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CLOSED END
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ACM Income Fund
(formerly ACM Government Income Fund, Inc.)
Annual Report
December 31, 2001
Alliance Capital [LOGO](R)
The Investment Professional's Choice
Investment Products Offered
---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
---------------------------
Alliance Fund Distributors, Inc., the principal underwriter of the Alliance
mutual funds and an affiliate of Alliance Capital Management L.P., the manager
of the funds, is a member of the NASD.
----------------------
LETTER TO SHAREHOLDERS
----------------------
LETTER TO SHAREHOLDERS
February 5, 2002
Dear Shareholder:
This report provides the strategy, performance and outlook for ACM Income Fund
(the "Fund") for the annual reporting period ended December 31, 2001. As of
August 31, 2001, the Fund's name was changed to ACM Income Fund, Inc. The Board
of Directors approved the name change at the recommendation of Alliance Capital
Management L.P., the Fund's investment adviser, in order to enable the Fund to
maintain the investment flexibility afforded by its current fundamental
investment policy of investing at least 65% of its total assets in U.S.
Government Securities, while complying with the new SEC rules regarding fund
names.
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 up to 35% of its assets in other
fixed-income securities, including those issued by foreign governments.
Additionally, the Fund may utilize other investment instruments, including
options and futures.
Investment Performance
The following table shows how the Fund performed over the past six- and 12-month
periods ended December 31, 2001. For comparison, we have included the
performance of the Fund's benchmark, the Lehman Brothers Aggregate Bond Index.
INVESTMENT RESULTS*
Periods Ended December 31, 2001
--------------------------
Total Returns
--------------------------
6 Months 12 Months
--------------------------------------------------------------------------------
ACM Income Fund (NAV) 1.32% 3.11%
--------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index 4.66% 8.44%
--------------------------------------------------------------------------------
* The Fund's investment results are total returns for the periods shown and
are based on the net asset value (NAV) of the Fund as of December 31,
2001. All fees and expenses related to the operation of the Fund have been
deducted. Returns for the Fund include the reinvestment of any
distributions paid during each period. Past performance is no guarantee of
future results.
The unmanaged Lehman Brothers (LB) Aggregate Bond Index is composed of the
LB Mortgage-Backed Securities Index, the LB Asset-Backed Securities Index
and the LB Government/Credit Index. It includes Treasury, agency and
corporate bond issues, as well as mortgage-backed securities. The Index
does not reflect fees and expenses. An investor cannot invest directly in
an index, and its results are not indicative of any particular investment,
including ACM Income Fund.
Additional investment results appear on pages 6-8.
During the six- and 12-month periods ended December 31, 2001, the Fund
underperformed its benchmark, the
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ACM INCOME FUND o 1
----------------------
LETTER TO SHAREHOLDERS
----------------------
Lehman Brothers (LB) Aggregate Bond Index. The primary sources of the Fund's
underperformance for both periods were its longer-maturity Treasury securities,
and secondarily, its high-yield positions.
During the year, the yield curve steepened in response to the slowing economy
and aggressive U.S. Federal Reserve easing. Short-term interest rates declined
as long-term rates remained unchanged. As a result, short and intermediate
Treasury securities outperformed the longer duration Treasury securities in the
Fund. Longer-term Treasuries were also hurt in November and December as the
government bond market reacted to less negative economic news, the prospects of
a recovery in 2002 increased and investors shortened the duration of their
portfolios.
The Fund's high-yield allocation also underperformed relative to the LB
Aggregate Bond Index, which holds only investment-grade securities primarily
from the U.S. Continued weakness in the high yield sector, caused by declines in
the equity market and investors' aversion to risk, negatively affected the
Fund's performance. Holdings in the telecommunications, cable and airlines
industries were hit particularly hard in the aftermath of September 11.
The Fund's emerging market securities had an overall neutral effect on
performance. Holdings in Argentina, which suffered from a worsening economy, and
later fears of default, detracted from performance. By the end of November,
before the Argentine government's collapse, the Fund had entirely eliminated its
Argentine holdings. The Fund's larger position in Russia, however, contributed
positively to performance as economic reforms continued and their geopolitical
importance grew.
Market Overview
Global economic growth continued to decelerate throughout 2001 with the U.S.
entering an official recession, ending a historic period of expansion. In the
U.S., declining business investment, weaker export performance, lower equity
valuations and a drop in consumer confidence coalesced to significantly slow the
economy. In response, the U.S. Federal Reserve aggressively lowered interest
rates 475 basis points from 6.50% to 1.75% this year, the lowest in four
decades.
The U.S. bond market was the beneficiary of a weakening economy, a poorer
business climate for stocks and investors' unwillingness to assume undue risk.
The LB Aggregate Bond Index, a standard measure of traditional U.S. bonds,
returned a strong 8.44% during the 12-month period. Among the sectors,
investment-grade corporates returned 10.40%, benefiting from low interest rates,
a steep yield curve and substantive market liquidity. Treasury securities posted
an overall return of 6.75% as investors retreated to the safety of Treasuries
due to negative economic news, as well as the events of September 11. As
mentioned in the investment results section, short-term Treasuries (two-year
maturities at 8.15%) outperformed longer-term maturity Treasuries (30-year
Treasury at
--------------------------------------------------------------------------------
2 o ACM INCOME FUND
----------------------
LETTER TO SHAREHOLDERS
----------------------
3.46%) as the yield curve steepened. At year-end, returns on Treasury securities
were modestly dampened by prospects of an economic recovery in 2002.
The emerging market debt sector, as measured by the J.P. Morgan Emerging Markets
Bond Index Plus (JPM EMBI+), returned an anemic -0.79% for the year. The poor
return, however, was not reflective of the asset class as a whole. All emerging
countries within the Index posted positive returns, with the exception of
Argentina's -66.85%. Countries outperforming for the period included the Fund's
largest emerging market holding, Russia, at 55.81%
For the 12-month period ended December 31, 2001, the high yield sector returned
5.80%, as measured by the Credit Suisse First Boston High Yield (CSFBHY) Index.
Weakness in the equity markets and the troubled telecommunications sector
dampened overall returns throughout the year. Additionally, investors reacted to
the September 11 attacks with increased risk aversion.
Investment Strategy
The investment strategy for the Fund was modified during 2001. With aggressive
easing of monetary policy, a steep yield curve and the benefit of improving
global liquidity, we shifted a modest share of the Fund's allocation from
Treasuries toward credit sectors. As a result, the Fund increased its exposure
to both investment-grade and higher-yielding corporate securities at the expense
of Treasury and agency debt. Corporate holdings that reflected a concentration
in the telecommunications (AT&T Corp., Charter Communications Holdings, Qwest
Capital Funding, Nextel Communications Inc., Lucent Technologies Inc.) and
financial sectors (Finova Group, Inc., Hanvit Bank) were added to the Fund.
In addition, as a result of changing liquidity patterns in the fixed-income
markets over the past few years, we have diversified the Fund's credit-sensitive
exposure and increased the number of positions held to meet its allocation. We
maintained the focus on diversification throughout the year and will continue
with that strategy.
Within the Treasury sector, we continued to concentrate the Fund's holdings on
longer-term Treasury securities. We also maintained the Fund's positions in U.S.
Treasury strips.
Within the emerging market sector, we continued to hold a relatively diversified
array of holdings. We did, however, modestly reduce the Fund's allocation to
emerging markets since the last annual report as of December 31, 2000. In Latin
America, the Fund eliminated its position in Argentina, as noted previously, and
maintained holdings in Brazil, Colombia, Ecuador, Panama and Mexico. The Fund's
allocation to Brazil however, was reduced as prospects in Latin America became
less favorable.
The Fund's investment strategy will continue to focus on yield and credit, given
our view that the U.S. economy has troughed and is set for recovery in 2002.
Increased global liquidity and favorable valuations, along with mod-
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ACM INCOME FUND o 3
----------------------
LETTER TO SHAREHOLDERS
----------------------
erate economic growth and low inflation will be positives for the credit
sensitive sectors. Corporate industries likely to outperform over the next few
months include utilities, telecommunications and banks. While our outlook for
the corporate sector is positive, security selection will remain key.
We will continue to invest a portion of the Fund in a diversified basket of
select emerging market and high yield securities that we believe will enhance
overall performance. We have a positive view in both sectors, given the belief
that global growth will recover and investors will be less risk averse. Current
valuations, particularly in high yield, are favorable, and we will continue to
manage a well-diversified portfolio in terms of issuers and industries. We will
also maintain our preference for longer-term Treasuries as we expect interest
rates at the long end of the yield curve to remain stable or decrease. We also
prefer long-term Treasuries as an offset to our credit exposure.
