggregate amount of the Fund's commitments under forward
exchange currency contracts entered into with respect to position hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Fund has in that particular currency
contract.
3. Option Transactions
For hedging and investment purposes, the Fund may purchase and write (sell) put
and call options on U.S. and foreign government securities and foreign
currencies 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 the premium and a 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 the 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 written options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from options
written. The difference between the premium received and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium received 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 or currency 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 or currency purchased by the Fund. In
writing an
_______________________________________________________________________________
26 o ACM INCOME FUND
Notes to Financial Statements
-------------------------------------------------------------------------------
option, the Fund bears the market risk of an unfavorable change in the price of
the security or currency underlying the written option. Exercise of an option
written by the Fund could result in the Fund selling or buying a security or
currency at a price different from the current market value.
Transactions in written options for the year ended December 31, 2003, were as
follows:
Number of
Contracts Premiums
(000) Received
============= =============
OPTIONS OUTSTANDING AT DECEMBER 31, 2002 1,000 $ 19,000
Options written 27,653 486,649
Options terminated in closing purchase
transactions (25,053) (423,849)
Options expired (3,600) (81,800)
------------- -------------
OPTIONS OUTSTANDING AT DECEMBER 31, 2003 -0- $ -0-
============= =============
4. Swap Agreements
The Fund may enter into swaps on sovereign debt obligations to hedge its
exposure to interest rates and credit risk or 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 the counterparty 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 a component
of net change in unrealized appreciation or depreciation of investments.
Realized gains and losses from terminated swap contracts are included in net
realized gain or loss on investment transactions.
_______________________________________________________________________________
ACM INCOME FUND o 27
Notes to Financial Statements
-------------------------------------------------------------------------------
The Fund may enter into credit default swaps. A sell/(buy) in a credit default
swap provides, upon the occurrence of a credit event, as defined in the swap
agreement, for the Fund to buy/(sell) from/(to) the counterparty at par and
take/(deliver) the principal amount (the "Notional Amount") of the referenced
obligation. During the term of the swap agreement, the Fund receives/(pays)
semi-annual fixed interest payments from/(to) the respective counterparty,
calculated at the agreed upon interest rate applied to the Notional Amount.
Credit default swaps may involve greater risks than if a Fund had invested in
the referenced obligation directly. Credit default swaps are subject to general
market risk, liquidity risk and credit risk. If the Fund is a buyer and no
credit event occurs, it will lose its investment. In addition, the value of the
referenced obligation received by the Fund as a seller if a credit event
occurs, coupled with the periodic payments previously received, may be less
than the full notional value it pays to the buyer, resulting in a loss of value
to the Fund.
5. Reverse Repurchase Agreements
Under a reverse repurchase agreement, the Fund sells securities and agrees to
repurchase them at a mutually agreed upon date and price. At the time the Fund
enters into a reverse repurchase agreement, it will establish a segregated
account with the custodian containing liquid assets having a value at least
equal to the repurchase price.
For the year ended December 31, 2003, the average amount of reverse repurchase
agreements outstanding was $400,970,127 and the daily weighted average annual
interest rate was 1.04%.
NOTE D
Capital Stock
There are 300,000,000 shares of $.01 par value common stock authorized of which
227,073,766 shares were issued and outstanding at December 31, 2003. During the
years ended December 31, 2003 and December 31, 2002, the Fund issued 1,349,486
and 1,507,419 shares, respectively, in connection with the Fund's dividend
reinvestment plan.
NOTE E
Securities Lending
The Fund has entered into a securities lending agreement with AG Edwards &
Sons, Inc. (the "Lending Agent"). Under the terms of the agreement, the Lending
Agent, on behalf of the Fund, administers the lending of portfolio securities
to certain broker-dealers. In return, the Fund receives fee income from the
lending transactions or it retains a portion of interest on the investment of
any cash received as collateral. The Fund also continues to receive dividends
or interest on the securities loaned. Unrealized gain or loss on the value of
the securities loaned that may occur during the term of the loan will be
reflected in
_______________________________________________________________________________
28 o ACM INCOME FUND
Notes to Financial Statements
-------------------------------------------------------------------------------
the accounts of the Fund. All loans are continuously secured by collateral
exceeding the value of the securities loaned. All collateral consists of either
cash or U.S. Government securities. The Lending Agent may invest the cash
collateral received in accordance with the investment restrictions of the Fund
in one or more of the following investments: U.S. Government or U.S. Government
agency obligations, bank obligations, corporate debt obligations, asset-backed
securities, structured products, repurchase agreements and an eligible money
market fund. The Lending Agent will indemnify the Fund for any loss resulting
from a borrower's failure to return a loaned security when due. As of December
31, 2003, the Fund had loaned securities with a value of $66,506,888 and
received cash collateral of $69,794,680, which was invested in a money market
fund as included in the accompanying portfolio of investments. For the year
ended December 31, 2003, the Fund earned fee income of $100,329, which is
included in interest income in the accompanying statement of operations.
