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: 811-05207
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: June 30, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
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Closed End
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ACM Income Fund
[Logo] AllianceBernstein (sm)
Investment Research and Management
Semi-Annual Report -- June 30, 2004
Investment Products Offered
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o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
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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.alliancebernstein.com (click on Investors, then the "proxy voting
policies and procedures" link on the left side of the page), or by going to the
Securities and Exchange Commission's web site at 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.
August 19, 2004
Semi-Annual Report
This report provides management's discussion of fund performance for ACM Income
Fund (the "Fund") for the semi-annual reporting period ended June 30, 2004.
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
and swaps and employs leverage.
Investment Results
The table on page 3 shows how the Fund performed over the past six- and
12-month periods ended June 30, 2004. For comparison, we have included the
performance of the Fund's benchmark, the Lehman Brothers (LB) Aggregate Bond
Index.
For the six-month period ended June 30, 2004, the Fund underperformed its
benchmark, the LB Aggregate Bond Index (see page 3 for Fund and benchmark
returns).
The primary contributors to the Fund's underperformance relative to the Index
during the six-month period ended June 30, 2004 were its longer duration
Treasury holdings and emerging market allocation. The Treasury market sold off
dramatically in April on expectations of U.S. Federal Reserve tightening.
Additionally, longer dated Treasuries were hurt the most, with maturities over
20 years losing 6.25% in April alone, as measured by the LB Aggregate Bond
Index. The Fund's heavy weighting in longer-term Treasuries, as well as its use
of leverage in that sector, detracted from performance.
The Fund's emerging market holdings also detracted from performance relative to
the Index in response to sharply higher U.S. interest rates and in anticipation
of generally higher rates worldwide over the next couple of years. Contributing
positively to performance were the Fund's high yield and mortgage-backed
holdings, both of which fared best during the sharp bond market sell-off in the
second quarter. High yield securities have historically outperformed in rising
interest rate environments.
For the 12-month period ended June 30, 2004, the Fund outperformed the LB
Aggregate Bond Index. This was due to both the Fund's emerging market and high
yield securities, which outperformed the Index, particularly in the first half
of the annual period.
Market Review and Investment Strategy
Fixed income securities posted generally weak returns during the six-month
period ended June 30, 2004, masking two volatile quarters. Global bond markets
rebounded strongly in the first quarter of 2004, as escalating geopolitical
tensions and concerns regarding the sustainability of the U.S. economic
recovery began to surface, which was primarily due to a weak job market. Early
in April, however, bond markets sold off dramatically on a surprisingly strong
gain in March payroll employment and in anticipation of U.S. Federal Reserve
tightening. In late June, a soft consumer confidence reading allowed the market
to regain some ground as investors reconsidered that
_______________________________________________________________________________
ACM INCOME FUND o 1
the U.S. Federal Reserve's pace was likely to be gradual. On the closing day of
the six-month period under review, the U.S. Federal Reserve began its
anticipated tightening cycle, raising rates by 25 basis points to 1.25%--the
first official rate increase in four years.
For the six-month period under review, U.S. Treasuries posted returns of
-0.20%, with longer duration Treasuries underperforming at -0.82%, as measured
by the LB Aggregate Bond Index. Mortgage-backed securities posted the best
returns within the Fund's benchmark at 0.77%, supported by decreased supply and
strong demand. Higher interest rates caused mortgage refinancings to drop
predictably and led to a lengthening of mortgage securities' durations.
Investment-grade corporates, which returned 0.25%, came under pressure in the
second quarter as U.S. interest rates rose dampening returns for that sector.
High yield corporates fared better returning 1.36% for the period as high yield
default rates continued to improve. Lastly, emerging market debt underperformed
the U.S. bond market, which can be seen in the -2.82% return of the J.P. Morgan
Emerging Markets Bond Index Plus. This was in response to sharply higher U.S.
interest rates and in anticipation of generally higher interest rates worldwide
over the next couple of years. Within the emerging market sector, Argentina at
2.95% and Bulgaria at 2.36% posted the strongest returns, with Brazil at -6.75%
and Turkey at -6.16% posting the weakest returns.
During the reporting period, we reduced the Fund's interest rate risk but still
maintained a duration posture that is longer than the LB Aggregate Bond Index.
Collateralized mortgage obligations were added to the Fund as they offered
relative value compared to Treasuries. Within the high yield sector, as spread
dispersion among industries narrowed during the period, our strategy turned
more toward specific issuer selection and diversifying the Fund's holdings
across industry sectors. One of the Fund's largest industry overweight
positions however, continued to be wireless communications. Within the wireless
sector, we were focused on rural growth providers that, in our view, had these
characteristics: fewer competitive restraints that would be less affected by
the implementation of number portability; and improved balance sheets from
recent capital-market transactions. Additionally, we continued to underweight
the utilities industry due to sustained margin pressure and generally weak
fundamentals. We implemented a conservative approach in the Fund's utilities
holdings, investing only in issues that we believe exhibit good asset
protection and sufficient financial liquidity. Within the Fund's emerging
market debt allocation, we maintained an overweight position in Russia as
credit statistics continued to improve and Russia benefited from higher oil
prices. We reduced the Fund's exposure in Brazil as concerns surfaced that
political scandal and the Central Bank's inability to lower interest rates
would hurt economic growth. Those concerns were misplaced; however, and we have
subsequently begun to add back to the Fund's Brazilian holdings. Finally, we
added some exposure to the publicly traded bank-loan market to take advantage
of the opportunity presented in this primarily floating-rate market.
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2 o ACM INCOME FUND
Historical Performance
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HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance shown below represents past performance and does not guarantee
future results. Current performance may be lower or higher than the performance
information shown. Returns are annualized for periods longer than one year. All
fees and expenses related to the operation of the Fund have been deducted.
Performance assumes reinvestment of distributions and does not account for
taxes.
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.
Benchmark Disclosure
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 LB Aggregate Bond 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. Investors cannot invest directly in an index, and
its results are not indicative of any particular investment, including
ACM Income Fund.
A Word About Risk
Among the principal risks of investing in the Fund are interest rate risk,
credit risk, market risk, leveraging risk, derivatives risk, foreign risk,
emerging market risk, currency risk and liquidity risk. The Fund is also
subject to market risk which is the risk that the value of the Fund's
investments will fluctuate as the bond markets fluctuate and that prices
overall will decline over shorter or longer-term periods. Because the Fund
uses derivative strategies and other leveraging techniques, including bank
leverage, speculatively to enhance returns, it is subject to greater risk and
its returns may be more volatile than other funds, particularly in periods of
market decline. The Fund's investments in foreign securities have foreign
risk, which is the risk that investments in issuers located in foreign
countries may have greater price volatility and less liquidity. Foreign risk
includes currency risk, which is the risk that fluctuations in the exchange
rates between the U.S. dollar and foreign currencies could negatively affect
the value of the Fund's investments.
Returns
THE FUND VS. ITS BENCHMARK --------------------------
PERIODS ENDED JUNE 30, 2004 6 Months 12 Months
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ACM Income Fund (NAV) -1.24% 0.77%
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Lehman Brothers Aggregate Bond Index 0.15% 0.32%
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The Fund's Market Price per share on June 30, 2004 was $7.86. For additional
Financial Highlights, please see page 34.
