EXHIBIT (a)(1)(i)
ACM MANAGED DOLLAR INCOME FUND, INC.
OFFER TO PURCHASE FOR CASH 1,110,972 OF ITS ISSUED
AND OUTSTANDING SHARES AT NET ASSET VALUE PER SHARE
THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT EASTERN TIME ON
APRIL 27, 2001, UNLESS THE OFFER IS EXTENDED.
To the Stockholders of ACM Managed Dollar Income Fund, Inc.:
ACM Managed Dollar Income Fund, Inc., a non-diversified, closed-end
management investment company incorporated in Maryland (the "Fund"), is
offering to purchase 1,110,972 of its issued and outstanding shares of Common
Stock, par value $0.01 per share (the "Shares"), to fulfill an undertaking
made in connection with the initial public offering of the Shares. See Section
2. The offer is for cash at a price equal to the net asset value ("NAV") per
Share determined as of the close of the regular trading session of the New
York Stock Exchange, the principal market in which the Shares are traded (the
"NYSE"), on the date after the date the offer expires, and is upon the terms
and subject to the conditions set forth in this Offer to Purchase and the
related Letter of Transmittal (which together with any amendments or
supplements thereto collectively constitute the "Offer"). The Offer will
expire at 12:00 Midnight Eastern Time on April 27, 2001, unless extended. The
Shares are traded on the NYSE under the symbol "ADF". The NAV as of the close
of the regular trading session of the NYSE on March 29, 2001 was $7.30 per
Share and the closing sale price per Share was $7.76. During the pendency of
the Offer, current NAV quotations can be obtained from EquiServe Trust
Company, N.A. (the "Depositary"), by calling (800) 426-5523 between the hours
of 9:00 a.m. and 5:00 p.m. Eastern Time, Monday through Friday (except
holidays).
THIS OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE SECTION 3.
IMPORTANT INFORMATION
Stockholders who desire to tender their Shares should either: (1) properly
complete and sign the Letter of Transmittal (or a copy or facsimile thereof),
provide thereon the original of any required signature guarantee(s) and mail
or deliver it together with the Shares (in proper certificated or
uncertificated form), any other documents required by the Letter of
Transmittal, and a check in the amount of $25.00 payable to EquiServe Trust
Company, N.A., Depositary (the "Processing Fee"); or (2) request their broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction on their behalf. Stockholders who desire to tender Shares
registered in the name of such a firm must contact that firm to effect a
tender on their behalf. Tendering Stockholders will not be obligated to pay
brokerage commissions in connection with their tender of Shares, but they may
be charged a fee by such a firm for processing the tender(s). The Fund
reserves the absolute right to reject tenders determined not to be in
appropriate form or not accompanied by the Processing Fee.
If you do not wish to tender your Shares, you need not take any action.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS NOR ALLIANCE CAPITAL MANAGEMENT
L.P. (THE "INVESTMENT ADVISER") MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS
TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. NO PERSON HAS BEEN
AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE FUND, ITS BOARD OF
DIRECTORS OR THE INVESTMENT ADVISER AS TO WHETHER STOCKHOLDERS SHOULD TENDER
OR REFRAIN FROM TENDERING SHARES PURSUANT TO THE OFFER OR TO MAKE ANY
REPRESENTATION OR TO GIVE ANY INFORMATION IN CONNECTION WITH THE OFFER OTHER
THAN AS CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. IF MADE OR GIVEN,
ANY SUCH RECOMMENDATION, REPRESENTATION OR INFORMATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, ITS BOARD OF DIRECTORS OR THE
INVESTMENT ADVISER. STOCKHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL
INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISERS AND
MAKE THEIR OWN DECISIONS WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR
SHARES.
EQUISERVE TRUST COMPANY, N.A., DEPOSITARY
TELEPHONE NUMBER: (800) 426-5523
BY FIRST CLASS MAIL: BY REGISTERED, CERTIFIED BY HAND:
OR
EquiServe Trust Company, EXPRESS MAIL OR OVERNIGHT Securities Transfer &
N.A. COURIER: Reporting Services, Inc.
Attn: Corporate Actions c/o EquiServe Trust
P.O. Box 43025 EquiServe Trust Company, Company, N.A.
Providence, RI 02940-3025 N.A. 100 William Street,
Attn: Corporate Actions Galleria
40 Campanelli Drive New York, NY 10038
Braintree, MA 02184
CORPORATE INVESTOR COMMUNICATIONS, INC., DISTRIBUTION AGENT
TELEPHONE NUMBER: (800) 346-7885
(Attention: Gloria Iatridis)
Distribution Center
111 Commerce Road
Carlstadt, New Jersey 07072-2586
SUMMARY TERM SHEET
(Section references are to this Offer to Purchase)
This Summary Term Sheet highlights certain information concerning this tender
offer. To understand the offer fully and for a more complete discussion of the
terms and conditions of the offer, you should read carefully the entire Offer
to Purchase and the related Letter of Transmittal.
What is the tender offer?
. ACM Managed Dollar Income Fund, Inc. (the "Fund") is offering to
purchase 1,110,972 of its shares of Common Stock for cash at a price per
share equal to the per share net asset value as of the close of the
regular trading session of the NYSE on April 30, 2001 (or, if the offer
is extended, on the date after the date to which the offer is extended)
upon specified terms and subject to conditions as set forth in the
tender offer documents.
When will the tender offer expire, and may the offer be extended?
. The tender offer will expire at 12:00 Midnight Eastern Time on April 27,
2001, unless extended. The Fund may extend the period of time the offer
will be open by issuing a press release or making some other public
announcement by no later than the next business day after the offer
otherwise would have expired. See Section 15.