NOTE F
Bank Borrowing
The Fund participated in a credit facility for a commercial paper asset
securitization program with Societe Generale ("SG") as Administrative Agent,
and Barton Capital Corporation ("Barton") as lender. The credit facility has a
maximum limit of $400 million. Under the SG Program, Barton will fund advances
to the Fund through the issuance of commercial paper rated A-1+ by Standard &
Poor's Ratings Services and P-1 by Moody's Investors Service, Inc. The
collateral value must be at least 171% of outstanding borrowings. The
borrowings under the SG program are secured by the pledging of the Fund's
portfolio securities as collateral. The interest rate on the Fund's borrowings
is based on the interest rate carried by the commercial paper. The weighted
average annual interest rate was 1.23% and the average borrowing was
$400,000,000 for the year ended December 31, 2003. At December 31, 2003, the
interest rate in effect was 1.14% and the amount of borrowings outstanding was
$400,000,000.
NOTE G
Risks Involved in Investing in the Portfolio
Interest Rate Risk and Credit Risk-- Interest rate risk is the risk that
changes in interest rates will affect the value of the Portfolio's investments
in fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Portfolio's investments to decline. Credit
risk is the risk that the issuer or guarantor of a debt security, or the
counterparty to a derivative contract, will be unable or unwilling to make
timely principal and/or interest payments, or to otherwise honor its
obligations. The degree of risk for a particular security may be reflected in
its credit risk rating. Credit risk is greater for medium quality and
lower-rated securities. Lower-rated debt securities and similar unrated
securities (commonly known as "junk bonds") have speculative elements or are
predominantly speculative risks.
_______________________________________________________________________________
ACM INCOME FUND o 29
Notes to Financial Statements
-------------------------------------------------------------------------------
Concentration of Risk--Investing in securities of foreign governments involves
special risks which include changes in foreign exchange rates and the
possibility of future political and economic developments which could adversely
affect the value of such securities. Moreover, securities of many foreign
governments and their markets may be less liquid and their prices more volatile
than those of the United States Government.
The Fund invests in 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.
NOTE H
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December
31, 2003 and December 31, 2002 were as follows:
2003 2002
============= =============
Distributions paid from:
Ordinary income $ 195,843,523 $ 191,884,640
------------- -------------
Total taxable distributions 195,843,523 191,884,640
Tax return of capital -0- 15,245,936
------------- -------------
Total distributions paid $ 195,843,523 $ 207,130,576
============= =============
As of December 31, 2003, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 523,166
Accumulated capital and other losses (414,461,868)(a)
Unrealized appreciation/(depreciation) 198,530,854(b)
-------------
Total accumulated earnings/(deficit) $(215,407,848)
=============
(a) On December 31, 2003, the Fund had a net capital loss carryforward of
$414,461,868 of which $20,933,043 expires in the year 2005, $131,355,099
expires in the year 2006, $67,513,083 expires in the year 2007, $8,878,672
expires in the year 2008, $48,113,872 expires in the year 2009 and $137,668,099
expires in the year 2010. To the extent future capital gains are offset by
capital loss carryforwards, such gains will not be distributed. Based on
certain provisions in the Internal Revenue Code, various limitations regarding
the future utilization of these carryforwards, brought forward as a result of
the Fund's merger with ACM Government Securities Fund and ACM Government
Spectrum Fund, may apply. During the fiscal year, the Fund utilized capital
loss carryforwards of $15,984,051.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales, the difference between book and tax amortization methods
for premium, and the recognition of unrealized gains and losses on certain
futures contracts.
_______________________________________________________________________________
30 o ACM INCOME FUND
Notes to Financial Statements
-------------------------------------------------------------------------------
During the current fiscal year, permanent differences, primarily due to the tax
treatment of foreign currency gains and losses, the tax treatment of bond
premium, and the tax treatment of paydown losses, resulted in a net decrease in
distributions in excess of net investment income and an increase in accumulated
net realized loss on investment and foreign currency transactions. This
reclassification had no effect on net assets.
NOTE I
Legal Proceedings
As has been previously reported in the press, the Staff of the U.S. Securities
and Exchange Commission ("SEC") and the Office of the New York Attorney General
("NYAG") have been investigating practices in the mutual fund industry
identified as "market timing" and "late trading" of mutual fund shares. Certain
other regulatory authorities have also been conducting investigations into
these practices within the industry and have requested that Alliance Capital
Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information
to them. Alliance Capital has been cooperating and will continue to cooperate
with all of these authorities. The shares of the Fund are not redeemable by the
Fund, but are traded on an exchange at prices established by the market.
Accordingly, the Fund and its shareholders are not subject to the market timing
and late trading practices that are the subject of the investigations mentioned
above or the lawsuits described below. Please see below for a description of
the agreements reached by Alliance Capital and the SEC and NYAG in connection
with the investigations mentioned above.
In addition, approximately forty lawsuits have been filed against Alliance
Capital and certain other defendants in which plaintiffs make claims
purportedly based on or related to the same practices that are the subject of
the SEC and NYAG investigations referred to above. Some of these lawsuits name
the Fund as a party. Management of the Fund's Adviser believes that these
private lawsuits are not likely to have a material adverse effect on the
results of operations or financial condition of the Fund.