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ACM INCOME FUND o 3
Portfolio Summary
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PORTFOLIO SUMMARY
June 30, 2004 (unaudited)
INCEPTION DATES
8/28/87
PORTFOLIO STATISTICS
Net Assets ($mil): 1,780.4
SECURITY TYPE*
67.0% U.S. Government and Sponsored Agency
19.7% Sovereign Debt Obligations [PIE CHART OMITTED]
12.7% Corporate Debt Obligations
0.6% Short-Term
* All data is as of June 30, 2004. The Fund's security type breakdown is
expressed as a percentage of total investments (excluding security lending
collateral) and may vary over time.
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4 o ACM INCOME FUND
Portfolio of Investments
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PORTFOLIO OF INVESTMENTS
June 30, 2004 (unaudited)
Principal
Amount
(000) U.S. $ Value
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U.S. GOVERNMENT AND SPONSORED
AGENCY OBLIGATIONS-108.0%
U.S. Treasury Bonds-42.7%
5.375%, 2/15/31(a) U.S.$ 570 $ 575,055
6.25%, 5/15/30(b) 84,000 94,076,724
11.25%, 2/15/15(b) 160,000 246,887,520
12.00%, 8/15/13(a) 82,000 108,265,666
12.50%, 8/15/14(b) 70,300 98,233,283
13.25%, 5/15/14(a) 150,000 212,472,750
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760,510,998
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U.S. Treasury Notes-14.6%
2.375%, 8/15/06(b) 34,000 33,719,772
2.625%, 5/15/08(b) 40,000 38,757,840
2.75%, 6/30/06(a) 40,000 40,037,520
3.00%, 2/15/09(b) 35,000 33,925,395
3.875%, 2/15/09(a) 3,030 2,897,559
4.00%, 6/15/09(a) 40,000 40,354,720
4.00%, 11/15/12(a) 4,664 4,516,977
4.25%, 8/15/13(a) 4,468 4,362,935
4.25%, 11/15/13(a) 346 336,877
4.375%, 8/15/12(a) 700 696,966
4.75%, 5/15/14(b) 58,900 59,532,763
4.875%, 2/15/12(a) 250 258,282
--------------
259,397,606
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U.S. Treasury Strips-13.6%
Zero coupon, 5/15/17(a) 260,000 132,433,860
Zero coupon, 11/15/21(a) 285,350 108,947,201
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241,381,061
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Federal National Mortgage
Association-20.0%
3.34%, 5/01/34(c) 10,069 9,880,817
3.35%, 4/01/34(c) 6,056 5,997,947
3.35%, 5/01/34(c) 7,395 7,316,142
3.51%, 7/01/34(c) 8,160 8,102,798
3.65%, 6/01/34(c) 22,366 22,290,901
3.72%, 6/01/34(c) 8,052 7,998,039
4.00%, 8/25/13(a) 11,600 11,556,500
4.00%, 11/25/16(a) 28,567 27,951,205
4.24%, 4/01/33(c) 4,220 4,229,443
4.62%, 2/01/34(c) 10,738 10,769,210
5.00%, 4/25/13(c) 13,528 1,116,053
5.00%, 12/25/26(c) 16,080 16,218,449
5.00%, 3/25/32(c) 13,940 13,370,412
5.00%, 10/25/33(c) 13,431 13,246,211
5.50%, TBA 38,520 39,254,268
6.00%, 5/25/30(c) 14,660 15,068,159
6.50%, 1/25/30(c) 6,637 6,754,696
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ACM INCOME FUND o 5
Portfolio of Investments
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Principal
Amount
(000) U.S. $ Value
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6.50%, 9/25/42(a) U.S.$ 5,269 $ 5,488,891
6.50%, 1/25/44(a) 8,520 8,924,646
6.50%, TBA 41,460 43,170,225
7.00%, 11/01/17(a) 72,622 77,182,294
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355,887,306
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Federal Home Loan Mortgage
Corporation-10.7%
4.50%, 9/15/13(a) 9,345 9,441,347
4.50%, 12/15/15(a) 12,438 12,270,833
4.50%, 10/15/17(a) 7,960 7,666,674
4.50%,12/15/17(a) 15,530 14,985,052
4.50%, 10/15/26(c) 4,818 4,807,930
5.00%, 6/15/14(a) 8,520 8,641,580
5.00%, 1/15/17(c) 6,277 800,333
5.00%, 1/15/18(a) 12,663 12,714,310
5.00%, 9/15/18(a) 5,275 5,326,115
5.00%, 5/15/20(a) 18,913 19,102,130
5.00%, 5/15/22(c) 14,065 1,740,582
5.00%, 5/15/25(a) 17,010 17,095,050
5.00%, 7/15/26(c) 14,399 1,795,450
5.00%, 6/15/27(a) 15,933 16,057,437
5.00%, 6/15/27(a) 21,030 21,082,575
5.00%, 8/15/27(a) 11,465 11,509,828
5.50%, 2/15/15(a) 2,906 2,980,246
5.50%, 6/15/29(a) 4,850 4,881,816
6.00%, 10/15/32(c) 11,556 11,437,085
6.50%, 3/15/28(a) 6,180 6,419,319
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190,755,692
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Resolution Funding Corp.-3.3%
Zero coupon, 10/15/20 150,000 59,593,350
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Government National Mortgage
Association-3.1%
5.00%, 4/16/18(a) 33,556 33,780,627
5.00%, 2/20/30(a) 14,000 13,825,000
7.00%, 12/15/26(a) 7,707 8,238,973
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55,844,600
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Total U.S. Government and Sponsored
Agency Obligations
(cost $1,899,531,000) 1,923,370,613
--------------
SOVEREIGN DEBT OBLIGATIONS-31.7%
Argentina-0.1%
Republic of Argentina FRN
1.234%, 8/03/12(c) 2,116 1,413,488
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Belize-0.0%
Government of Belize
9.50%, 8/15/12(c) 246 196,800
--------------
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6 o ACM INCOME FUND
Portfolio of Investments
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Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Brazil-6.7%
Brazilian Real Structured Note
Zero coupon, 9/20/07(d) BRL 120,551 $ 22,585,191
Republic of Brazil
7.31%, 6/29/09 FRN(c) U.S.$ 6,366 6,366,000
11.00%, 8/17/40(c) 17,669 16,555,853
12.00%, 4/15/10(c) 12,850 13,614,575
Republic of Brazil
C-Bonds
8.00%, 4/15/14(c) 59,489 54,545,274
Republic of Brazil-DCB FRN
2.125%, 4/15/12(c) 5,064 4,259,947
2.125%, 4/15/12(c) 1,882 1,595,294
--------------
119,522,134
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Bulgaria-0.0%
Republic of Bulgaria
8.25%, 1/15/15(d) 528 612,760
--------------
Colombia-1.0%
Republic of Colombia
10.75%, 1/15/13(c) 3,025 3,212,550
11.75%, 2/25/20(c) 14,335 15,632,318
--------------
18,844,868
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Ecuador-0.6%
Republic of Ecuador
7.00%, 8/15/30(d)(e) 14,974 10,257,190
--------------
Germany-2.5%
Federal Republic of Germany
3.50%, 10/10/08(c) EUR 30,000 36,594,584