The Fund's recent offering of non-transferable rights has been completed and was
over-subscribed. The net proceeds to the Fund from the rights offering, $399.6
million, have enabled the Fund to execute the investment strategy discussed in
this letter without the need to liquidate portfolio securities that we believe
remain attractive and wish to retain.
Market Outlook
In the U.S., accelerating liquidity, improving consumer confidence, a
deceleration in the job-loss rate and signs of a turnaround in manufacturing
activity point to a recovery in the U.S. economy in early 2002. We expect
economic growth to advance throughout the year, with real gross domestic product
(GDP) reaching a 3.5% annualized pace by the fourth quarter. We believe the U.S.
Federal Reserve's monetary policy will remain largely unchanged for the first
half of the year, and a tighter policy will be implemented in the latter half of
2002. In this environment, interest rates will gradually trend higher, and the
yield curve will flatten somewhat.
The high yield sector should perform well in 2002 as the economy recovers.
Within the high yield sector, we expect single B-rated securities to outperform
double B-rated debt. Industrial high-yield sectors that should do well in 2002
include aerospace and defense, cable, wireless telecommunications, packaging and
industrial machinery. Chemical and service companies should also experience
improved earnings once signs of renewed economic growth begin to emerge. Lagging
sectors will likely include lodging and transportation. High default rates
should moderate as the economy rebounds.
We expect growth to accelerate in all emerging market economies in 2002 as the
demand for imports increases in developed economies and global risk aversion
begins to subside. The crisis in Argentina had muted effects on other emerging
market countries, which we find an encouraging sign, as the countries within the
asset class appear to be de-coupling.
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4 o ACM INCOME FUND
----------------------
LETTER TO SHAREHOLDERS
----------------------
Thank you for your continued interest and investment in ACM Income Fund. We look
forward to reporting its progress to you in the future.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman
/s/ Wayne D. Lyski
Wayne D. Lyski
President
John D. Carifa [PHOTO]
Wayne D. Lyski [PHOTO]
Wayne D. Lyski, Portfolio Manager, has over 27 years of investment experience.
--------------------------------------------------------------------------------
ACM INCOME FUND o 5
------------------
PERFORMANCE UPDATE
------------------
PERFORMANCE UPDATE
ACM INCOME FUND (NAV)
GROWTH OF A $10,000 INVESTMENT
12/31/91 TO 12/31/01
ACM Income Fund (NAV): $21,608
Lehman Brothers Aggregate Bond Index: $20,103
[The following table was depicted as a mountain chart in the printed material.]
Lehman Brothers
ACM Income Fund Aggregate Bond Index
-------------------------------------------------------------------------------
12/31/1991 $10,000 $10,000
12/31/1992 $10,850 $10,740
12/31/1993 $13,220 $11,787
12/31/1994 $11,138 $11,443
12/31/1995 $14,338 $13,558
12/31/1996 $16,691 $14,050
12/31/1997 $19,210 $15,406
12/31/1998 $17,574 $16,745
12/31/1999 $16,955 $16,607
12/31/2000 $20,953 $18,538
12/31/2001 $21,489 $20,103
This chart illustrates the total value of an assumed $10,000 investment in ACM
Income Fund at net asset value (NAV) (from 12/31/91 to 12/31/01) as compared to
the performance of an appropriate index. The chart assumes the reinvestment of
dividends and capital gains. Past performance is not indicative of future
results, and is not representative of future gain or loss in capital value or
dividend income.
The unmanaged Lehman Brothers (LB) Aggregate Bond Index is composed of the LB
Mortgage-Backed Securities Index, the LB Asset-Backed Securities Index and the
LB Government/Credit Index. It includes Treasury, agency and corporate bond
issues, as well as mortgage-backed securities.
When comparing ACM Income Fund to the index shown above, you should note that no
charges or expenses are reflected in the performance of the index. An investor
cannot invest directly in an index, and its results are not indicative of any
specific investment, including ACM Income Fund.
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6 o ACM INCOME FUND
------------------
PERFORMANCE UPDATE
------------------
PERFORMANCE UPDATE
ACM INCOME FUND (NAV)
HISTORY OF RETURNS
YEARLY PERIODS ENDED 12/31
[The following table was depicted as a bar chart in the printed material.]
ACM Income Fund (NAV)-Yearly Periods Ended 12/31
--------------------------------------------------------------------------------
ACM Income Lehman Brothers
Fund (NAV) Aggregate Bond Index
--------------------------------------------------------------------------------
12/31/92 8.48% 7.40%
12/31/93 21.84% 9.75%
12/31/94 -15.75% -2.92%
12/31/95 28.73% 18.47%
12/31/96 16.41% 3.63%
12/31/97 15.08% 9.65%
12/31/98 -8.38% 8.69%
12/31/99 -3.53% -0.82%
12/31/00 23.58% 11.63%
12/31/01 3.11% 8.44%
Past performance is no guarantee of future results. The Fund's investment
results represent total returns and are based on the net asset value (NAV). All
fees and expenses related to the operation of the Fund have been deducted.
Returns for the Fund include the reinvestment of any distributions paid during
each period.
The unmanaged Lehman Brothers (LB) Aggregate Bond Index is composed of the LB
Mortgage-Backed Securities Index, the LB Asset-Backed Securities Index and the
LB Government/Credit Index. It includes Treasury, agency and corporate bond
issues, as well as mortgage-backed securities. The Index does not reflect fees
or expenses. An investor cannot invest directly in an index, and its results are
not indicative of any specific investment, including ACM Income Fund.
--------------------------------------------------------------------------------
ACM INCOME FUND o 7
-----------------
PORTFOLIO SUMMARY
-----------------
PORTFOLIO SUMMARY
December 31, 2001
INCEPTION DATE PORTFOLIO STATISTICS
8/28/87 Net Assets ($mil): $1,764.9
SECURITY TYPE
64.5% Treasury
14.5% Corporate [PIE CHART]
12.9% Sovereign
0.9% Preferred Stock
0.0% Warrants*
7.2% Short-Term
COUNTRY BREAKDOWN
85.2% United States
4.6% Russia [PIE CHART]
2.7% Brazil
1.9% Mexico
1.8% Turkey
1.1% Bulgaria
0.9% Cayman Islands
0.7% Ecuador
0.4% Canada
0.4% Korea
0.1% Philippines
0.2% Other
* Less than 0.05%
All data as of December 31, 2001. The Fund's security type and country
breakdowns are expressed as a percentage of total investments and may vary
over time. "Other" represents less than 0.05% weightings in each of these
countries: Barbados, Colombia, Dominican Republic, Guatemala, Luxembourg,
Panama, Peru, Ukraine and Venezuela.
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8 o ACM INCOME FUND
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
PORTFOLIO OF INVESTMENTS
December 31, 2001
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS-92.0%
U.S. Treasury Bonds-40.9%
5.375%, 2/15/31(a) ...................... $ 313,230 $ 308,678,768
12.00%, 8/15/13(a) ...................... 61,000 85,104,760
12.50%, 8/15/14(a) ...................... 70,300 103,231,332
13.25%, 5/15/14(a) ...................... 150,000 225,774,000
---------------
722,788,860
---------------
U.S. Treasury Strips-29.1%
Zero coupon, 5/15/12(a) ................. 246,900 139,056,549
Zero coupon, 8/15/12 .................... 78,000 43,231,500
Zero coupon, 5/15/17(a) ................. 407,000 162,979,080
Zero coupon, 11/15/21(a) ................ 545,850 167,515,907
---------------
512,783,036
---------------
U.S. Treasury Notes-20.3%
3.50%, 11/15/06 ......................... 50,000 48,187,500
5.00%, 2/15/11(a) ....................... 35,000 34,868,750
5.00%, 8/15/11(a)(b) .................... 275,755 274,891,887
---------------
357,948,137
---------------
Mortgage Related Securities-1.7%
Federal Home Loan Mortgage Association
5.50%, 9/15/11(c) ....................... 30,000 29,395,200
---------------
Total U.S. Government and Agency Obligations
(cost $1,623,960,152) ................... 1,622,915,233
---------------
CORPORATE DEBT OBLIGATIONS-20.6%
Canada-0.6%
Calpine Canada Energy Finance
8.50%, 5/01/08(c) ....................... 12,000 10,988,424
---------------
Korea-0.5%
Cho Hung Bank FRN
11.875%, 4/01/10(c)(d) .................. 500 547,500
Korea Deposit Insurance Corp.
2.50%, 12/11/05(d) ...................... 400 402,400
Korea Electric Power Corp.