On December 18, 2003, Alliance Capital confirmed that it had reached terms with
the SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is subject to final,
definitive documentation. Among the key provisions of these agreements are the
following:
(i) Alliance Capital agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reim-
_______________________________________________________________________________
ACM INCOME FUND o 31
Notes to Financial Statements
-------------------------------------------------------------------------------
bursement Fund is to be paid, in order of priority, to fund investors based on
(i) their aliquot share of losses suffered by the fund due to market timing,
and (ii) a proportionate share of advisory fees paid by such fund during the
period of such market timing;
(ii) Alliance Capital agreed to reduce the advisory fees it receives from some
of the AllianceBernstein long-term, open-end retail funds, commencing January
1, 2004, for a period of at least five years; and
(iii) Alliance Capital agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order contemplates that Alliance
Capital's registered investment company clients, including the Fund, will
introduce governance and compliance changes.
The shares of the Fund are not redeemable by the Fund, but are traded on an
exchange at prices established by the market. Accordingly, the Fund and its
shareholders are not subject to the market timing practices described in the
SEC Order and are not expected to participate in the Reimbursement Fund. Since
the Fund is a closed-end fund, it will not have its advisory fee reduced
pursuant to the terms of the agreements mentioned above.
_______________________________________________________________________________
32 o ACM INCOME FUND
Financial Highlights
-------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
Year Ended December 31,
---------------------------------------------------------------
2003 2002 2001(a) 2000 1999
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $7.91 $7.87 $8.45 $7.64 $8.80
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income(b) .76 .89 .76 .70 .79
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .59 .07 (.11) .91 (1.11)
----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in net asset value from
operations 1.35 .96 .65 1.61 (.32)
----------- ----------- ----------- ----------- -----------
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net
investment income (.87) (.85) (.77) (.70) (.79)
Distributions in excess of
net investment income -0- -0- (.07) (.10) (.05)
Tax return of capital -0- (.07) -0- -0- -0-
----------- ----------- ----------- ----------- -----------
Total dividends and
distributions (.87) (.92) (.84) (.80) (.84)
----------- ----------- ----------- ----------- -----------
LESS: FUND SHARE TRANSACTIONS
Dilutive effect of rights offering -0- -0- (.32) -0- -0-
Offering costs charged to
paid-in-capital in excess
of par -0- -0- (.07) -0- -0-
----------- ----------- ----------- ----------- -----------
Total fund share transactions -0- -0- (.39) -0- -0-
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $8.39 $7.91 $7.87 $8.45 $7.64
----------- ----------- ----------- ----------- -----------
Market value, end of period $8.58 $8.46 $7.30 $7.50 $6.50
----------- ----------- ----------- ----------- -----------
Premium/(Discount) 2.26% 6.95% (7.24)% (11.24)% (14.92)%
TOTAL INVESTMENT RETURN
Total investment return based on:(c)
Market value 12.50% 30.60% 7.80% 28.97% (20.84)%
Net asset value 17.66% 13.27% 3.11% 23.58% (3.53)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $1,904,853 $1,785,164 $1,764,895 $1,390,542 $448,735
Ratio to average net assets of:
Expenses 1.67% 1.87% 2.31% 2.54% 2.37%
Expenses, excluding
interest expense(d) 1.10% 1.26% 1.18% 1.19% 1.19%
Net investment income 9.28% 11.69% 9.33% 9.40% 9.80%
Portfolio turnover rate 276% 414% 676% 538% 368%
Asset coverage ratio 559% 376% 379% 339% 325%
Bank borrowing outstanding
(in millions) $400 $400 $300 $300 $90
See footnote summary on page 34.
_______________________________________________________________________________
ACM INCOME FUND o 33
Financial Highlights
-------------------------------------------------------------------------------
(a) As required, effective January 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide Audits of Investment
Companies, and began amortizing premium on debt securities for financial
reporting purposes only. The effect of this change for the year ended December
31, 2001, was to decrease net investment income per share by $.05, decrease net
realized and unrealized loss on investment transactions per share by $.05, and
decrease the ratio of net investment income to average net assets from 9.92% to
9.33%. Per share, ratios and supplemental data for periods prior to January 1,
2001 have not been restated to reflect this change in presentation.
(b) Based on average shares outstanding.
(c) 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.
(d) Net of interest expense of .57%, .61%, 1.13%, 1.35% and 1.18%
respectively, on borrowings (see Notes C and F).
_______________________________________________________________________________
34 o ACM INCOME FUND
Report of Ernst & Young LLP, Independent Auditors
-------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of ACM Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities of ACM
Income Fund, Inc. (the "Fund"), including the portfolio of investments, as of
December 31, 2003, 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
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, by correspondence with the
custodian and others. 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
Income Fund, Inc. at December 31, 2003, 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 five years in the period then ended, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
February 12, 2004
_______________________________________________________________________________
ACM INCOME FUND o 35
Additional Information
-------------------------------------------------------------------------------
ADDITIONAL INFORMATION
(unaudited)
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. Equiserve Trust
Company, N.A. (the "Agent") will act as agent for participants under the Plan.
Shareholders whose shares are held in the name of a broker or nominee should
contact such broker or nominee to determine whether or how they may participate
in the Plan.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will issue new
shares at the greater of net asset value or 95% of the then current market
price.