4.25%, 2/15/08(c) 5,989 7,528,593
--------------
44,123,177
--------------
Indonesia-0.0%
Republic of Indonesia
6.75%, 3/10/14(d) U.S.$ 620 557,225
--------------
Jamaica-0.0%
Government of Jamaica
11.75%, 5/15/11(c) 50 55,500
12.75%, 9/01/07(c) 200 226,594
--------------
282,094
--------------
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ACM INCOME FUND o 7
Portfolio of Investments
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Principal
Amount
(000) U.S. $ Value
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Mexico-3.0%
Mexican Bonos
8.00%, 12/19/13(c) MXP 32,609 $ 2,490,265
8.00%, 12/07/23(c) 10,870 728,850
9.00%, 12/20/12(c) 117,939 9,424,290
9.50%, 3/08/07(c) 328,855 29,197,147
United Mexican States
8.125%, 12/30/19(c) U.S.$ 3,913 4,196,693
11.375%, 9/15/16(c) 4,856 6,816,610
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52,853,855
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Panama-0.2%
Republic of Panama
8.875%, 9/30/27(c) 1,350 1,314,900
9.375%, 4/01/29(c) 169 187,168
9.63%, 2/08/11(c) 165 182,738
10.75%, 5/15/20(c) 1,075 1,208,300
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2,893,106
--------------
Peru-0.2%
Republic of Peru
8.375%, 5/03/16(c) 1,588 1,472,870
9.125%, 2/21/12(c) 1,275 1,313,250
9.875%, 2/06/15(c) 725 755,813
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3,541,933
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Philippines-0.4%
Republic of Philippines
8.25%, 1/15/14(c) 750 713,438
9.00%, 2/15/13(c) 4,825 4,785,797
9.875%, 1/15/19(c) 750 742,500
10.625%, 3/16/25(c) 475 491,625
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6,733,360
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Russia-8.9%
Russian Federation
5.00%, 3/31/30(d)(e) 140,260 128,337,900
5.00%, 3/31/30(d)(e) 8,405 7,690,575
Russian Ministry of Finance
3.00%, 5/14/08(c) 19,980 17,509,473
3.00%, 5/14/11(c) 7,260 5,506,209
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159,044,157
--------------
South Africa-0.1%
Republic of South Africa
6.50%, 6/02/14(c) 370 374,625
7.375%, 4/25/12(c) 725 789,344
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1,163,969
--------------
Turkey-6.1%
Republic of Turkey
9.875%, 3/19/08(c) 300 317,700
11.00%, 1/14/13(c) 11,260 12,318,430
11.50%, 1/23/12(c) 500 561,250
11.75%, 6/15/10(c) 475 532,000
12.375%, 6/15/09(c) 1,975 2,259,400
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8 o ACM INCOME FUND
Portfolio of Investments
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Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Turkish Lira Structured Notes
Zero Coupon, 8/12/04(d) TRL 47,686,466,208 $ 31,321,024
Zero Coupon, 10/14/04(d) 40,915,600,209 25,752,320
Zero Coupon, 8/25/05(d) 71,284,104,123 35,527,680
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108,589,804
--------------
Ukraine-0.5%
Government of Ukraine
6.875%, 3/04/11(d) U.S.$ 5,500 5,211,250
7.65%, 6/11/13(d) 2,122 2,031,815
11.00%, 3/15/07(d) 1,268 1,365,457
--------------
8,608,522
--------------
Uruguay-0.2%
Republic of Uruguay
7.25%, 2/15/11(c) 500 410,000
7.50%, 3/15/15(c) 4,360 3,191,520
7.875%, 1/15/33(c)(f) 1,024 655,334
--------------
4,256,854
--------------
Venezuela-1.2%
Republic of Venezuela
2.75%,12/18/07 DCB(c) 5,500 5,218,191
5.375%, 8/07/10(d) 2,225 1,761,088
9.25%, 9/15/27(c)(g) 16,660 14,077,700
--------------
21,056,979
--------------
Total Sovereign Debt Obligations
(cost $517,227,850) 564,552,275
--------------
CORPORATE DEBT OBLIGATIONS-20.4%
Australia-0.0%
WMC Finance USA
5.125%, 5/15/13(c) 500 481,124
--------------
Canada-0.9%
Doman Industries, Ltd.
12.00%, 7/01/04 3,000 3,000,000
Fairfax Financial Holdings
7.375%, 4/15/18(c) 4,500 3,937,500
8.30%, 4/15/26(c) 5,000 4,450,000
Ispat Inland ULC
9.75%, 4/01/14(d) 5,000 5,175,000
Rogers Cable Inc.
5.50%, 3/15/14(c) 360 319,882
--------------
16,882,382
--------------
Germany-0.0%
Salomon Brothers AG
11.00%, 11/06/07(d) 200 221,000
--------------
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ACM INCOME FUND o 9
Portfolio of Investments
-------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Japan-0.2%
Mizuho Finance
8.375%, 12/29/49(c) U.S.$ 3,290 $ 3,391,378
UFJ Finance Aruba AEC
6.75%, 7/15/13(c) 100 103,581
--------------
3,494,959
--------------
Kazakhstan-0.0%
Hurricane Finance BV
9.625%, 2/12/10(d) 200 208,500
Kazkommerts International BV
8.50%, 4/16/13(d) 125 123,750
--------------
332,250
--------------
Romania-0.3%
Mobifon Holdings BV
12.50%, 7/31/10(c) 5,205 5,959,725
--------------
Russia-0.3%
AO Siberian Oil Co.
10.75%, 1/15/09(c) 265 273,434
Gazprom OAO
9.625%, 3/01/13(c) 610 629,833
9.625%, 3/01/13(d) 750 775,313
Mobile Telesystems Finance
9.75%, 1/30/08(d) 2,210 2,287,350
Tyumen Oil Co.
11.00%, 11/06/07(c) 675 744,218
--------------
4,710,148
--------------
United Kingdom-0.1%
British Telecommunications PLC
7.125%, 2/15/11(c)(e) EUR 1,500 2,086,816
--------------
United States -18.6%
Advanced Medical Optics
2.25%, 6/26/09(c) U.S.$ 1,500 1,518,750
Allied Waste
2.50%, 1/15/10 FRN(c) 1,000 1,017,250
Amerada Hess Corp.
7.125%, 3/15/33(c) 500 499,926
American Cellular Corp.
10.00%, 8/01/11(c) 5,000 4,337,500
American Safety Razor Co.
3.25%, 4/28/11(c) 3,000 3,030,000
Amkor Technologies Inc.
7.75%, 5/15/13(c) 5,000 4,762,500
Associated Materials
11.25%, 3/01/14(d)(e) 12,545 8,467,875
AT&T Corp.
8.05%, 11/15/11(c)(e) 73 75,054
_______________________________________________________________________________
10 o ACM INCOME FUND
Portfolio of Investments
-------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
ATA Holdings Corp.
13.00%, 2/01/09(c)(e) U.S.$ 7,212 $ 5,084,460
13.00%, 6/15/10(c)(e) 1,165 751,425
Berry Plastics Corp.
10.75%, 7/15/12(c) 6,820 7,604,300
Boyd Gaming Corp.
1.75%, 4/14/11(c) 1,500 1,514,063
Broadway Corp.
2.25%, 6/01/11 1,000 1,000,000
Calpine Corp.
8.50%, 7/15/10(d) 6,700 5,577,750
Calpine Generating Co. FRN
10.25%, 4/01/11(d) 4,000 3,640,000
Capital One Financial Corp.