7.95%, 4/01/96(c)(e) .................... 35,000 7,944,265
Hanvit Bank
12.75%, 3/01/10(d) ...................... 175 195,563
---------------
9,089,728
---------------
Luxembourg-0.0 %
Mobile Telesystems Finance S.A
10.95%, 12/21/04(d) ..................... 650 645,125
---------------
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ACM INCOME FUND o 9
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Mexico-0.3%
Grupo Iusacell S.A. de C.V.
14.25%, 12/01/06(c) ..................... $ 175 $ 187,915
International Bank Reconstruction
& Development
15.875%, 2/28/03(c) ..................... MXN 36,170 4,164,528
Innova S De R. L
12.875%, 4/01/07(c) ..................... 900 861,258
---------------
5,213,701
---------------
United States-19.2%
AT&T Corp.
8.00%, 11/15/31(d) ...................... $ 30,000 31,507,050
Calpine Corp.
8.50%, 2/15/11(c) ....................... 10,000 8,700,000
Charter Communications Holdings
10.00%, 5/15/11 ......................... 2,900 2,965,250
10.75%, 10/01/09(c) ..................... 9,655 10,234,300
11.75%, 5/15/11(c)(e) ................... 10,000 6,200,000
Delhaize America, Inc.
9.00%, 4/15/31(c) ....................... 35,240 42,363,660
Devon Financing Corp.
7.875%, 9/30/31(d) ...................... 20,000 20,300,980
Finova Group, Inc.
7.50%, 11/15/09(c) ...................... 56,500 24,012,500
HYDI 100
9.40%, 11/15/06(c) ...................... 15,000 15,262,500
Kerr-McGee Corp.
7.875%, 9/15/31(c) ...................... 25,000 26,422,725
Lucent Technologies Inc.
6.45%, 3/15/29(c) ....................... 50,680 34,462,400
McCaw International Ltd.
13.00%, 4/15/07(c)(e) ................... 500 27,500
Nextel Communications Inc.
9.375%, 11/15/09(c) ..................... 13,275 10,520,438
9.95%, 2/15/08(c)(e) .................... 14,175 9,780,750
10.65%, 9/15/07(c)(e) ................... 19,500 14,966,250
Nextel Partners Inc.
12.50%, 11/15/09(d) ..................... 8,500 7,480,000
Pemex Project
9.125%, 10/13/10 ........................ 500 531,250
Qwest Capital Funding
7.75%, 2/15/31(c) ....................... 35,000 33,675,705
South Point Energy Center LLC
9.825%, 5/30/19(d) ...................... 9,000 7,830,000
U.S. Airways Group, Inc.
7.96%, 1/20/18 .......................... 39,942 17,175,038
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10 o ACM INCOME FUND
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Williams Companies Inc.
7.50%, 1/15/31(c) ..................... $ 14,000 $ 13,678,504
---------------
338,096,800
---------------
Total Corporate Debt Obligations
(cost $378,244,076) ..................... 364,033,778
---------------
SOVEREIGN DEBT OBLIGATIONS-18.3%
Sovereign Debt Securities-16.6%
Barbados-0.0%
Government of Barbados
7.25%, 12/15/21(d) ...................... 500 469,600
---------------
Brazil-3.8%
Republic of Brazil
Discount Bonds FRN
6.00%, 4/15/24(c) ....................... 900 607,500
Global Bonds
8.00%, 4/15/14(c) ....................... 1,262 965,579
11.00%, 8/17/40(c) ...................... 58,795 45,125,162
Structured Assets Bonds
19.725%, 7/02/03 ........................ 20,000 20,000,000
---------------
66,698,241
---------------
Colombia-0.1%
Republic of Colombia
Global Bonds
8.70%, 2/15/16(c) ....................... 1,000 787,500
10.00%, 1/23/12(c) ...................... 250 246,875
---------------
1,034,375
---------------
Dominican Republic-0.0%
Dominican Republic
9.50%, 9/27/06(d) ....................... 500 511,250
---------------
Ecuador-0.9%
Republic of Ecuador
5.00%, 8/15/30(d)(f) .................... 19,200 9,072,000
12.00%, 11/15/12(d) ..................... 10,000 7,350,000
---------------
16,422,000
---------------
Guatemala-0.0%
Republic of Guatemala
10.25%, 11/08/11(d) ..................... 350 370,125
---------------
Mexico-2.4%
Mexican Bonds
16.00%, 1/23/03(c) ......................MXN 14,550 1,680,593
Mexican Bonos de Proteccion
al Ahorro FRN
14.00%, 9/2/04(c) ....................... 181,869 21,458,961
--------------------------------------------------------------------------------
ACM INCOME FUND o 11
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
United Mexican States
8.125%, 12/30/19(c) ..................... $ 4,380 $ 4,266,120
11.375%, 9/15/16(c) ..................... 2,710 3,330,590
11.50%, 5/15/26(c) ...................... 225 284,625
14.50%, 5/12/05(c) ......................MXN 91,523 11,114,446
---------------
42,135,335
---------------
Panama-0.1%
Republic of Panama
8.25%, 4/22/08(c) ....................... $ 100 98,250
10.75%, 5/15/20(c) ...................... 1,000 1,059,000
---------------
1,157,250
---------------
Philippines-0.1%
Republic of Philippines
9.875%, 1/15/19(c) ...................... 1,400 1,325,100
10.625%, 3/16/25(c) ..................... 1,275 1,248,225
---------------
2,573,325
---------------
Russia-6.6%
Ministry of Finance
3.00%, 5/14/06 .......................... 13,450 9,347,750
3.00%, 5/14/08 .......................... 600 336,000
Russian Federation
5.00%, 3/31/30(d)(f) .................... 183,825 106,848,281
---------------
116,532,031
---------------
Turkey-2.5%
Turkey Treasury Bills
60.80%, 7/10/02(c)(g) ...................TRL 9,519,000,000 4,944,851
61.00%, 7/10/02(c)(g) ................... 9,540,000,000 4,955,760
70.50%, 3/06/02(c)(g) ................... 7,803,354,000 4,886,640
72.01%, 3/06/02(c)(g) ................... 8,500,000,000 5,322,895
72.10%, 3/06/02(c)(g) ................... 17,357,000,000 10,869,352
73.54%, 3/06/02(c)(g) ................... 8,000,000,000 5,009,784
Republic of Turkey
11.375%, 11/27/06(c) .................... $ 400 407,000
11.875%, 1/15/30(c) ..................... 8,070 7,779,480
---------------
44,175,762
---------------
Ukraine-0.1%
Republic of Ukraine
11.00%, 3/15/07(c) ...................... 1,142 1,076,429
---------------
Total Sovereign Debt Securities
(cost $262,567,665) ..................... 293,155,723
---------------
Collateralized Brady Bonds(h)-1.7%
Brazil-0.0%
Republic of Brazil
Discount Bonds FRN
3.188%, 4/15/24(c) ...................... 850 616,250
---------------
--------------------------------------------------------------------------------
12 o ACM INCOME FUND
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Shares or
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Bulgaria-1.6%
Republic of Bulgaria
Discount Bonds FRN
Series A
4.563%, 7/28/12(c) ...................... $ 10,000 $ 9,025,000
4.563%, 7/28/24(c) ...................... 21,550 19,153,640
---------------
28,178,640
---------------
Peru-0.0%
Republic of Peru FLIRB
4.00%, 3/07/17(c)(f) .................... 400 280,000
Republic of Peru, PDI
4.50%, 3/07/17(c)(f) .................... 650 498,875
---------------
778,875
---------------
Venezuela-0.1%
Republic of Venezuela
Discount Bonds FRN
3.00%, 3/31/20(c) ....................... 1,203 1,066,919
3.188%, 3/31/20 FRN(c) .................. 250 175,000
---------------
1,241,919
---------------
Total Collateralized Brady Bonds
(cost $28,938,250) ...................... 30,815,684
---------------
Total Sovereign Debt Obligations
(cost $291,505,915) ..................... 323,971,407
---------------
PREFERRED STOCK-1.3%
Centaur Funding Corp., Series B(d) ......... 8,000 8,765,520
Centaur Funding Corp., Series C(d) ......... 75,000 13,952,400
---------------
Total Preferred Stock
(cost $21,484,870) ...................... 22,717,920
---------------
RIGHTS-0.0%
Mexico-0.0%
United Mexican States,
Value Recovery Rights,
expiring 6/30/03
(cost $0) ............................... 2,500,000 2,500
---------------
SHORT-TERM INVESTMENT-10.3%
Repurchase Agreement-10.3%
State Street Bank & Trust Co.