(ii) If the shares of Common Stock are trading at a discount from net asset
value at the time of valuation, the Agent will receive the dividend or
distribution in cash and apply it to the purchase of the Fund's shares of
Common Stock in the open market on the New York Stock Exchange or elsewhere,
for the participants' accounts. Such purchases will be made on or shortly after
the payment date for such dividend or distribution and in no event more than 30
days after such date except where temporary curtailment or suspension of
purchase is necessary to comply with Federal securities laws. If, before the
Agent has completed its purchases, the market price exceeds the net asset value
of a share of Common Stock, the average purchase price per share paid by the
Agent may exceed the net asset value of the Fund's shares of Common Stock,
resulting in the acquisition of fewer shares than if the dividend or
distribution had been paid in shares issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of
the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro-rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average cost,
including brokerage commissions, of any shares purchased in the open market
plus the cost of any shares issued by the Fund.
_______________________________________________________________________________
36 o ACM INCOME FUND
Additional Information
-------------------------------------------------------------------------------
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent
to written notice of the change sent to participants in the Plan at least 90
days before the record date for such dividend or distribution. The Plan may
also be amended or terminated by the Agent on at least 90 days written notice
to participants in the Plan. All correspondence concerning the Plan should be
directed to the Agent at Equiserve Trust Company, N.A., P.O. Box 43011,
Providence, RI 02940-3011.
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's, (iii) no material changes in the principal risk
factors associated with investment in the Fund. There has been a change to one
of the portfolio managers of the Fund's portfolio. Kewjin Yuoh has replaced S.
Sean Kelleher, as a Vice President of the Fund. Mr. Paul DeNoon and Mr. Douglas
Peebles continue to act as the persons primarily responsible for the day-to-day
management of the Fund's investment portfolio.
_______________________________________________________________________________
ACM INCOME FUND o 37
Board of Directors
-------------------------------------------------------------------------------
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Dr. James M. Hester(1)
Clifford L. Michel(1)
Donald J. Robinson(1)
OFFICERS
Kathleen A. Corbet, Senior Vice President
Andrew M. Aran, Vice President
Paul J. DeNoon(2), Vice President
Michael L. Mon, Vice President
Douglas J. Peebles(2), Vice President
Michael A. Snyder, Vice President
Kewjin Yuoh, Vice President
Mark R. Manley, Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Vincent S. Noto, Controller
Administrator
UBS Global Asset Management (US) Inc.
51 West 52nd Street
New York, NY 10019
Dividend Paying Agent, Transfer Agent and Registrar
Equiserve Trust Company, N.A.
P.O. Box 43011
Providence, RI 02940-3011
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Independent Auditors
Ernst & Young LLP
5 Times Square
New York, NY 10036
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
(1) Member of the Audit Committee.
(2) Messrs. DeNoon and Peebles are the persons primarily responsible for the
day-to-day management of the Fund's investment portfolio.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase from time to time at market
prices shares of its Common Stock in the open market.
This report, including the financial statements herein, is transmitted to the
shareholders of ACM Income Fund for their information. The financial
information included herein is taken from the records of the Fund. 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.
_______________________________________________________________________________
38 o ACM INCOME FUND
Management of the Fund
-------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the
Board of Directors. Certain information concerning the Fund's Directors is set
forth below.
PORTFOLIOS
IN FUND OTHER
NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP
ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY
(YEARS OF SERVICE) DURING PAST 5 YEARS DIRECTOR DIRECTOR
--------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
William H. Foulk, Jr., #, 71 Investment adviser and an inde- 116 None
2 Sound View Drive pendent consultant. He was for-
Suite 100 merly Senior Manager of Barrett
Greenwich, CT 06830 Associates, Inc., a registered invest-
(6) ment adviser, with which he had
Chairman of the Board been associated since prior to 1999.
He was formerly Deputy Comptroller
and Chief Investment Officer of the
State of New York and, prior thereto,
Chief Investment Officer of the New
York Bank for Savings.
Ruth Block, #, 73 Formerly Executive Vice President 96 None
500 SE Mizner Blvd., and Chief Insurance Officer of The
Boca Raton, FL 33432 Equitable Life Assurance Society of
(17) THE UNITED STATES; CHAIRMAN AND
Chief Executive Officer of Evlico;
Director of Avon, BP (oil and gas),
Ecolab Incorporated (specialty
chemicals), Tandem Financial Group
and Donaldson, Lufkin & Jenrette
Securities Corporation; former
Governor at Large National Associ-
ation of Securities Dealers,Inc.
David H. Dievler, #, 74 Independent consultant. Until 100 None
P.O. Box 167 December 1994 he was Senior
Spring Lake, NJ 07762 Vice President of Alliance Capital
(17) Management Corporation ("ACMC")
responsible for mutual fund admin-
istration. Prior to joining ACMC in
1984 he was Chief Financial Officer
of Eberstadt Asset Management
since 1968. Prior to that he was a
Senior Manager at Price Waterhouse
& Co. Member of American Institute
of Certified Public Accountants
since 1953.
_______________________________________________________________________________
ACM INCOME FUND o 39
Management of the Fund
-------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
(continued)
PORTFOLIOS
IN FUND OTHER
NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP
ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY
(YEARS OF SERVICE) DURING PAST 5 YEARS DIRECTOR DIRECTOR
--------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin, #, 61 Consultant. Formerly President 98 None
P.O. Box 12 of Save Venice, Inc. (preservation
Annandale, NY 12504 organization) from 2001-2002, a
(6) Senior Advisor from June 1999-
June 2000 and President of Historic
Hudson Valley (historic preservation)
FROM DECEMBER 1989-MAY 1999.