6.25%, 11/15/13(c) 1,005 1,017,577
CBA Capital Trust I
5.805%, 12/30/49(d) 274 268,343
Celanese AG
3.20%, 11/01/11(c) 1,500 1,543,751
3.79%, 11/01/11(c) 1,000 1,014,583
Charter Communications Holdings
10.75%, 10/01/09(c) 4,655 3,933,475
11.75%, 5/15/11(c)(h) 10,000 6,525,000
Clear Channel Communications, Inc.
5.75%, 1/15/13(c) 220 221,586
Cognis
4.75%, 11/10/13(c) 3,000 2,988,750
Coinstar Inc.
2.25%, 7/01/11(c) 1,000 1,015,000
Columbia/HCA HealthCare Corp.
6.25%, 2/15/13(c) 175 174,239
7.58%, 9/15/25(c) 630 619,153
7.69%, 6/15/25(c) 355 352,966
Comerica Bank
8.375%, 7/15/24 2,000 2,296,930
Conseco Inc.
4.00%, 6/16/10(c) 3,000 3,052,500
Consolidated Communications
2.75%, 9/18/11(c) 1,000 1,016,875
Continental Airlines, Inc.
6.703%, 12/15/22(c) 1,944 1,813,893
6.748%, 3/15/17(c) 62 47,154
7.033%, 6/15/11(c) 489 396,730
7.875%, 7/02/18(c) 175 164,552
Delhaize America, Inc.
8.125%, 4/15/11(c) 110 120,618
Dex Media, Inc.
9.00%, 11/15/13(d) 7,000 4,550,000
Dominion Resources Capital Trust III
8.40%, 1/15/31(c) 500 581,228
_______________________________________________________________________________
ACM INCOME FUND o 11
Portfolio of Investments
-------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
DPL Inc.
6.875%, 9/01/11(c) U.S.$ 500 $ 506,250
Duke Capital Corp.
6.25%, 2/15/13(c) 1,500 1,523,262
Dura Operating Corp.
9.00%, 5/01/09(c) 3,000 2,955,000
Emmis Communications
1.75%, 5/04/12(c) 3,000 3,022,083
Farmers Exchange Capital
7.05%, 7/15/28(d) 200 198,000
First American Capital Trust I
8.50%, 4/15/12(c) 100 111,000
First Energy Corp.
7.375%, 11/15/31(c) 1,600 1,672,661
Ford Motor Co.
6.375%, 2/01/29(c) 473 400,868
7.45%, 7/16/31(c) 1,977 1,889,820
Freedom Communications Inc.
3.31%, 4/04/12(c) 3,000 3,046,875
Freeport-McMoran Copper & Gold, Inc.
10.125%, 2/01/10(c) 500 555,000
General Motors Corp.
8.375%, 7/15/33(c) 2,617 2,777,885
Global Cash Access LLC
8.75%, 3/15/12(d) 5,000 5,225,000
Helms Holding Corp.
3.00%, 6/01/10 1,000 1,000,000
Hilcorp Energy I LP
10.50%, 9/01/10(d) 4,250 4,621,875
Holmes Group Inc.
3.25%, 4/14/11(c) 1,000 1,002,500
HSBC Bank USA
4.625%, 4/01/14(c) 1,000 932,636
Huntsman ICI Chemicals LLC
10.125%, 7/01/09(c) 7,500 7,687,500
Huntsman LLC
11.50%, 7/15/12(d) 5,000 5,050,000
Huntsman Packaging
13.00%, 6/01/10 4,585 4,126,500
Iasis Healthcare
2.25%, 6/15/11(c) 1,000 1,014,583
Insight Communications Inc.
1.00%, 2/15/11(c)(e) 7,000 6,335,000
International Lease Finance Corp.
3.50%, 4/01/09(c) 496 472,149
J.P. Morgan Chase & Co.
6.625%, 3/15/12 1,400 1,516,126
Key Automotive
3.00%, 6/01/10(c) 2,000 2,030,000
Koch Cellulose LLC
2.25%, 5/03/11(c) 1,604 1,625,282
2.25%, 5/03/11 (LOC)(c) 396 400,968
_______________________________________________________________________________
12 o ACM INCOME FUND
Portfolio of Investments
-------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Maax Corp.
2.75%, 6/01/11(c) U.S.$ 2,000 $ 2,025,000
Medcath Inc.
3.00%, 6/30/11(c) 1,000 1,012,500
MeriStar Hospitality Corp.
10.50%, 6/15/09(c) 4,120 4,408,400
Merrill Lynch & Co.
6.00%, 2/17/09(c) 100 106,406
MGM Studios
2.50%, 4/30/11(c) 5,000 5,016,250
Midwest Generation
3.25%, 4/05/11(c) 1,000 1,010,000
Milacron Escrow Corp.
11.50%, 5/15/11(d) 5,000 5,000,000
Mueller Group
3.25%, 3/24/11(c) 3,780 3,803,440
Nextel Partners, Inc.
2.50%, 5/18/11(c) 4,000 4,071,000
12.50%, 11/15/09(c) 8,084 9,458,280
Nortek, Inc.
10.00%, 5/15/11(d)(h) 15,020 12,091,100
Owens Illinois General, Inc.
2.75%, 4/01/08(c) 3,000 3,031,071
Paxson Communications Corp.
12.25%, 1/15/09(c)(h) 10,000 8,750,000
Pemex Project
9.125%, 10/13/10(c) 500 575,000
Pliant Corp.
13.00%, 6/01/10(c) 3,040 2,736,000
Premcor Refining Group
2.00%, 4/13/09(c) 2,000 2,017,500
Prestige Brands
5.19%, 4/15/11(c) 3,500 3,536,460
PSEG Power LLC
5.00%, 4/01/14(c) 1,000 934,531
Qwest Services Corp.
14.00%, 12/15/14(d) 19,907 23,838,633
Regal Cinemas Corp.
2.75%, 10/19/10(c) 2,417 2,443,487
Rite Aid Corp.
11.25%, 7/01/08(c) 5,220 5,781,150
Riverside & Rocky Mountain
4.25%, 6/22/11(c) 3,000 3,011,250
Rural Cellular Corp.
9.75%, 1/15/10(c) 13,000 11,862,500
Sealy Mattress Co.
2.75%, 3/31/12(c) 2,500 2,537,500
Simmons Co.
2.75%, 12/19/11(c) 2,500 2,528,645
Six Flags, Inc.
9.75%, 4/15/13(c) 11,005 11,115,050
_______________________________________________________________________________
ACM INCOME FUND o 13
Portfolio of Investments
-------------------------------------------------------------------------------
Shares or
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Sprint Capital Corp.
8.75%, 3/15/32(c) U.S.$ 6,800 $ 7,946,623
Swift & Co.
10.125%, 10/01/09(c) 6,580 7,057,050
Time Warner Entertainment Co. LP
8.38%, 7/15/33(c) 146 171,417
Trac-X North America High Yield
8.00%, 3/25/09(d) 10,000 9,718,750
TXU Gas Capital I FRN
2.46%, 7/01/28(c) 230 215,236
United Industries Corp.
3.84%, 3/31/11(c) 1,995 2,017,444
Venetian Casino Resort
11.00%, 6/15/10(c) 6,000 6,960,000
Verifone Inc.
2.50%, 6/09/11(c) 1,000 1,011,250
Verizon Global Funding Corp.