1.70%, due 1/02/02 in the amount
of $181,300,000 (collateralized by:
$126,255,000 Federal National Mortgage
Association 6.21%, 10/01/32 value
$123,729,900 and $62,450,000
Federal National Mortgage Association
5.50%, 3/01/14 value $61,201,000) ....... $ 181,300 181,300,000
---------------
--------------------------------------------------------------------------------
ACM INCOME FUND o 13
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
U.S. $ Value
-------------------------------------------------------------------------------
TOTAL INVESTMENTS-142.5%
(cost $2,496,495,013) ................... $ 2,514,940,838
Other assets less liabilities-(42.5%) ...... (750,045,901)
---------------
Net Assets-100.0% .......................... $ 1,764,894,937
===============
(a) Securities, or portion thereof, have been segregated to collateralize the
loan outstanding. Total value of segregated securities amounted to
$1,022,369,282 at December 31, 2001.
(b) Securities, or portion thereof, with an aggregate market value of
$91,418,028 have been segregated to collateralize reverse repurchase
agreements.
(c) Securities, or portion thereof, have been segregated to collateralize open
forward foreign currency contracts. Total value of segregated securities
amounted to $474,062,723 at December 31, 2001.
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2001, these securities amounted to $216,247,794 or 12.3 % of net assets.
(e) 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.
(f) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at December 31, 2001.
(g) Annualized yield to maturity at purchase date.
(h) Sovereign debt obligations issued as part of debt restructurings that are
collateralized in full as to principal due at maturity by U.S. Treasury
zero coupon obligations which have the same maturity as the Brady Bond.
Glossary of Terms:
FLIRB - Front Loaded Interest Reduction Bond
FRN - Floating Rate Note
PDI - Past Due Interest
See notes to financial statements.
--------------------------------------------------------------------------------
14 o ACM INCOME FUND
---------------------------------
STATEMENT OF ASSETS & LIABILITIES
---------------------------------
STATEMENT OF ASSETS & LIABILITIES
December 31, 2001
Assets
Investments in securities, at value (cost $2,496,495,013) .. $ 2,514,940,838
Cash ....................................................... 471,311
Interest and dividends receivable .......................... 38,040,058
Prepaid expenses ........................................... 160,165
---------------
Total assets ............................................... 2,553,612,372
---------------
Liabilities
Loan payable ............................................... 300,000,000
Payable for investment securities purchased ................ 385,606,073
Reverse repurchase agreements .............................. 89,350,805
Dividend payable ........................................... 10,531,927
Advisory fee payable ....................................... 921,159
Loan interest payable ...................................... 885,814
Rights offering payable .................................... 853,900
Administrative fee payable ................................. 178,840
Unrealized depreciation on forward exchange
currency contracts ...................................... 99,242
Accrued expenses ........................................... 289,675
---------------
Total liabilities .......................................... 788,717,435
---------------
Net Assets ................................................. $ 1,764,894,937
===============
Composition of Net Assets
Capital stock, at par ...................................... $ 2,242,169
Additional paid-in capital ................................. 2,152,679,834
Distributions in excess of net investment income ........... (11,914,527)
Accumulated net realized loss on investments, swap
contracts, option contracts and foreign currency
transactions ............................................ (396,504,843)
Net unrealized appreciation of investments and
foreign currency denominated assets and liabilities ..... 18,392,304
---------------
$ 1,764,894,937
===============
Net Asset Value Per Share
(based on 224,216,861 shares outstanding) ............... $7.87
=====
See notes to financial statements.
--------------------------------------------------------------------------------
ACM INCOME FUND o 15
-----------------------
STATEMENT OF OPERATIONS
-----------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 2001
Investment Income
Interest ............................................. $ 159,705,531
Dividends (net of foreign taxes
withheld of $63,031) .............................. 1,548,140 $ 161,253,671
-------------
Expenses
Advisory fee ......................................... 11,783,218
Administrative fee ................................... 2,158,222
Printing ............................................. 611,586
Transfer agency ...................................... 582,726
Custodian ............................................ 415,481
Registration fee ..................................... 410,667
Audit and legal ...................................... 194,879
Directors' fees ...................................... 59,201
Miscellaneous ........................................ 153,106
-------------
Total expenses before interest ....................... 16,369,086
Interest expense ..................................... 15,591,652
-------------
Total expenses ....................................... 31,960,738
-------------
Net investment income ................................ 129,292,933
-------------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Transactions
Net realized loss on investment
transactions ...................................... (31,409,151)
Net realized gain on option contracts ................ 2,016,363
Net realized loss on foreign currency
transactions ...................................... (1,698,141)
Net change in unrealized appreciation/depreciation of:
Investments ....................................... 12,092,382
Foreign currency denominated assets
and liabilities ................................... 1,248,356
-------------
Net loss on investments, option contracts
and foreign currency transactions ................. (17,750,191)
-------------
Net Increase in Net Assets
from Operations ................................... $ 111,542,742
=============
See notes to financial statements.
--------------------------------------------------------------------------------
16 o ACM INCOME FUND
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
STATEMENT OF CHANGES
IN NET ASSETS
Year Ended Year Ended
December 31, December 31,
2001 2000
=============== ===============
Increase (Decrease) in Net Assets
from Operations
Net investment income .................... $ 129,292,933 $ 46,684,417
Net realized gain (loss) on investments,
swap contracts, option contracts and
foreign currency transactions ......... (31,090,929) 20,917,915
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities .... 13,340,738 21,637,103
--------------- ---------------
Net increase in net assets from
operations ............................ 111,542,742 89,239,435
Dividends and Distributions to
Shareholders from:
Net investment income .................... (129,292,933) (46,684,417)
Distributions in excess of net investment
income ................................ (10,957,527) (4,915,050)
Capital Stock Transactions
Net increase ............................. -0- 903,815,269
Reinvestment of dividends resulting in
issuance of Common Stock .............. 3,428,477 351,782
Proceeds from sale of shares of
common stock in rights offering ....... 399,632,465 -0-
--------------- ---------------
Total increase ........................... 374,353,224 941,807,019
Net Assets
Beginning of period ...................... 1,390,541,713 448,734,694
--------------- ---------------
End of period ............................ $ 1,764,894,937 $ 1,390,541,713
=============== ===============
See notes to financial statements.
--------------------------------------------------------------------------------
ACM INCOME FUND o 17
-----------------------
STATEMENT OF CASH FLOWS
-----------------------
STATEMENT OF CASH FLOWS
Year Ended December 31, 2001
Increase (Decrease) in Cash from
Operating Activities:
Interest and dividends received ............ $ 112,261,990
Interest expense paid ...................... (16,280,720)
Operating expenses paid .................... (16,749,927)
----------------
Net increase in cash from operating
activities .............................. $ 79,231,343
Investing Activities:
Purchases of long-term investments ......... (13,930,149,369)
Proceeds from disposition of long-term
investments ............................. 13,677,083,872
Purchases of short-term investments--net ... (136,849,918)
----------------
Net decrease in cash from investing
activities .............................. (389,915,415)
Financing Activities*:
Cash dividends paid ........................ (134,327,361)
Proceeds from reverse repurchase
agreements .............................. 44,903,698
Proceeds from capital stock transactions ... 400,486,365
----------------
Net increase in cash from financing
activities .............................. 311,062,702
----------------
Net increase in cash ....................... 378,630
Cash at beginning of period ................ 92,681
----------------
Cash at end of period ...................... $ 471,311
================
-----------------------------------------------------------------------------------
Reconciliation of Net Increase in
Net Assets from Operations to
Net Increase in Cash from
Operating Activities:
Net increase in net assets from
operations .............................. $ 111,542,742
Adjustments:
Increase in interest and dividend receivable $ (5,956,671)
Accretion of bond discount and amortization
of bond premium ......................... (43,035,010)
Decrease in accrued expenses ............... (1,069,909)
Net realized loss on investments, option
contracts and foreign currency
transactions ............................ 31,090,929
Net change in unrealized appreciation/
depreciation of investments and
foreign currency denominated assets
and liabilities ......................... (13,340,738)
----------------
Total adjustments .......................... (32,311,399)
----------------
Net Increase in Cash from Operating
Activities .............................. $ 79,231,343
================
* Non-cash financing activities not included herein consist of reinvestment
of dividends.
See notes to financial statements.
--------------------------------------------------------------------------------
18 o ACM INCOME FUND
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 2001
NOTE A
Significant Accounting Policies
ACM Income Fund, Inc. (formerly, ACM Government 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
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are generally
valued at the last reported sale price or, if there was no sale on such day, the
last bid price quoted on such day. If no bid prices are quoted, then the
security is valued at the mean of the bid and asked prices as obtained on that
day from one or more dealers regularly making a market in that security.