Previously, Director of the National
Academy of Design and during
1988-1992, he was Director and
Chairman of the Audit Committee
of ACMC.
Dr. James M. Hester, #, President of the Harry Frank Guggen- 11 None
79 heim Foundation, with which he has
25 Cleveland Lane been associated since prior to 1998.
Princeton, NJ 08540 Formerly President of New York
(17) University and the New York Botanical
Garden. Formerly Rector of the United
Nations University and Vice Chairman
of the Board of the Federal Reserve
Bank of New York.
Clifford L. Michel, #, 64 Senior Counsel to the law firm 97 Placer
15 St. Bernard's Road of Cahill Gordon & Reindel since Dome
Gladstone, NJ 07934 February 2001 and a partner of Inc.
(17) that firm for more than twenty-five
years prior thereto. He is President
and Chief Executive Officer of
Wenonah Development Company
(investments) and a Director of
Placer Dome, Inc. (mining).
Donald J. Robinson, #, Senior Counsel to the law firm of Orrick, 96 None
69 Herrington & Sutcliffe LLP since prior to
98 Hell's Peak Road 1999. Formerly a senior partner and a
Weston, VT 05161 member of the Executive Committee of
(7) that firm. He was also a member and
Chairman of the Municipal Securities
Rulemaking Board and Trustee of
the Museum of the City of New York.
_______________________________________________________________________________
40 o ACM INCOME FUND
Management of the Fund
-------------------------------------------------------------------------------
PORTFOLIOS
IN FUND OTHER
NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP
ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY
(YEARS OF SERVICE) DURING PAST 5 YEARS DIRECTOR DIRECTOR
--------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTOR
Marc O. Mayer, +, 46 Executive Vice President of ACMC 68 None
1345 Avenue of the since 2001; prior thereto, Chief
Americas Executive Officer of Sanford C.
New York, NY 10105 Bernstein & Co., LLC and its
(Elected predecessor since prior to 1999.
November 18, 2003)
# Member of the Audit Committee and the Nominating Committee.
+ Mr. Mayer is an "interested director", as defined in the 1940 Act, due to
his position as Executive Vice President of ACMC.
_______________________________________________________________________________
ACM INCOME FUND o 41
Management of the Fund
-------------------------------------------------------------------------------
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, POSITION(S) PRINCIPAL OCCUPATION
ADDRESS* AND AGE HELD WITH FUND DURING PAST 5 YEARS**
---------------------------------------------------------------------------------------------------------
Marc O. Mayer, 46 President See biography above.
Kathleen A. Corbet, 43 Senior Vice President Executive Vice President of Alliance
Capital Management Corporation
("ACMC")**, with which she has been
associated since prior to 1999.
Andrew M. Aran,46 Vice President Senior Vice President of ACMC, ** with
which he has been associated since
prior to 1999.
Paul J. DeNoon, 41 Vice President Senior Vice President of ACMC,** with
which he has been associated since
prior to 1998.
Michael L. Mon, 34 Vice President Vice President of ACMC, ** with which
he has been associated since June
1999. Prior thereto he was a Portfolio
Manager at Brundage, Story and Rose
since prior to 1999.
Douglas J. Peebles, 38 Vice President Senior Vice President of ACMC, **with
which he has been associated since
prior to 1999.
Michael A. Snyder, 41 Vice President Senior Vice President of ACMC since
May, 2001. Previously he was a
Managing Director in the high yield
asset management group at
Donaldson, Lufkin & Jenrette
Corporation since prior to 1999.
Kewjin Yuoh, 32 Vice President Vice President of ACMC, ** since
March 2003. Previously, he was a
Vice President of Credit Suisse Asset
Management from 2000 to 2002 and
a Vice President of Brundage, Story
& Rose since prior to 1999.
_______________________________________________________________________________
42 o ACM INCOME FUND
Management of the Fund
-------------------------------------------------------------------------------
Officer Information
(continued)
NAME, POSITION(S) PRINCIPAL OCCUPATION
ADDRESS* AND AGE HELD WITH FUND DURING PAST 5 YEARS**
---------------------------------------------------------------------------------------------------------
Mark R. Manley, 41 Secretary Senior Vice President and Acting
General Counsel of ACMC,** with
which he has been associated since
prior to 1999.
Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance
Financial Officer Global Investor Services, Inc.
("AGIS") and a Vice President of
AllianceBernstein Investment Research
and Management, Inc. ("ABIRM")**,
with which he has been associated
since prior to 1999.
Vincent S. Noto, 39 Controller Vice President of AGIS**, with which
he has been associated since prior to
1999.
* The address for each of the Fund's officers is 1345 Avenue of the Americas,
New York, NY 10105.