7.375%, 9/01/12(c) 864 973,312
7.75%, 6/15/32 1,215 1,370,265
VWR International
2.50%, 4/05/11(c) 3,500 3,555,125
Warner Music Group
2.75%, 3/22/11(c) 4,489 4,551,404
Western Wireless Term B1
3.00%, 5/30/11(c) 3,500 3,540,002
Williams Cos., Inc. Series A
7.50%, 1/15/31(c) 4,025 3,662,750
WPP Finance
5.875%, 6/15/14(d) 180 181,075
Zurich Capital Trust
8.376%, 6/01/37(d) 300 332,334
--------------
330,259,769
--------------
Total Corporate Debt Obligations
(cost $355,774,833) 364,428,173
--------------
NON-CONVERTIBLE PREFERRED
STOCKS-0.1%
Banco Santander
6.41%(d) 4,000 96,932
Duquesne Light Co.
6.50%(c) 14,950 743,763
EIX Trust II
Series B
8.60%(c) 9,150 230,763
Zurich Funding Trust
1.71%(d) 500 487,500
--------------
Total Non-Convertible Preferred Stocks
(cost $1,566,038) 1,558,958
--------------
_______________________________________________________________________________
14 o ACM INCOME FUND
Portfolio of Investments
-------------------------------------------------------------------------------
Contracts(k),
Shares or
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
CALL OPTIONS PURCHASED(i)-0.0%
Russia-0.0%
Russian Federation
5.00%, 3/31/30
Expiring July '04 @ 90.625 4,100 $ 45,100
Expiring July '04 @ 90.9375 600 9,000
--------------
Total Call Options Purchased
(cost $78,400) 54,100
--------------
WARRANTS(i)-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-1.0%
Repurchase Agreement-0.5%
Deutsche Bank
1.30%, 6/30/04, due
7/01/04 in the amount of
$8,100,293 (collateralized by
$8,260,000 FNMA, 1.30% due
9/10/04; value $8,100,000)
(cost $8,100,000) U.S.$ 8,100 8,100,000
--------------
U.S. Treasury Bill-0.5%
Zero coupon, 7/22/04(j)
(amortized cost $8,995,031) 9,000 8,995,031
--------------
Total Short-Term Investments
(cost $17,095,031) 17,095,031
--------------
Total Investments Before Security
Lending Collateral-161.3%
(cost $2,791,273,152) 2,871,059,150
--------------
INVESTMENT OF CASH COLLATERAL FOR
SECURITIES LOANED*-5.5%
Short-Term Investment-5.5%
UBS Private Money Market Fund, LLC
1.19%
(cost $97,524,050) 97,524,050 97,524,050
--------------
Total Investments-166.7%
(cost $2,888,797,202) 2,968,583,200
Other assets less liabilities-(66.7%) (1,188,146,628)
--------------
Net Assets-100.0% $1,780,436,572
==============
_______________________________________________________________________________
ACM INCOME FUND o 15
Portfolio of Investments
-------------------------------------------------------------------------------
CALL OPTIONS WRITTEN (see Note C)
Exercise Expiration
Description Contracts (k) Price Month U.S. $ Value
-------------------------------------------------------------------------------
Republic of Venezula
9.25%, 9/15/27 725,000 $ 85.40 July '04 $ (5,800)
(premiums received
$11,600)
FINANCIAL FUTURES CONTRACTS SOLD (see Note C)
Number of Expiration Original Value at Unrealized
Type Contracts Month Value June 30, 2004 Depreciation
-------------------------------------------------------------------------------
U.S. Treasury
Note September
10 Year Futures 400 2004 $ 42,813,399 $ 43,731,250 $ (917,851)
U.S. Treasury
Note September
5 Year Futures 6,778 2004 731,823,465 736,683,875 (4,860,410)
U.S. Treasury
Note September
2 Year Futures 1,526 2004 321,143,999 321,294,533 (150,534)
10 Year Swap September
Futures 400 2004 41,612,493 42,425,000 (812,507)
------------
$(6,741,302)
------------
FORWARD EXCHANGE CURRENCY CONTRACTS (see Note C)
U.S. $
Contract Value on U.S. $ Unrealized
Amount Origination Current Appreciation/
(000) Date Value (Depreciation)
-------------------------------------------------------------------------------
Sale Contracts
Euro,
settling 7/26/04 38,665 $ 46,178,970 $ 47,073,573 $ (894,603)
Mexican Peso,
settling 8/13/04 269,477 23,544,376 23,194,636 349,740
CREDIT DEFAULT SWAP CONTRACTS (see Note C)
Swap
Counterparty & Notional Unrealized
Referenced Amount Interest Termination Appreciation/
Obligations (000) Rate Date (Depreciation)
-------------------------------------------------------------------------------
Buy Contracts:
Citigroup Global
Markets, Inc.
Republic of Brazil
12.25%, 3/06/30 6,275 2.55% 5/20/05 $ (50,383)
Citigroup Global
Markets, Inc.
Republic of
Hungary
4.50%, 2/06/13 10,250 0.50 11/26/13 (170,551)
Citigroup Global
Markets, Inc.
Republic of
Philippines
10.625%, 3/16/25 3,360 5.60 3/20/14 (28,573)
Credit Suisse
First Boston
Republic of Brazil
12.25%, 3/06/30 600 3.60 6/20/05 (12,120)
JP Morgan Chase
Republic of Ecuador
7.00%, 8/15/30 650 3.70 4/30/05 (15,187)
_______________________________________________________________________________
16 o ACM INCOME FUND
Portfolio of Investments
-------------------------------------------------------------------------------
CREDIT DEFAULT SWAP CONTRACTS (continued)
Swap
Counterparty & Notional Unrealized
Referenced Amount Interest Termination Appreciation/
Obligations (000) Rate Date (Depreciation)
-------------------------------------------------------------------------------
Sale Contracts:
Citigroup Global
Markets, Inc.
Republic of Brazil
12.25%, 3/06/30 3,000 6.35% 8/20/05 $ 189,682
Citigroup Global
Markets, Inc.
Republic of Brazil
12.25%, 3/06/30 6,275 4.40 5/20/06 30,608
Citigroup Global
Markets, Inc.
Republic of
Philippines
10.625%, 3/16/25 3,360 4.95 3/20/09 30,172
Citigroup Global
Markets, Inc.
Republic of
Venezuela
9.25%, 9/15/27 4,000 6.00 5/20/06 126,533
Citigroup Global
Markets, Inc.
United Mexican
States
8.30%, 8/15/31 500 2.40 5/20/14 15,983
Citigroup Global
Markets, Inc.
United Mexican
States
8.30%, 8/15/31 1,450 2.05 5/20/09 44,086
Credit Suisse
First Boston
Republic of Brazil
12.25%, 3/06/30 600 6.90 6/20/07 25,720
Deutsche Bank AG
Republic of Brazil
12.25%, 3/06/30 1,150 3.50 4/20/06 7,118
Goldman Sachs
Republic of Brazil
12.25%, 3/06/30 10,000 7.31 6/20/09 108,367
JP Morgan Chase
Russian Federation
2.50%, 3/31/30 1,000 3.20 6/26/13 9,795
JP Morgan Chase
Russian Federation
2.50%, 3/31/30 1,000 3.20 6/25/13 9,717
JP Morgan Chase
Russian Federation
5.00%, 3/31/30 500 2.98 4/29/14 (735)
_______________________________________________________________________________
ACM INCOME FUND o 17
Portfolio of Investments
-------------------------------------------------------------------------------
REVERSE REPURCHASE AGREEMENTS (see Note C)
Interest
Broker Rate Maturity Amount
-------------------------------------------------------------------------------
Chase Securities 0.88% 7/07/04 $ 33,280,507
Chase Securities 0.90 7/07/04 33,462,691
Citigroup 0.90 7/07/04 58,168,517
Greenwich Capital Markets 1.10 7/07/04 91,687,407
Greenwich Capital Markets 1.11 7/07/04 345,832,535
Lehman Brothers 1.05 7/07/04 37,950,029
------------
$600,381,686
------------
* See Note E for securities lending information.