Securities traded on the over-the-counter market, securities listed on a foreign
securities exchange whose operations are similar to the United States
over-the-counter market and securities listed on a national securities exchange
whose primary market is believed to be over-the-counter are valued at the mean
of the closing bid and asked price provided by two or more dealers regularly
making a market in such securities. U.S. government securities and other debt
securities which mature in 60 days or less are valued at amortized cost unless
this method does not represent fair value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by, or in accordance with procedures approved by, the Board of
Directors. Fixed income securities may be valued on the basis of prices provided
by a pricing service when such prices are believed to reflect the fair market
value of such securities. Listed put and call options purchased by the Fund are
valued at the last sale price. If there is no sale on that day, such securities
are valued at the closing bid prices on that day.
2. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Dividend income is recorded on the ex-dividend
date. Investment transactions are accounted for on the date 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.
--------------------------------------------------------------------------------
ACM INCOME FUND o 19
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
4. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the mean
of the quoted bid and asked prices of such currencies against the U.S. dollar.
Purchases and sales of portfolio securities are translated into U.S. dollars at
the rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated into U.S. dollars at the rates of exchange
prevailing when accrued. Net realized gain or loss on foreign currency
transactions represents foreign exchange gains and losses from sales and
maturities of foreign securities, holding of foreign currencies, options on
foreign currencies, closed forward exchange currency contracts, exchange gains
and losses realized between the trade and settlement dates on foreign security
transactions, and the difference between the amounts of interest and foreign
withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of
the amounts actually received or paid. Net foreign currency gains and losses
from valuing foreign currency denominated assets and liabilities at period end
exchange rates are reflected as a component of net unrealized appreciation or
depreciation of investments and foreign currency denominated assets and
liabilities.
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. During the current fiscal
year, permanent differences, primarily due to foreign currency transactions,
expiring capital loss carryforward and recognition of bond premium, resulted in
a net decrease in distributions in excess of net investment income, a net
decrease in accumulated net realized loss on investments and a corresponding
decrease in additional paid in capital.
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 whether
the value of such securities are sufficient to cover the value of the repurchase
agreements. If the seller defaults and the value of the 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.
7. Change in Accounting Principle
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 statement reporting purposes
only. This change has no impact on the net assets of the Fund. Prior to January
1, 2001, the Fund did not amortize premiums on debt securities.
--------------------------------------------------------------------------------
20 o ACM INCOME FUND
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
The cumulative effect of this accounting change resulted in a $17,980,546
reduction in cost of investments and a corresponding $17,980,546 increase in net
unrealized appreciation (depreciation), based on investments owned by the Fund
on January 1, 2001.
The effect of this change for the year ended December 31, 2001, was to decrease
net investment income by $8,109,339, decrease net unrealized appreciation of
investments by $11,011,400, and decrease net realized loss on investment
transactions by $19,120,739. The statement of changes in net assets and
financial highlights for prior periods have not been restated to reflect this
change in accounting principle.
NOTE B
Advisory, Administrative Fees and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P., (the "Adviser") a monthly advisory fee in an amount
equal to the sum of 1/12th of .30% of the Fund's average weekly net assets up to
$250 million, 1/12th of .25% of the Fund's average weekly net assets in excess
of $250 million, and 5.25% of the 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"), (formerly, Alliance Fund Services, Inc.), an
affiliate of the Adviser, the Fund reimburses AGIS for costs relating to
servicing phone inquiries on behalf of the Fund. For the year ended December 31,
2001, the Fund did not reimburse AGIS.
Under the terms of an Administrative Agreement, the Fund pays its Administrator,
Brinson Advisors, Inc. (formerly Mitchell Hutchins Asset Management Inc.), a
monthly fee equal to the annualized rate of .18 of 1% of the Fund's average
weekly net assets up to $100 million, .16 of 1% of the Fund's next $200 million
of average weekly net assets, and .15 of 1% of the Fund's average weekly net
assets in excess of $300 million. Brinson Advisors, Inc. is an indirect
wholly-owned asset management subsidiary of UBS AG. The Administrator prepares
financial and regulatory reports for the Fund and provides other clerical
services.
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $2,516,366,233 and $2,295,823,916,
respectively, for the year ended December 31, 2001. There were purchases of
$11,529,632,675 and
--------------------------------------------------------------------------------
ACM INCOME FUND o 21
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
sales of $11,374,745,517 of U.S. government and government agency obligations
for the year ended December 31, 2001.
At December 31, 2001, the cost of investments for federal income tax purposes
was $2,561,375,963. Accordingly, gross unrealized appreciation of investments
was $47,981,897, and gross unrealized depreciation was $94,417,022, resulting in
net unrealized depreciation of $46,435,125 (excluding foreign currency
transactions).
1. Forward Exchange Currency Contracts
The Fund enters into forward exchange currency contracts to hedge its exposure
to changes in foreign currency exchange rates on its foreign portfolio holdings,
to hedge certain firm purchase and sale commitments denominated in foreign
currencies and for investment purposes. A forward exchange currency contract is
a commitment to purchase or sell a foreign currency at 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 is included in net
realized gain or loss on foreign currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
reflected for financial reporting purposes as a component of net unrealized
appreciation (depreciation) of investments and foreign currency denominated
assets and liabilities.
The Fund's custodian places and maintains 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. At December 31, 2001, the Fund had
outstanding forward exchange currency contracts as follows:
U.S. $
Contract Value on U.S. $ Unrealized
Amount Origination Current Appreciation/
(000) Date Value (Depreciation)
------------------------------------------------------
Forward Exchange
Currency Buy
Contract
British Pounds,
settling 1/28/02 ...... 8,957 $12,710,738 $ 12,999,484 $ 288,746
Forward Exchange
Currency Sale
Contract
British Pounds,
settling 1/28/02 ...... 8,957 12,611,496 12,999,484 (387,988)
----------
$ (99,242)
==========
--------------------------------------------------------------------------------
22 o ACM INCOME FUND
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
2. Option Transactions
For hedging purposes, the Fund purchases and writes (sells) 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 premium and change in market value should the counterparty not perform
under the contract. Put and call options purchased are accounted for in the same
manner as portfolio securities. The cost of securities acquired through the
exercise of call options is increased by 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 gain 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 is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security or currency in determining whether the Fund has realized a gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security 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 option written. 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.
For the year ended December 31, 2001, the Fund had the following written option
transactions:
Number of
Contracts Premiums
============ ============
Options outstanding at December 31, 2000 .......... 0 $ 0
Options written ................................... 202,201,050 2,380,410
Options terminated in closing purchase transactions (202,201,050) (2,380,410)
------------ ------------
Options outstanding at December 31, 2001 .......... 0 $ 0
============ ============
--------------------------------------------------------------------------------
ACM INCOME FUND o 23
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
3. Swap Agreements
The Fund enters into swaps on sovereign debt obligations to protect itself from
interest rate fluctuations on the underlying debt instruments and for investment
purposes. A swap is an agreement that obligates two parties to exchange a series
of cash flows at specified intervals based upon or calculated by reference to
changes in specified prices or rates for a specified amount of an underlying
asset. The payment flows are usually netted against each other, with the
difference being paid by one party to the other. Risks may arise as a result of
the failure of the counterparty to the swap contract to comply with the terms of
the swap contract. The loss incurred by the failure of a counterparty is
generally limited to the net interest payment to be received by the Fund, and/or
the termination value at the end of the contract. Therefore, the Fund considers
the creditworthiness of each counterparty to a swap contract in evaluating
potential credit risk. Additionally, risks may arise from unanticipated
movements in interest rates or in the value of the underlying securities.
The Fund records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid during the interest
period. Net interest received or paid on these contracts is recorded as interest
income (or as an offset to interest income). Fluctuations in the value of swap
contracts are recorded for financial statement purposes as a component of net
change in unrealized appreciation/depreciation of investments and swap
contracts.
At December 31, 2001, the Fund did not have any swap agreements outstanding.
NOTE D: Distributions to Shareholders
The tax character of distributions paid during the fiscal year ended December
31, 2001 and December 31, 2000 were as follows:
2001 2000
============ ===========
Distributions paid from:
Ordinary income .................. $143,680,532 $46,990,639
------------ -----------
Total taxable distributions ......... 143,680,532 46,990,639
------------ -----------
Total distributions paid ............ $143,680,532(a) $46,990,639(a)
============ ===========
--------------------------------------------------------------------------------
24 o ACM INCOME FUND
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
As of December 31, 2001 the components
of accumulated earnings/(deficit) on a
tax basis were as follows:
Accumulated capital and other losses .................. $(342,458,906)(b)
Unrealized appreciation/(depreciation) ................ (46,389,404)(c)
-------------
Total accumulated earnings/(deficit) .................. $(388,848,310)
=============
(a) Total distributions paid differ from the Statement of Changes in Net
Assets because for tax purposes dividends are recognized when actually
paid.