** ACMC, ABIRM and AGIS are affiliates of the Fund.
_______________________________________________________________________________
ACM INCOME FUND o 43
Alliancebernstein Family of Funds
-------------------------------------------------------------------------------
ALLIANCEBERNSTEIN FAMILY OF FUNDS
--------------------------------------------
Wealth Strategies Funds
--------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy*
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy**
--------------------------------------------
Blended Style Series
--------------------------------------------
U.S. Large Cap Portfolio
--------------------------------------------
Growth Funds
--------------------------------------------
Domestic
Growth Fund
Health Care Fund
Mid-Cap Growth Fund
Premier Growth Fund
Small Cap Growth Fund +
Technology Fund
Global & International
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Biotechnology Portfolio
Premier Portfolio
Technology Portfolio
--------------------------------------------
Value Funds
--------------------------------------------
Domestic
Balanced Shares
Disciplined Value Fund
Growth & Income Fund
Real Estate Investment Fund
Small Cap Value Fund
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
--------------------------------------------
Taxable Bond Funds
--------------------------------------------
Americas Government Income Trust
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Quality Bond Portfolio
Short Duration Portfolio
U.S. Government Portfolio
--------------------------------------------
Municipal Bond Funds
--------------------------------------------
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
--------------------------------------------
Intermediate Municipal Bond Funds
--------------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
--------------------------------------------
Closed-End Funds
--------------------------------------------
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
We also offer Exchange Reserves,++ which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our web site at
www.alliancebernstein.com or call us at (800) 227-4618 for a current
prospectus. Please read the prospectus carefully before you invest or send
money.
* Formerly Growth Investors Fund.
** Formerly Conservative Investors Fund.
+ Quasar Fund changed its name to Small Cap Growth Fund on 11/3/03.
++ An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
_______________________________________________________________________________
44 o ACM INCOME FUND
Summary of General Information
-------------------------------------------------------------------------------
SUMMARY OF GENERAL INFORMATION
ACM Income Fund Shareholder Information
The daily net asset value of the Fund's shares is available from the Fund's
Transfer Agent by calling (800) 426-5523. The Fund also distributes its daily
net asset value to various financial publications or independent organizations
such as Lipper Inc., Morningstar, Inc. and Bloomberg.
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction section of newspapers under the designation
"ACMIn." The Fund's NYSE trading symbol is "ACG." Weekly comparative net asset
value (NAV) and market price information about the Fund is published each
Monday in The Wall Street Journal and each Sunday in The New York Times and
other newspapers in a table called "Closed-End Bond Funds."
Dividend Reinvestment Plan
A Dividend Reinvestment Plan provides automatic reinvestment of dividends and
capital gains distributions in additional Fund shares. The Plan also allows you
to make optional cash investments in Fund Shares through the Plan Agent. If you
wish to participate in the Plan and your shares are held in your name, simply
complete and mail the enrollment form in the brochure. If your shares are held
in the name of your brokerage firm, bank or other nominee, you should ask them
whether or how you can participate in the Plan.
For questions concerning shareholder account information, or if you would like
a brochure describing the Dividend Reinvestment Plan, please call Equiserve
Trust Company, N.A. at (800) 219-4218.
_______________________________________________________________________________
ACM INCOME FUND o 45
ACM INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO] AllianceBernstein(SM)
Investment Research and Management
(SM) This service mark used under license from
the owner, Alliance Capital Management L.P.
INCAR1203
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and principal accounting
officer. A copy of the registrant's code of ethics is filed herewith as
Exhibit 11(a)(1).
(b) During the period covered by this report, no amendments were made to the
provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers
to the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial
experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table sets forth the aggregate fees billed by the independent
auditors for the Fund's last two fiscal years for professional services
rendered for: (i) the audit of the Fund's annual financial statements included
in the Fund's annual report to stockholders; (ii) assurance and related
services that are reasonably related to the performance of the audit of the
Fund's financial statements and are not reported under (i), which include
advice and education on accounting and auditing issues, quarterly press release
review and preferred stock maintenance testing (for those Funds that issue
preferred stock); (iii) tax compliance, tax advice and tax return preparation;
and (iv) aggregate non-audit services provided to the Fund, the Fund's Adviser
and entities that control, are controlled by or under common control with the
Adviser that provide ongoing services to the Fund ("Service Affiliates"), which
include conducting an annual internal control report pursuant to Statement on
Auditing Standards No. 70. No other services were provided to the Fund during
this period.
All Fees for
Non-Audit Services
Provided to the
Audit-Related Fund, the Adviser
Audit Fees Fees Tax Fees and Service Affiliates
---------- ------------- -------- ----------------------
2002: $48,000 $11,746 $17,000 $595,746
2003: $55,000 $12,500 $18,000 $929,765
Beginning with audit and non-audit service contracts entered into on or after
May 6, 2003, the Fund's Audit Committee policies and procedures require the
pre-approval of all audit and non-audit services provided to the Fund by the
Fund's independent auditors. The Fund's Audit Committee policies and
procedures also require pre-approval of all audit and non-audit services
provided to the Adviser and Service Affiliates to the extent that these
services are directly related to the operations or financial reporting of the
Fund. Accordingly, all of the amounts in the table for Audit Fees,
Audit-Related Fees and Tax Fees for 2003 are for services pre-approved by the
Fund's Audit Committee. The amounts of the Fees for Non-Audit Services
provided to the Fund, the Adviser and Service Affiliates in the table for the
Fund, that were subject to pre-approval by the Audit Committee for 2003 were
$392,500 (comprising $374,500 of audit related fees and $18,000 of tax fees).
The Audit Committee of the Fund has considered whether the provision of any
non-audit services not pre-approved by the Audit Committee provided by the
Fund's independent auditor to the Adviser and Service Affiliates is compatible
with maintaining the auditor's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant has adopted the following proxy voting policies and procedures
of its investment adviser, Alliance Capital Management L.P.