(a) Positions, or portion thereof, with an aggregate market value of
$1,013,278,816 have been segregated to collateralize the loan outstanding.
(b) Positions, or portion thereof, with an aggregate market value of
$605,133,297 have been segregated to collateralize reverse repurchase
agreements.
(c) Positions, or portion thereof, with an aggregate market value of
$708,022,687 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 June 30, 2004, the
aggregate market value of these securities amounted to $371,147,555 or 20.8% of
net assets.
(e) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at June 30, 2004.
(f) PIK (Paid in Kind) preferred quarterly stock payable.
(g) A position or portion of the underlying security has been segregated for
the written call options outstanding at June 30, 2004. The value of this
security amounted to $612,625.
(h) 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.
(i) Non-income producing security.
(j) Position, or a portion thereof, with an aggregate market value of
$8,995,031 has been segregated as collateral for the futures transactions
outstanding at June 30, 2004.
(k) One contract relates to principal amount of $1.00.
Currency Abbreviations:
BRL - Brazilian Real
EUR - Euro
MXP - Mexican Peso
TRL - Turkish Lira
US$ - United States Dollar
Glossary of Terms:
DCB - Debt Conversion Bond
FNMA - Federal National Mortgage Association
FRN - Floating Rate Note
LOC - Letter of Credit
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.
See notes to financial statements.
_______________________________________________________________________________
18 o ACM INCOME FUND
Statement of Assets & Liabilities
-------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
June 30, 2004 (unaudited)
ASSETS
Investments in securities, at value (cost $2,888,797,202--
including investment of cash collateral for securities
loaned of $97,524,050) $ 2,968,583,200(a)
Cash 13,643,601
Unrealized appreciation of swap contracts 597,781
Unrealized appreciation on forward exchange currency
contracts 349,740
Receivable for investment securities sold 114,761,054
Interest and dividends receivable 37,009,021
---------------
Total assets 3,134,944,397
---------------
LIABILITIES
Outstanding call option written, at value
(premiums received $11,600) 5,800
Reverse repurchase agreements 600,381,686
Loan payable 400,000,000
Unrealized depreciation on forward exchange
currency contracts 894,603
Unrealized depreciation of swap contracts 277,549
Payable for investment securities purchased 232,462,020
Payable for collateral received on securities loaned 97,524,050
Dividend payable 15,377,632
Payable for variation margin on futures contracts 4,739,500
Advisory fee payable 1,347,101
Loan interest payable 1,008,875
Administrative fee payable 244,449
Accrued expenses 244,560
---------------
Total liabilities 1,354,507,825
---------------
Net Assets $ 1,780,436,572
===============
COMPOSITION OF NET ASSETS
Capital stock, at par $ 2,278,168
Additional paid-in capital 2,125,679,582
Distributions in excess of net investment income (62,658,246)
Accumulated net realized loss on investment
and foreign currency transactions (357,639,409)
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 72,776,477
---------------
$ 1,780,436,572
===============
Net Asset Value Per Share
(based on 227,816,768 shares outstanding) $ 7.82
======
(a) Includes securities on loan with a value of $95,132,400 (see Note E).
See notes to financial statements.
_______________________________________________________________________________
ACM INCOME FUND o 19
Statement of Operations
-------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2004 (unaudited)
INVESTMENT INCOME
Interest $ 90,752,540
Dividends 558,066 $ 91,310,606
------------
EXPENSES
Advisory fee 7,468,384
Administrative fee 1,418,530
Custodian 303,314
Transfer agency 196,935
Printing 111,043
Registration fee 86,512
Audit and legal 67,191
Directors' fees 17,293
Miscellaneous 63,910
------------
Total expenses before interest 9,733,112
Interest expense 4,744,431
------------
Total expenses 14,477,543
-------------
Net investment income 76,833,063
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT AND FOREIGN CURRENCY
TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 44,764,349
Swap contracts 3,710,914
Futures contracts (33,880)
Written options 360,535
Foreign currency transactions 11,744,905
Net change in unrealized
appreciation/depreciation of:
Investments (158,423,396)
Swap contracts (3,351,210)
Futures contracts 1,878,073
Written options 5,800
Foreign currency denominated assets
and liabilities (530,998)
-------------
Net loss on investment and foreign
currency transactions (99,874,908)
-------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (23,041,845)
=============
See notes to financial statements.
-------------------------------------------------------------------------------
20 o ACM INCOME FUND
Statement of Changes in Net Assets
-------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months
Ended
June 30, Year Ended
2004 December 31,
(unaudited) 2003
============== ==============
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 76,833,063 $ 172,795,433
Net realized gain on investment and
foreign currency transactions 60,546,823 52,973,949
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities (160,421,731) 78,521,785
-------------- --------------
Net increase (decrease) in net assets
from operations (23,041,845) 304,291,167
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income (107,465,897) (195,843,523)
CAPITAL STOCK TRANSACTIONS
Reinvestment of dividends resulting
in issuance of Common Stock 6,091,266 11,241,411
-------------- --------------
Total increase (decrease) (124,416,476) 119,689,055
NET ASSETS
Beginning of period 1,904,853,048 1,785,163,993
-------------- --------------
End of period (including distributions
in excess of net investment income
of $62,658,246 and $32,025,412,
respectively) $1,780,436,572 $1,904,853,048
============== ==============
See notes to financial statements.
_______________________________________________________________________________
ACM INCOME FUND o 21
Statement of Cash Flows
-------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2004 (unaudited)
INCREASE (DECREASE) IN CASH FROM
OPERATING ACTIVITIES:
Interest and dividends received $ 75,996,075
Interest expense paid (4,419,991)
Operating expenses paid (9,964,370)
--------------
Net increase in cash from
operating activities $ 61,611,714
INVESTING ACTIVITIES:
Purchases of long-term portfolio
investments (1,953,449,469)
Proceeds from disposition of
long-term portfolio investments 1,772,693,116
Proceeds from disposition of short-term
investments, net 45,882,973
Premiums received on written options 11,600
Variation margin paid on
futures contracts 3,997,625
--------------
Net decrease in cash from
investing activities (130,864,155)
FINANCING ACTIVITIES*:
Cash dividends paid (85,996,999)
Increase in reverse
repurchase agreements 168,826,097
--------------
Net increase in cash from
financing activities 82,829,098
--------------
Net increase in cash 13,576,657
Cash at beginning of period 66,944
--------------
Cash at end of period $ 13,643,601
==============
-------------------------------------------------------------------------------
RECONCILIATION OF NET DECREASE IN NET
ASSETS FROM OPERATIONS TO NET INCREASE
IN CASH FROM OPERATING ACTIVITIES:
Net decrease in net assets from
operations $ (23,041,845)
ADJUSTMENTS:
Decrease in interest and
dividends receivable $ 4,361,326
Accretion of bond discount and
amortization of bond premium (19,675,857)
Increase in interest payable 324,440
Decrease in accrued expenses (231,258)
Net realized gain on investment and
foreign currency transactions (60,546,823)
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities 160,421,731
--------------
Total adjustments 84,653,559
--------------
NET INCREASE IN CASH FROM OPERATING
ACTIVITIES $ 61,611,714
==============
* Non-cash financing activities not included herein consist of reinvestment of
dividends.