(b) On December 31, 2001, the Fund had a net capital loss carryforward of
$333,182,448 of which $40,404,628 expires in the year 2002, $2,680,733
expires in the year 2003, $79,155 expires in the year 2004, $34,157,206
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,
and $48,113,872 expires in the year 2009. To the extent future capital
gains are offset by capital loss carryforward, 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.
Net capital losses incurred after October 31, and within the taxable year
are deemed to arise on the first business day of the Fund's next taxable
year. For the year ended December 31, 2001, the Fund deferred to January
1, 2002, post October capital losses of $5,410,591 and post October
currency losses of $3,018,725. As of December 31, 2001, the Fund deferred
tax straddle losses of $847,142.
(c) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to: the tax deferral
of losses on wash sales, the realization for tax purposes of unrealized
gains/losses on certain derivative instruments and the difference between
book and tax amortization methods for premium and market discount.
NOTE E
Capital Stock
There are 300,000,000 shares of $0.01 par value common stock authorized, of
which 224,216,861 shares were outstanding at December 31, 2001. During the years
ended December 31, 2001 and December 31, 2000, the Fund issued 410,752 and
47,092 shares, respectively, in connection with the Fund's dividend reinvestment
plan. The shares issued in connection with the acquisition of ACM Government
Securities Fund and ACM Government Spectrum Fund at the close of business on
December 19, 2000 were 105,852,934.
NOTE F
Rights Offering
During the year ended December 31, 2001, the Fund issued 59,208,424 shares in
connection with a rights offering of the Fund's shares. Shareholders of record
on November 19, 2001, were issued one non-transferable right for each share of
common stock owned, entitling shareholders the opportunity to acquire one newly
issued share of common stock for every three rights held at a subscription price
of $7.03 per share. Offering costs of $993,936 attributed to the rights offering
were charged against additional paid-in capital. Dealer management and
soliciting fees of $15,608,821 were netted against the proceeds of the
subscription.
--------------------------------------------------------------------------------
ACM INCOME FUND o 25
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE G
Security Lending
The Fund may make secured loans of portfolio securities to brokers, dealers and
financial institutions, provided that cash, liquid high-grade debt securities or
bank letters of credit equal to at least 102% of the market value of the
securities loaned is deposited and maintained by the borrower with the Fund.
The risks in lending portfolio securities, as with other extensions of credit,
consist of possible loss of rights in the collateral should the borrower fail
financially. In determining whether to lend securities to a particular borrower,
the Adviser will consider all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan, the borrower
will pay the Fund any income earned thereon and the Fund may invest any cash
collateral in portfolio securities, thereby earning additional income, or
receive an agreed upon amount of income from a borrower who has delivered
equivalent collateral. When such securities are borrowed against cash, the Fund
agrees to pay the borrower of such securities a "rebate rate" for the use of the
cash the borrower has pledged as collateral.
For the year ended December 31, 2001, the Fund had no security lending
agreements outstanding.
NOTE H
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.
As of December 31, 2001, the Fund had entered into the following reverse
repurchase agreements:
Broker Amount Interest Rate Maturity
===================== =========== ============= ================
Lehman Brothers, Inc. $89,350,805 0.80% January 18, 2002
--------------------------------------------------------------------------------
26 o ACM INCOME FUND
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
For the year ended December 31, 2001 the average amount of reverse repurchase
agreements outstanding was approximately $74,906,701 and the daily weighted
average annualized interest rate was 3.17%.
NOTE I
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 was
increased to a maximum of $400 million in January 2002. 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 annualized interest rate for the year ended December 31, 2001
was 4.38% and the average borrowing was $300,000,000. At December 31, 2001, the
interest rate in effect was 1.94% and the amount of borrowings outstanding was
$300,000,000.
NOTE J
Concentration of Risk
Investing in securities of foreign governments involves special risks which
include changes in foreign exchange rates and the possibility of future adverse
political and economic developments which could adversely affect the value of
such securities. Moreover, securities of many foreign governments and their
markets may be less liquid and their prices more volatile than those of the
United States Government.
NOTE K
Acquisition of ACM Government Securities Fund and ACM Government Spectrum Fund
Effective as of the close of business on December 19, 2000, the Fund acquired
all of the net assets of ACM Government Securities Fund and ACM Government
Spectrum Fund pursuant to the plan of reorganization and acquisition. The
acquisition was accomplished by a tax-free exchange of 105,852,934 shares of the
Fund for 78,226,348 and 35,235,527 shares of ACM Government Securities Fund and
ACM Government Spectrum Fund, respectively, on December 20, 2000. The aggregate
net assets of the Fund, ACM Government Securities Fund and ACM Government
Spectrum Fund before the acquisition were $494,005,466, $652,545,090 and
$237,788,207, respectively. Immediately after the acquistion the combined net
assets of the Fund amounted to $1,384,338,763.
--------------------------------------------------------------------------------
ACM INCOME FUND o 27
--------------------
FINANCIAL HIGHLIGHTS
--------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
Year Ended December 31,
--------------------------------------------------------------
2001(a) 2000 1999 1998 1997
--------------------------------------------------------------
Net asset value,
beginning of period ......... $ 8.45 $ 7.64 $ 8.80 $10.51 $10.29
Income From Investment
Operations
Net investment income(b) ...... .76 .70 .79 .88 .94
Net realized and unrealized
gain (loss) on investments,
swap contracts, option
contracts and foreign
currency transactions ....... (.11) .91 (1.11) (1.71) .54
--------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations .................. .65 1.61 (.32) (.83) 1.48
--------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income ........... (.77) (.70) (.79) (.88) (.92)
Distributions in excess of
net investment income ....... (.07) (.10) (.05) -0- -0-
Distributions from net
realized gain on
investments ................. -0- -0- -0- -0- (.34)
--------------------------------------------------------------
Total dividends and
distributions ............... (.84) (.80) (.84) (.88) (1.26)
--------------------------------------------------------------
Less: Fund Share
Transactions
Dilutive effect of rights
offering .................... (.32) -0- -0- -0- -0-
Offering costs charged to
paid-in-capital in excess
of par ...................... (.07) -0- -0- -0- -0-
--------------------------------------------------------------
Total capital shares
transactions ................ (.39) -0- -0- -0- -0-
--------------------------------------------------------------
Net asset value, end of
period ...................... $ 7.87 $ 8.45 $ 7.64 $ 8.80 $10.51
==============================================================
Market value, end of period ... $ 7.30 $ 7.50 $ 6.50 $9.125 $11.00
==============================================================
Total Investment Return
Total investment return
based on:(c)
Market value ................ 7.80% 28.97% (20.84)% (9.25)% 20.73%
Net asset value ............. 3.11% 23.58% (3.53)% (8.38)% 15.08%
See footnote summary on page 29.
--------------------------------------------------------------------------------
28 o ACM INCOME FUND
--------------------
FINANCIAL HIGHLIGHTS
--------------------
Year Ended December 31,
-----------------------------------------------------------------
2001(a) 2000 1999 1998 1997
-----------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ............. $1,764,895 $1,390,542 $448,735 $512,296 $605,664
Ratio to average net assets of:
Expenses .................... 2.31% 2.54% 2.37% 2.09% 2.03%
Expenses, excluding
interest expense(d) ...... 1.18% 1.19% 1.19% 1.12% 1.11%
Net investment income ....... 9.33% 9.40% 9.80% 9.04% 9.02%
Portfolio turnover rate ....... 676% 538% 368% 409% 304%
(a) As required, effective January 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide Audits of Investment
Companies, and began amortizing premium on debt securities for financial
reporting purposes only. The effect of this change for the year ended
December 31, 2001, was to decrease net investment income per share by
$.05, decrease net realized and unrealized loss on investment transactions
per share by $.05, and decrease the ratio of net investment income to
average net assets from 9.92% to 9.33%. Per share, ratios and supplemental
data for periods prior to January 1, 2001 have not been restated to
reflect this change in presentation.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of each period reported. Dividends and distributions, if any, are assumed
for purposes of this calculation, to be reinvested at prices obtained
under the Fund's Dividend Reinvestment Plan. Generally, total investment
return based on net asset value will be higher than total investment
return based on market value in periods where there is an increase in the
discount or a decrease in the premium of the market value to the net asset
value from the beginning to the end of such periods. Conversely, total
investment return based on net asset value will be lower than total
investment return based on market value in periods where there is a
decrease in the discount or an increase in the premium of the market value
to the net asset value from the beginning to the end of such periods.
Total investment return for a period of less than one year is not
annualized.