July 2003
ALLIANCE CAPITAL MANAGEMENT L.P.
Statement of Policies and Procedures for
Voting Proxies on Behalf of Discretionary Client Accounts
Introduction
As a registered investment adviser, Alliance Capital Management L.P. ("Alliance
Capital", "we" or "us") has a fiduciary duty to act solely in the best
interests of our clients. As part of this duty, we recognize that we must vote
client securities in a timely manner and make voting decisions that are in the
best interests of our clients.
This statement is intended to comply with Rule 206(4)-6 of the Investment
Advisers Act of 1940. It sets forth our policies and procedures for voting
proxies for our discretionary investment advisory clients, including investment
companies registered under the Investment Company Act of 1940. This statement
is applicable to Alliance Capital's growth and value investment groups
investing on behalf of clients in both US and global securities.
PROXY POLICIES
This statement is designed to be responsive to the wide range of subjects that
can have a significant effect on the investment value of the securities held in
our clients' accounts. These policies are not exhaustive due to the variety of
proxy voting issues that we may be required to consider. Alliance Capital
reserves the right to depart from these guidelines in order to avoid voting
decisions that we believe may be contrary to our clients' best interests. In
reviewing proxy issues, we will apply the following general policies:
Elections of Directors: Unless there is a proxy fight for seats on the Board
or we determine that there are other compelling reasons for withholding votes
for directors, we will vote in favor of the management proposed slate of
directors. That said, we believe that directors have a duty to respond to
shareholder actions that have received significant shareholder support. We may
withhold votes for directors that fail to act on key issues such as failure to
implement proposals to declassify boards, failure to implement a majority vote
requirement, failure to submit a rights plan to a shareholder vote and failure
to act on tender offers where a majority of shareholders have tendered their
shares. In addition, we will withhold votes for directors who fail to attend
at least seventy-five percent of board meetings within a given year without a
reasonable excuse. Finally, we may withhold votes for directors of non-U.S.
issuers where there is insufficient information about the nominees disclosed in
the proxy statement.
Appointment of Auditors: Alliance Capital believes that the company remains in
the best position to choose the auditors and will generally support
management's recommendation. However, we recognize that there may be inherent
conflicts when a company's independent auditor performs substantial non-audit
related services for the company. Therefore, we may vote against the
appointment of auditors if the fees for non-audit related services are
disproportionate to the total audit fees paid by the company or there are other
reasons to question the independence of the company's auditors.
Changes in Capital Structure: Changes in a company's charter, articles of
incorporation or by-laws are often technical and administrative in nature.
Absent a compelling reason to the contrary, Alliance Capital will cast its
votes in accordance with the company's management on such proposals. However,
we will review and analyze on a case-by-case basis any non-routine proposals
that are likely to affect the structure and operation of the company or have a
material economic effect on the company. For example, we will generally
support proposals to increase authorized common stock when it is necessary to
implement a stock split, aid in a restructuring or acquisition or provide a
sufficient number of shares for an employee savings plan, stock option or
executive compensation plan. However, a satisfactory explanation of a
company's intentions must be disclosed in the proxy statement for proposals
requesting an increase of greater than one hundred percent of the shares
outstanding. We will oppose increases in authorized common stock where there
is evidence that the shares will be used to implement a poison pill or another
form of anti-takeover device, or if the issuance of new shares could
excessively dilute the value of the outstanding shares upon issuance.
Corporate Restructurings, Mergers and Acquisitions: Alliance Capital believes
proxy votes dealing with corporate reorganizations are an extension of the
investment decision. Accordingly, we will analyze such proposals on a
case-by-case basis, weighing heavily the views of the research analysts that
cover the company and the investment professionals managing the portfolios in
which the stock is held.
Proposals Affecting Shareholder Rights: Alliance Capital believes that certain
fundamental rights of shareholders must be protected. We will generally vote
in favor of proposals that give shareholders a greater voice in the affairs of
the company and oppose any measure that seeks to limit those rights. However,
when analyzing such proposals we will weigh the financial impact of the
proposal against the impairment of shareholder rights.
Corporate Governance: Alliance Capital recognizes the importance of good
corporate governance in ensuring that management and the board of directors
fulfill their obligations to the shareholders. We favor proposals promoting
transparency and accountability within a company. For example, we will vote
for proposals providing for equal access to proxies, a majority of independent
directors on key committees, and separating the positions of chairman and chief
executive officer.
Anti-Takeover Measures: Alliance Capital believes that measures that impede
takeovers or entrench management not only infringe on the rights of
shareholders but may also have a detrimental effect on the value of the
company. We will generally oppose proposals, regardless of whether they are
advanced by management or shareholders, the purpose or effect of which is to
entrench management or dilute shareholder ownership. Conversely, we support
proposals that would restrict or otherwise eliminate anti-takeover measures
that have already been adopted by corporate issuers. For example, we will
support shareholder proposals that seek to require the company to submit a
shareholder rights plan to a shareholder vote. We will evaluate, on a
case-by-case basis, proposals to completely redeem or eliminate such plans.
Furthermore, we will generally oppose proposals put forward by management
(including blank check preferred stock, classified boards and supermajority
vote requirements) that appear to be intended as management entrenchment
mechanisms.