See notes to financial statements.
_______________________________________________________________________________
22 o ACM INCOME FUND
Notes to Financial Statements
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 (unaudited)
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 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
_______________________________________________________________________________
ACM INCOME FUND o 23
Notes to Financial Statements
-------------------------------------------------------------------------------
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. The Fund fair values a
security that it holds when a significant event (e.g., an earthquake or a major
terrorist attack) occurs after the time that the latest market quotation was
established, and, as a result, such market quotation cannot be said to
represent the current market value of the security as of the time the Fund
prices its shares. Fair valuing securities is imprecise, and there is no
assurance that the Fund could dispose of the security at the price used for
determining the Fund's net asset value.
2. 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.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
_______________________________________________________________________________
24 o ACM INCOME FUND
Notes to Financial Statements
-------------------------------------------------------------------------------
4. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the date the securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund accretes discounts as
adjustments to interest income. Additionally, the Fund amortizes premiums on
debt securities for financial statement reporting purposes only.
5. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
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 six months ended June 30, 2004, the Fund reimbursed
AGIS $7,850 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
_______________________________________________________________________________
ACM INCOME FUND o 25
Notes to Financial Statements
-------------------------------------------------------------------------------
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. Effective July 1, 2004, the Fund will pay UBS Global
AM .02 of 1% of the Fund's average weekly net assets. 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.
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the period ended June 30, 2004 were as follows:
Purchases Sales
============== ==============
Investment securities (excluding
U.S. government securities) $ 838,669,457 $ 816,971,850
U.S. government securities 1,257,615,156 955,534,679
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation (excluding foreign currency contracts,
futures contracts, written options and swap contracts) are as follows:
Cost $2,888,797,202
==============
Gross unrealized appreciation $ 151,009,633
Gross unrealized depreciation (71,223,635)
--------------
Net unrealized appreciation $ 79,785,998
==============
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.
_______________________________________________________________________________
26 o ACM INCOME FUND
Notes to Financial Statements
-------------------------------------------------------------------------------
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 difference 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
_______________________________________________________________________________
ACM INCOME FUND o 27
Notes to Financial Statements
-------------------------------------------------------------------------------
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 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 period ended June 30, 2004, were as
follows:
Number of
Contracts Premiums
(000) Received
============= =============
Options outstanding at
December 31, 2003 -0- $ -0-
Options written 161,132 516,934
Options terminated in closing purchase
transactions (1,625) (37,705)
Options expired (158,782) (467,629)
------------- -------------
Options outstanding at
June 30, 2004 725 $ 11,600
============= =============
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 accrues for the interim payments on swap contracts on a daily basis,
with the net amount recorded within unrealized appreciation/depreciation of
swap contracts on the statement of assets and liabilities. Once the interim
payments are settled in cash, the net amount is recorded as realized gain/loss
on swaps, in addition to realized gain/loss recorded upon the termination of
swap contracts on the statement of operations. Fluctuations in the value of
swap contracts are recorded as a component of net change in unrealized
appreciation/ depreciation of investments.
_______________________________________________________________________________
28 o ACM INCOME FUND
Notes to Financial Statements
-------------------------------------------------------------------------------
The Fund may enter into credit default swaps. The Fund may purchase credit
protection on the referenced obligation of the credit default swap ("Buy
Contract") or provide credit protection on the referenced obligation of the
credit default swap ("Sale Contract"). A sale/(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 the
notional amount (the "Notional Amount") and receive/(deliver) the principal
amount of the referenced obligation. If a credit event occurs, the maximum
payout amount for a Sale Contract is limited to the Notional Amount of the swap
contract ("Maximum Payout Amount"). During the term of the swap agreement, the
Fund receives/(pays) semi-annual fixed payments from/(to) the respective
counterparty, calculated at the agreed upon interest rate applied to the
Notional Amount. These interim payments are recorded within unrealized
appreciation/depreciation of swap contracts on the statement of assets and
liabilities.
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, counterparty risk and credit risk. If the Fund is
a buyer and no credit event occurs, it will lose its investment. In addition,
if the Fund is a seller and a credit event occurs, the value of the referenced
obligation received by the Fund coupled with the periodic payments previously
received, may be less than the Maximum Payout Amount it pays to the buyer,
resulting in a loss to the Fund.
At June 30, 2004, the Fund had Sale Contracts outstanding with Maximum Payout
Amounts aggregating $32,835,000, with net unrealized appreciation of $597,046
and terms ranging from 1 year to 10 years, as reflected in the portfolio of
investments.
In certain circumstances, the Fund may hold Sale Contracts on the same
referenced obligation and with the same counterparty it has purchased credit
protection, which may reduce its obligation to make payments on Sale Contracts,
if a credit event occurs. The Fund had Buy Contracts outstanding with a
Notional Amount of $10,235,000 with respect to the same referenced obligations
and same counterparties of certain Sale Contracts outstanding, which reduced
its obligation to make payments on Sale Contracts to $22,600,000 as of June 30,
2004.
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 June 30, 2004, the average amount of reverse repurchase
agreements outstanding was $431,265,927 and the daily weighted average annual
interest rate was .98%.
_______________________________________________________________________________
ACM INCOME FUND o 29
Notes to Financial Statements
-------------------------------------------------------------------------------
NOTE D
Capital Stock
There are 300,000,000 shares of $.01 par value common stock authorized of which
227,816,768 shares were issued and outstanding at June 30, 2004. During the
period ended June 30, 2004 and the year ended December 31, 2003, the Fund
issued 743,002 and 1,349,486 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 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 June 30, 2004, the Fund had loaned securities with a
value of $95,132,400 and received cash collateral of $97,524,050, which was
invested in a money market fund as included in the accompanying portfolio of
investments. For the six months ended June 30, 2004, the Fund earned fee income
of $99,774, 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 1.12% and the average borrowing was
$400,000,000 for the six
_______________________________________________________________________________
30 o ACM INCOME FUND
Notes to Financial Statements
-------------------------------------------------------------------------------
months ended June 30, 2004. At June 30, 2004, 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 Fund's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Fund'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.
Foreign Securities Risk--Investing in securities of foreign companies or
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 companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable United States companies or 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.
In the ordinary course of business, the Fund enters into contracts that contain
a variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these indemnification provisions and expects the risk of loss
thereunder to be remote.
NOTE H
Distributions to Shareholders
The tax character of distributions to be paid for the year ending December 31,
2004 will be determined at the end of the current fiscal year.
_______________________________________________________________________________
ACM INCOME FUND o 31
Notes to Financial Statements
-------------------------------------------------------------------------------
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.
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 the Adviser provide
information to them. The Adviser 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 the Adviser and the SEC
and NYAG in connection with the investigations mentioned above.
_______________________________________________________________________________
32 o ACM INCOME FUND
Notes to Financial Statements
-------------------------------------------------------------------------------
Numerous lawsuits have been filed against the Adviser 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 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, the Adviser 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) The Adviser 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 Reimbursement 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) The Adviser 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) The Adviser agreed to implement changes to its governance and compliance
procedures. Additionally, the SEC Order contemplates that the Adviser'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.