(d) Net of interest expense of 1.13%, 1.35%, 1.18%, .97%, and .92%,
respectively, on borrowings (see Notes G, H and I).
--------------------------------------------------------------------------------
ACM INCOME FUND o 29
---------------------------
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
---------------------------
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of ACM Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities of ACM
Income Fund, Inc., including the portfolio of investments, as of December 31,
2001, and the related statements of operations and cash flows for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2001, by correspondence with
the custodian and others. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of ACM
Income Fund, Inc. at December 31, 2001, the results of its operations and its
cash flows for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
February 13, 2002
--------------------------------------------------------------------------------
30 o ACM INCOME FUND
----------------------
ADDITIONAL INFORMATION
----------------------
ADDITIONAL INFORMATION
(unaudited)
Shareholders whose shares are registered in their own names may elect to be
participants in the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
pursuant to which dividends and capital gain distributions to shareholders will
be paid in or reinvested in additional shares of the Fund. State Street Bank and
Trust Company (the "Agent") will act as agent for participants under the Plan.
Shareholders whose shares are held in the name of a broker or nominee should
contact such broker or nominee to determine whether or how they may participate
in the Plan.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will
issue new shares at the greater of net asset value or 95% of the then
current market price.
(ii) If the shares of Common Stock are trading at a discount from net asset
value at the time of valuation, the Agent will receive the dividend or
distribution in cash and apply it to the purchase of the Fund's shares of
Common Stock in the open market on the New York Stock Exchange or
elsewhere, for the participant's accounts. Such purchases will be made on
or shortly after the payment date for such dividend or distribution and in
no event more than 30 days after such date except where temporary
curtailment or suspension of purchase is necessary to comply with Federal
securities laws. If, before the Agent has completed its purchases, the
market price exceeds the net asset value of a share of Common Stock, the
average purchase price per share paid by the Agent may exceed the net
asset value of the Fund's shares of Common Stock, resulting in the
acquisition of fewer shares than if the dividend or distribution had been
paid in shares issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of the
participant, and each shareholder's proxy will include those shares purchased or
received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average
--------------------------------------------------------------------------------
ACM INCOME FUND o 31
----------------------
ADDITIONAL INFORMATION
----------------------
cost, including brokerage commissions, of any shares purchased in the open
market plus the cost of any shares issued by the Fund.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent to
written notice of the change sent to participants in the Plan at least 90 days
before the record date for such dividend or distribution. The Plan may also be
amended or terminated by the Agent on at least 90 days' written notice to
participants in the Plan. All correspondence concerning the Plan should be
directed to the Agent at State Street Bank and Trust Company, PO Box 8200,
Boston, Massachusetts 02266-8200.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change of
control of the Fund, (iii) no material changes in the principal risk factors
associated with investment in the Fund, and (iv) no change in the person
primarily responsible for the day-to-day management of the Fund's portfolio, who
is Wayne D. Lyski, the President of the Fund.
--------------------------------------------------------------------------------
32 o ACM INCOME FUND
----------------------------
GLOSSARY OF INVESTMENT TERMS
----------------------------
GLOSSARY OF INVESTMENT TERMS
basis point (bp)
One basis point equals 0.01%.
benchmark
A standard by which a fund's performance can be measured. A benchmark is usually
an unmanaged index, such as the Standard & Poor's 500 Stock Index or the Lehman
Brothers Aggregate Bond Index.
index
A compilation of securities of similar types of companies that is used to
measure the investment performance of securities within that specific market. An
index is often used as a benchmark for a mutual fund. An investor cannot invest
directly in an index.
liquidity
The ability of an asset to be quickly converted into cash and without penalty.
mortgage-backed securities (MBS)
Securities or certificates backed by mortgages. Typically issued by institutions
such as the Federal National Mortgage Association (FNMA), Government National
Mortgage Association (GNMA) and the Federal Home Loan Mortgage Corporation
(FHLMC). Investors receive payments out of the interest and principal of the
underlying mortgages.
portfolio
The collection of securities that make up a fund's or an investor's investments.
Treasuries
Negotiable U.S. government debt obligations, backed by the full faith and credit
of the U.S. government. Treasuries are issued either as bills, notes or bonds
depending on the maturity. Treasuries are exempt from state and local taxes.
yield
The rate of return on an asset, usually referring to dividend or interest
payments, expressed as a percentage of current market price.
--------------------------------------------------------------------------------
ACM INCOME FUND o 33
----------------
ALLIANCE CAPITAL
----------------
ALLIANCE CAPITAL
The Investment Professional's Choice
Alliance Capital is a leading global investment management firm with
approximately $455 billion in assets under management. In recognition of our
far-reaching investment capabilities, Alliance Capital has been selected by
employee benefit plans for 41 of the FORTUNE 100 companies and public retirement
funds in 43 states as well as by hundreds of foundations, endowments and foreign
institutions. By sharing this institutional money management experience with
millions of mutual fund investors as well, Alliance stands out as a "manager of
choice" for thousands of investment professionals around the world.
At Alliance Capital, we place a premium on investment research. We carefully
select securities based on our proprietary research, conducted by over 640
investment professionals in 36 cities and 19 countries. Our commitment to this
process means that our mutual fund shareholders have their portfolios managed by
the same experienced analysts and portfolio managers who manage the pension
funds of some of America's largest institutional investors.
All information on Alliance Capital is as of 12/31/01.
--------------------------------------------------------------------------------
34 o ACM INCOME FUND
--------------------------------
ALLIANCE CAPITAL AT YOUR SERVICE
--------------------------------
ALLIANCE CAPITAL AT YOUR SERVICE
At Alliance Capital, shareholder satisfaction is among our top priorities. That
is why we provide our shareholders with a wide variety of products and
time-saving services.
o Automatic Reinvestment
You may choose to reinvest fund dividend and capital-gains distributions
automatically at no charge.
o Automatic Investment Program
Build your investment account by having money automatically transferred
from your bank account on a regular basis.
o Dividend Direction Plans
You may cross-invest dividends from one fund into the same class of shares
in any other fund without incurring a sales charge--a good way to
diversify your assets.
o Auto Exchange
You may choose to automatically exchange money from one Alliance Capital
fund to another on a regular basis. This can be a good way to dollar cost
average*, helping you to invest with discipline.
o Systematic Withdrawals
Regular checks for specified amounts can be sent to you or to your
brokerage or bank account.
o E-Statements and Electronic Delivery
Sign up to view your quarterly mutual fund, retirement or
CollegeBoundfund(SM) account statements online, rather than wait to
receive paper copies in the mail. You may also sign up for electronic
delivery of your legal documents so you can receive your semi-annual and
annual shareholder reports, prospectuses and prospectus supplements
online. It's easy, convenient and saves you time and storage space. Sign
up today at www.alliancecapital.com. Simply go to Individual Investor,
U.S., Account Access.
o A Choice of Purchase Plans
Most funds are available in A, B, and C Class shares. Many funds are also
available in Advisor Class shares.
o Telephone Transaction
Purchases, transfers and redemptions can be made by calling (800)
221-5672. Our knowledgeable representatives are available to assist you
Monday through Friday from 8:30 a.m. to 8:00 p.m. Eastern Standard Time.
o Alliance Answer: 24-Hour Information
For your convenience, our computerized audio response system is available
to you 24-hours a day by calling (800) 251-0539. Using any touch tone
phone, you can hear share prices, get account balances, review details of
your last transaction, obtain dividend information, order
statements/checkbooks, review fund objectives, and Watchlist information,
order additional copies of statements and request additional year-end tax
forms (available from February 1 to May 31).
o The Alliance Advance
A quarterly newsletter discussing investment strategies, economic news and
other mutual fund matters.
o Our Website at www.alliancecapital.com gives you a broad perspective of
Alliance Capital. You can reach Alliance mutual fund and account
information more directly from www.investor.alliancecapital.com. Either
way, you'll have access to extensive Alliance fund data, answers to
frequently asked questions, and financial planning tools and calculators.
* Dollar cost averaging does not assure a profit nor protect against loss in
a declining market. Since this strategy involves continuous investments in
securities, regardless of fluctuating prices, investors should consider
their financial ability to invest during periods of low price levels.
--------------------------------------------------------------------------------
ACM INCOME FUND o 35
------------------
BOARD OF DIRECTORS
------------------
BOARD OF DIRECTORS
John D. Carifa, Chairman
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
William H. Foulk, Jr.(1)
Dr. James M. Hester(1)
Clifford L. Michel(1)
Donald J. Robinson(1)
Officers
Wayne D. Lyski, President
Kathleen A. Corbet, Senior Vice President
Paul J. DeNoon, Vice President
Michael L. Mon, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Vincent S. Noto, Controller
Administrator
Brinson Advisors, Inc.