Executive Compensation: Alliance Capital believes that company management and
the compensation committee of the board of directors should, within reason, be
given latitude to determine the types and mix of compensation and benefit
awards offered. Whether proposed by a shareholder or management, we will
review proposals relating to executive compensation plans on a case-by-case
basis to ensure that the long-term interests of management and shareholders are
properly aligned. We will analyze the proposed plans to ensure that
shareholder equity will not be excessively diluted, the option exercise price
is not below market price on the date of grant and an acceptable number of
employees are eligible to participate in such programs. We will generally
oppose plans that permit repricing of underwater stock options without
shareholder approval. Other factors such as the company's performance and
industry practice will generally be factored into our analysis. We will
support proposals to submit severance packages triggered by a change in control
to a shareholder vote and proposals that seek additional disclosure of
executive compensation. Finally, we will support shareholder proposals
requiring companies to expense stock options because we view them as a large
corporate expense.
Social and Corporate Responsibility: Alliance Capital will review and analyze
on a case-by-case basis proposals relating to social, political and
environmental issues to determine whether they will have a financial impact on
shareholder value. We will vote against proposals that are unduly burdensome
or result in unnecessary and excessive costs to the company. We may abstain
from voting on social proposals that do not have a readily determinable
financial impact on shareholder value.
Proxy Voting Procedures
Proxy Voting Committees
Our growth and value investment groups have formed separate proxy voting
committees to establish general proxy policies for Alliance Capital and
consider specific proxy voting matters as necessary. These committees
periodically review new types of corporate governance issues, evaluate
proposals not covered by these policies and recommend how we should generally
vote on such issues. In addition, the committees, in conjunction with the
analyst that covers the company, contact management and interested shareholder
groups as necessary to discuss proxy issues. Members of the committees include
senior investment personnel and representatives of the Corporate Legal
Department. The committees may also evaluate proxies where we face a potential
conflict of interest (as discussed below). Finally, the committees monitor
adherence to guidelines, industry trends and review the policies contained in
this statement from time to time.
Conflicts of Interest
Alliance Capital recognizes that there may be a potential conflict of interest
when we vote a proxy solicited by an issuer whose retirement plan we manage,
whose retirement plan we administer, or with whom we have another business or
personal relationship that may affect how we vote on the issuer's proxy. We
believe that centralized management of proxy voting, oversight by the proxy
voting committees and adherence to these policies ensures that proxies are
voted with only our clients' best interests in mind. That said, we have
implemented additional procedures to ensure that our votes are not the product
of a conflict of interests, including: (i) requiring anyone involved in the
decision making process to disclose to the chairman of the appropriate proxy
committee any potential conflict that they are aware of and any contact that
they have had with any interested party regarding a proxy vote; (ii)
prohibiting employees involved in the decision making process or vote
administration from revealing how we intend to vote on a proposal in order to
reduce any attempted influence from interested parties; and (iii) where a
material conflict of interests exists, reviewing our proposed vote by applying
a series of objective tests and, where necessary, considering the views of a
third party research service to ensure that our voting decision is consistent
with our clients' best interests. For example, if our proposed vote is
consistent with our stated proxy voting policy, no further review is necessary.
If our proposed vote is contrary to our stated proxy voting policy but is also
contrary to management's recommendation, no further review is necessary. If
our proposed vote is contrary to our stated proxy voting policy or is not
covered by our policy, is consistent with management's recommendation, and is
also consistent with the views of an independent source, no further review is
necessary. If our proposed vote is contrary to our stated proxy voting policy
or is not covered by our policy, is consistent with management's recommendation
and is contrary to the views of an independent source, the proposal is reviewed
by the appropriate proxy committee for final determination.
Proxies of Certain Non-US Issuers
Proxy voting in certain countries requires "share blocking." Shareholders
wishing to vote their proxies must deposit their shares shortly before the date
of the meeting (usually one-week) with a designated depositary. During this
blocking period, shares that will be voted at the meeting cannot be sold until
the meeting has taken place and the shares are returned to the clients'
custodian banks. Alliance Capital may determine that the value of exercising
the vote does not outweigh the detriment of not being able to transact in the
shares during this period. Accordingly, if share blocking is required we may
abstain from voting those shares. In such a situation we would have determined
that the cost of voting exceeds the expected benefit to the client.
Proxy Voting Records
Clients may obtain information about how we voted proxies on their behalf by
contacting their Alliance Capital administrative representative.
Alternatively, clients may make a written request for proxy voting information
to: Mark R. Manley, Senior Vice President & Assistant General Counsel,
Alliance Capital Management L.P., 1345 Avenue of the Americas, New York, NY
10105.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as
amended) are effective at the reasonable assurance level based on their
evaluation of these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) There were no significant changes in the registrant's internal controls
that could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 11. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
11 (a) (1) Code of ethics that is subject to the disclosure of
Item 2 hereof
11 (b) (1) Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
11 (b) (2) Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
11 (c) Certification of Principal Executive Officer and Principal
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): ACM Income Fund, Inc.
By: /s/ Marc O. Mayer
---------------------
Marc O. Mayer
President
Date: February 26, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Marc O. Mayer
---------------------
Marc O. Mayer
President
Date: February 26, 2004
By: /s/ Mark D. Gersten
-----------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: February 26, 2004