_______________________________________________________________________________
ACM INCOME FUND o 33
Financial Highlights
-------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
Six Months
Ended
June 30, Year Ended December 31,
2004 ---------------------------------------------------------------
(unaudited)(a) 2003 2002 2001(b) 2000 1999
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $8.39 $7.91 $7.87 $8.45 $7.64 $8.80
INCOME FROM INVESTMENT
OPERATIONS
Net investment income(c) .34 .76 .89 .76 .70 .79
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions (.44) .59 .07 (.11) .91 (1.11)
Net increase (decrease) in net
asset value from operations (.10) 1.35 .96 .65 1.61 (.32)
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
income (.47) (.87) (.85) (.77) (.70) (.79)
Distributions in excess of net
investment income -0- -0- -0- (.07) (.10) (.05)
Tax return of capital -0- -0- (.07) -0- -0- -0-
Total dividends and distributions (.47) (.87) (.92) (.84) (.80) (.84)
LESS: FUND SHARE
TRANSACTIONS
Dilutive effect of rights offering -0- -0- -0- (.32) -0- -0-
Offering costs charged to
paid-in-capital in excess of par -0- -0- -0- (.07) -0- -0-
Total fund share transactions -0- -0- -0- (.39) -0- -0-
Net asset value, end of period $7.82 $8.39 $7.91 $7.87 $8.45 $7.64
Market value, end of period $7.86 $8.58 $8.46 $7.30 $7.50 $6.50
Premium/(Discount) .51% 2.26% 6.95% (7.24)% (11.24)% (14.92)%
TOTAL INVESTMENT RETURN
Total investment return
based on:(d)
Market value (2.94)% 12.50% 30.60% 7.80% 28.97% (20.84)%
Net asset value (1.24)% 17.66% 13.27% 3.11% 23.58% (3.53)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $1,780,437 $1,904,853 $1,785,164 $1,764,895 $1,390,542 $448,735
Ratio to average net assets of:
Expenses 1.56%(f) 1.67% 1.87% 2.31% 2.54% 2.37%
Expenses, excluding
interest expense(e) 1.05%(f) 1.10% 1.26% 1.18% 1.19% 1.19%
Net investment income 8.27%(f) 9.28% 11.69% 9.33% 9.40% 9.80%
Portfolio turnover rate 126% 276% 414% 676% 538% 368%
Asset coverage ratio 505% 559% 376% 379% 339% 325%
Bank borrowing outstanding
(in millions) $400 $400 $400 $300 $300 $90
See footnote summary on page 35.
_______________________________________________________________________________
34 o ACM INCOME FUND
(a) As of January 1 2004, the Fund has adopted the method of accounting for
interim payments on swap contracts in accordance with Financial Accounting
Standards Board Statement No. 133. These interim payments are reflected within
net realized and unrealized gain (loss) on swap contracts, however prior to
January 1 2004, these interim payments were reflected within interest
income/expense on the statement of operations. The effect of this change for
the six months ended June 30, 2004, was to decrease net investment income per
share and increase net realized and unrealized gain (loss) on investment
transactions. The effect on the per share amounts was less than $0.005. The
ratio of net investment income to average net assets was decreased by 0.02%.
(b) 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.
(c) Based on average shares outstanding.
(d) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day of
each period reported. Dividends and distributions, if any, are assumed for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's Dividend Reinvestment Plan. Generally, total investment return based on
net asset value will be higher than total investment return based on market
value in periods where there is an increase in the discount or a decrease in
the premium of the market value to the net asset value from the beginning to
the end of such periods. Conversely, total investment return based on net asset
value will be lower than total investment return based on market value in
periods where there is a decrease in the discount or an increase in the premium
of the market value to the net asset value from the beginning to the end of
such periods. Total investment return calculated for a period of less than one
year is not annualized.
(e) Net of interest expense of .51%, .57%, .61%, 1.13%, 1.35% and 1.18%,
respectively, on borrowings (see Notes C and F).
(f) Annualized.
_______________________________________________________________________________
ACM INCOME FUND o 35
Additional Information
-------------------------------------------------------------------------------
ADDITIONAL INFORMATION
(unaudited)
Supplemental Proxy Information
A Special Meeting of Shareholders of ACM Income Fund, Inc. was held on March
25, 2004. The description of each proposal and number of shares voted at the
meeting are as follows:
Authority
Voted For Withheld
-------------------------------------------------------------------------------
1. To elect directors Class One Nominees
(terms expire in 2007)
John H. Dobkin 206,041,163 3,801,420
Clifford L. Michel 206,124,907 3,717,676
Donald J. Robinson 206,013,343 3,829,240
Class Three Nominee
(term expires in 2006)
Marc O. Mayer 206,036,709 3,805,874
_______________________________________________________________________________
36 o ACM INCOME FUND
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
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 and Nominating 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.
_______________________________________________________________________________
ACM INCOME FUND o 37
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- 113 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 94 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 98 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.
_______________________________________________________________________________
38 o ACM INCOME FUND
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, #, 62 Consultant. Formerly President 96 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, #, Formerly President of the Harry Frank 11 None
80 Guggenheim Foundation, New York
25 Cleveland Lane University and the New York Botanical
Princeton, NJ 08540 Garden, Rector of the United Nations
(17) University and Vice Chairman of the
Board of the Federal Reserve Bank
of New York.
Clifford L. Michel,#, 65 Senior Counsel to the law firm 96 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, 95 None
70 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.
_______________________________________________________________________________
ACM INCOME FUND o 39
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 66 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.
_______________________________________________________________________________
40 o ACM INCOME FUND
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**
--------------------------------------------------------------------------------------------------------------
Andrew M. Aran, 47 Vice President Senior Vice President of ACMC, ** with
which he has been associated since
prior to 1999.
Paul J. DeNoon, 42 Vice President Senior Vice President of ACMC,** with
which he has been associated since
prior to 1999.
Michael L. Mon, 35 Vice President Vice President of ACMC, ** with which
he has been associated since prior to
June 1999.
Douglas J. Peebles, 38 Vice President Executive Vice President of ACMC,
**with which he has been associated
since prior to 1999.
Michael A. Snyder, 42 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, 33 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.
Mark R. Manley, 41 Secretary Senior Vice President and Chief
Compliance Officer 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 41
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 Funds
--------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International 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 Research Growth 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.
+ 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.
_______________________________________________________________________________
42 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 43
NOTES
_______________________________________________________________________________
44 o ACM INCOME FUND
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.
INCSR0604
ITEM 2. CODE OF ETHICS.
Not applicable when filing a Semi-Annual report to shareholders.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable when filing a Semi-Annual report to shareholders.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable when filing a Semi-Annual report to shareholders.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable when filing a Semi-Annual report to shareholders.
ITEM 6. SCHEDULE OF INVESTMENTS.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable when filing a Semi-Annual report to shareholders.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
There were no purchases of the Fund's equity securities by the Fund for the
period.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last
provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of
Schedule 14A in its proxy statement filed with the Commission on February 23,
2004.
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) (2) (i) Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
11 (a) (2) (ii) Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
11 (a) (3) Not applicable.
11 (b) 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/ Mark O. Mayer
-------------------
Mark O. Mayer
President
Date: August 30, 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/ Mark O. Mayer
-------------------
Mark O. Mayer
President
Date: August 30, 2004
By: /s/ Mark D. Gersten
-------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: August 30, 2004