51 West 52nd Street
New York, NY 10019
Custodian, Dividend Paying Agent, Transfer Agent and Registrar
State Street Bank
and Trust Company
225 Franklin Street
Boston, MA 02110
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
(1) Member of the Audit Committee.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase 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.
--------------------------------------------------------------------------------
36 o ACM INCOME FUND
----------------------
MANAGEMENT OF THE FUND
----------------------
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the
Board of Directors. Certain information concerning the Fund's Directors is set
forth below.
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
AGE OF DIRECTOR OCCUPATION(S) OVERSEEN BY HELD BY
(YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
-----------------------------------------------------------------------------------------------------
INTERESTED DIRECTOR
John D. Carifa,**, 56, President, Chief Operating 114 None
1345 Avenue of the Officer and a Director of
Americas, ACMC, with which he has
New York, NY 10105 been associated with since
(15) prior to 1997.
DISINTERESTED
DIRECTORS
Ruth Block,#+, 71, Formerly an Executive Vice 87 None
P.O. Box 4623, President and Chief Insurance
Stamford, CT 06903 Officer of The Equitable Life
(15) Assurance Society of the United
States; Chairman and Chief
Executive Officer of Evlico.
Formerly a Director of Avon,
BP Amoco Corporation, Ecolab,
Inc., Tandem Financial Group
and Donaldson, Lufkin & Jenrette
Securities Corporation.
David H. Dievler,#+, 72 Independent Consultant. Until 94 None
P.O. Box 167, December 1994, Senior Vice
Spring Lake, NJ 07762 President of ACMC
(15) responsible for mutual fund
administration. Prior to joining
ACMC in 1984, Chief
Financial Officer of Eberstadt
Asset Management since 1968.
Prior to that, Senior Manager
at Price Waterhouse & Co.,
member of the American
Institute of Certified Public
Accountants since 1953.
John H. Dobkin,#+, 59 Consultant. Currently, 90 None
P.O.Box 12, President of the Board of
Annadale, NY 12504 Save Venice, Inc. (preservation
(4) organization). Formerly a
Senior Adviser (June 1999-June
2000) and President (December
1989-May 1999) of Historic
Hudson Valley (historic
preservation). Previously,
Director of the National Academy
of Design. During 1988-92,
Director and Chairman of the
Audit Committee of ACMC.
--------------------------------------------------------------------------------
ACM INCOME FUND o 37
----------------------
MANAGEMENT OF THE FUND
----------------------
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS, PRINCIPAL COMPLEX DIRECTORSHIPS
AGE OF DIRECTOR OCCUPATION(S) OVERSEEN BY HELD BY
(YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
-----------------------------------------------------------------------------------------------------
William H. Foulk, Jr.,#+, 69 Investment Adviser and 108 None
2 Sound View Drive Independent Consultant.
Suite 100 Formerly Senior Manager of
Greenwich, CT 06830 Barrett Associates, Inc., a
(4) registered investment adviser,
with which he had been
associated since prior to 1997.
Former Deputy Comptroller of the
State of New York and, prior
thereto, Chief Investment
Officer of the New York Bank for
Savings.
Dr. James M. Hester,#+, 77 President of The Harry Frank 12 None
The Harry Frank Guggenheim Foundation, with
Guggenheim Foundation which he has been associated
527 Madison Avenue since prior to 1997. Formerly
New York, NY 10022-4301 President of New York
(15) University and the New York
Botanical Garden, Rector of the
United Nations University and
Vice Chairman of the Board of
the Federal Reserve Bank of New
York.
Clifford L. Michel,#+, 62 Senior Counsel of the law firm 90 Placer Dome,
St. Bernard's Road of Cahill Gordon & Reindel Inc. (mining).
Gladstone, NJ 07934 since February 2001 and a partner
(15) of that firm for more than twenty-
five years prior thereto. President
and Chief Executive Officer of
Wenonah Development Company
(Investments).
Donald J. Robinson,#+, 67 Senior Counsel of the law firm 102 None
98 Hell's Peak Road of Orrick, Herrington &
Weston, VT 05161 Sutcliffe LLP since prior to
(7) 1997. Formerly a senior
partner and a member of the
Executive Committee of that
firm. He was also a member
of the Municipal Securities
Rulemaking Board and a
Trustee of the Museum of
the City of New York.
* There is no stated term of office for the Fund's Directors.
** Mr. Carifa is an "interested director", as defined in the 1940 Act, due to
his position as President and Chief Operating Officer of ACMC, the Fund's
investment adviser.
# Member of the Audit Committee.
+ Member of the Nominating Committee.
--------------------------------------------------------------------------------
38 o ACM INCOME FUND
----------------------
MANAGEMENT OF THE FUND
----------------------
Officer Information
Certain information concerning the Fund's officers is set forth below.
NAME, PRINCIPAL
ADDRESS,* PRINCIPAL POSITION(S) OCCUPATION DURING
AND (AGE) HELD WITH FUND PAST 5 YEARS
------------------------------------------------------------------------------------------------------
Wayne D. Lyski, 60 Senior Vice President Executive Vice President of ACMC**, with
which he has been associated since prior to
1997.
Kathleen A. Corbet, 42 Senior Vice President Executive Vice President of ACMC**, with
which she has been associated since prior
to 1997.
Paul J. DeNoon, 39 Vice President Senior Vice President of ACMC**, with which
he has been associated since prior to 1997.
Michael Mon, 32 Vice President Vice President of ACMC**, with which he has
been associated since June 1999. Prior
thereto he was a Portfolio Manager at
Brundage, Stroy and Rose since 1998.
Previously, he was employed as an Assistant
Vice President at Mitchell Hutchin Asset
Management since prior to 1997.
Edmund P. Bergan, Jr., 51 Secretary Senior Vice President and General Counsel
of Alliance Fund Distributors, Inc. (AFD)**
and Alliance Global Investor Services Inc.
("AGIS")**, with which he has been
associated since prior to 1997.
Mark D. Gersten, 51 Treasurer and Chief Senior Vice President of AGIS**, with which
Financial Officer he has been associated since prior to 1997.
Vincent S. Noto, 37 Controller Vice President of AGIS**, with which he has
been associated since prior to 1997.
* The address for each of the Fund's officers is 1345 Avenue of the
Americas, New York, NY 10105.
** ACMC, AFD, ACL, and AGIS are affiliates of the Fund.
The Fund's Statement of Additional Information (SAI) has additional information
about the Fund's Directors and officers and is available without charge upon
request. Contact your financial representative or Alliance Capital at
800-227-4618 for a free prospectus or SAI.
--------------------------------------------------------------------------------
ACM INCOME FUND o 39
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
Domestic Equity Funds
Growth & Income Fund
Growth Fund
Health Care Fund
Mid-Cap Growth Fund*
Premier Growth Fund
Quasar Fund
Technology Fund
Global & International Equity Funds
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Fund
International Premier Growth Fund
The Korean Investment Fund
New Europe Fund
Worldwide Privatization Fund
AllianceBernstein Value Funds
Disciplined Value Fund
Global Value Fund
International Value Fund
Real Estate Investment Fund
Small Cap Value Fund
Utility Income Fund
Value Fund
Select Investor Series
Biotechnology Portfolio
Premier Portfolio
Small Cap Growth Portfolio
Technology Portfolio
Asset Allocation Funds
Balanced Shares
Conservative Investors Fund
Growth Investors Fund
Fixed Income 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
U.S. Government Portfolio
Municipal Income Funds
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
Closed-End Funds
All-Market Advantage Fund
The Austria Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
The Southern Africa Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
Alliance also offers AFD Exchange Reserves, which serves as the money market
fund exchange vehicle for the Alliance mutual funds.
To obtain a prospectus for any Alliance Capital fund, call your investment
professional, or call Alliance at (800) 227-4618.
* The Alliance Fund changed its name to Alliance Mid-Cap Growth Fund on
February 1, 2002.
** Alliance North American Government Income Trust changed its name to
Alliance Americas Government Income Trust on March 1, 2002.
*** Alliance Global Dollar Government Fund changed its name to Alliance
Emerging Market Debt Fund on March 1, 2002.
--------------------------------------------------------------------------------
40 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) 432-5523. 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 State Street
Bank and Trust Company at (800) 219-4218.
--------------------------------------------------------------------------------
ACM INCOME FUND o 41
ACM Income Fund
1345 Avenue of the Americas
New York, NY 10105
Alliance Capital [LOGO](R)
The Investment Professional's Choice
(R) These registered service marks used under license from the owner, Alliance
Capital Management L.P.
INCAR1201