What is the net asset value per Fund share and the closing sale price on the
NYSE per Fund share as of a recent date?
. As of March 29, 2001, the net asset value per share was $7.30 and the
closing sale price per share was $7.76. See Section 8 of the Offer to
Purchase for details. During the pendency of the tender offer, current
net asset value quotations can be obtained from EquiServe Trust Company,
N.A. by calling (800) 426-5523 between 9:00 a.m. and 5:00 p.m. Eastern
Time, Monday through Friday (except holidays). You can find the current
market price per share, as quoted on the NYSE, under the symbol "ADF".
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Will the net asset value be higher or lower on the date that the price to be
paid for tendered shares is to be determined?
. No one can accurately predict the net asset value at a future date.
What happens if I tender my shares and the net asset value on the date of
determination of the tender price is lower than the then current market price
per share on the NYSE?
. You would receive less money for your shares than if you had sold them on
the NYSE.
How do I tender my shares?
. If your shares are registered in your name, you should obtain the tender
offer materials, including the Offer to Purchase and the related Letter
of Transmittal, read them, and if you should decide to tender, complete
a Letter of Transmittal and submit any other documents required by the
Letter of Transmittal. These materials must be received by EquiServe
Trust Company, N.A., the Depositary, in proper form before 12:00
Midnight Eastern Time on April 27, 2001 (unless the tender offer is
extended by the Fund in which case the new deadline will be as stated in
the public announcement of the extension). If your shares are held by a
broker, dealer, commercial bank, trust company or other nominee (e.g.,
in "street name"), you should contact that firm to obtain the package of
information necessary to make your decision, and you can only tender
your shares by directing that firm to complete, compile and deliver the
necessary documents for submission to the Depositary by April 27, 2001
(or if the offer is extended, the expiration date as extended). See
Section 4.
Is there any cost to me to tender?
. There is a $25.00 processing fee per tendering stockholder. A tender
will not be a proper one unless a check payable to EquiServe Trust
Company, N.A. for this fee accompanies the tender documents submitted to
EquiServe Trust Company, N.A. The processing fee will be refunded only
if no shares tendered are purchased pursuant to the offer. Your broker,
dealer, commercial bank, trust company or other nominee may charge you
additional fees according to its individual policies. See the Letter of
Transmittal.
May I withdraw my shares after I have tendered them and, if so, by when?
. Yes, you may withdraw your shares at any time prior to 5:00 P.M. Eastern
Time on May 1, 2001 (or if the offer is extended, at any time prior to
5:00 P.M. Eastern Time on the second day on which the NYSE is open for
trading after the new expiration date). Withdrawn shares may be re-
tendered by following the tender procedures before the offer expires
(including any extension period). In addition, if shares tendered have
not by then been accepted for payment, you may withdraw your tendered
shares at any time after May 25, 2001. See Section 5.
How do I withdraw tendered shares?
. A notice of withdrawal of tendered shares must be timely received by
EquiServe Trust Company, N.A., which specifies the name of the
stockholder who tendered the shares, the number of shares being
withdrawn (which must be all of the shares tendered) and, as regards
share certificates which represent tendered shares that have been
delivered or otherwise identified to EquiServe Trust Company, N.A., the
name of the registered owner of such shares if different than the person
who tendered the shares. See Section 5.
May I place any conditions on my tender of shares?
. No.
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Is there a limit on the number of shares I may tender?
. No. Also, your tender will be proper only if you tender all Fund shares
you own or which you are considered to own under specified federal tax
rules. See Sections 1 and 14.
What if more than 1,110,972 shares are tendered (and not timely withdrawn)?
. The Fund will purchase duly tendered shares from tendering stockholders
pursuant to the terms and conditions of the tender offer on a pro rata
basis (disregarding fractions) in accordance with the number of shares
tendered by each stockholder (and not timely withdrawn), unless the Fund
determines not to purchase any shares. The Fund's present intention, if
the tender offer is oversubscribed, is not to purchase more than
1,110,972 shares. See Section 1.
If I decide not to tender, how will the tender offer affect the Fund shares I
hold?
. Your percentage ownership interest in the Fund will increase after
completion of the tender offer. See Section 11.
Does the Fund have the financial resources to make payment?
. Yes.
If shares I tender are accepted by the Fund, when will payment be made?
. It is contemplated that payment for tendered shares, if accepted, will
be made as soon as reasonably practicable after the expiration of the
tender offer. See Section 6.
Is my sale of shares in the tender offer a taxable transaction?
. For most stockholders, yes. All U.S. stockholders other than those who
are tax-exempt who sell shares in the tender offer will recognize gain
or loss for U.S. federal income tax purposes equal to the difference
between the cash they receive for the shares sold and their adjusted
basis in the shares. The sale date for tax purposes will be the date the
Fund accepts shares for purchase. See Section 14 for details, including
the nature of the income or loss and the differing rules for U.S. and
non-U.S. stockholders. Please consult your tax advisor as well.
Is the Fund required to complete the tender offer and purchase all shares
tendered up to the number of shares tendered for?
. Under most circumstances, yes. There are certain circumstances, however,
in which the Fund will not be required to purchase any shares tendered
as described in Section 3.
Is there any reason shares tendered would not be accepted?
. In addition to those circumstances described in Section 3 in which the
Fund is not required to accept tendered shares, the Fund has reserved
the right to reject any and all tenders determined by it not to be in
appropriate form. Tenders will be rejected if all shares actually and
constructively (as determined under the Internal Revenue Code) owned by
the tendering stockholder are not tendered or if the tender does not
include the processing fee, original signature(s) or the original of any
required signature guarantee(s).
How will tendered shares be accepted for payment?
. Properly tendered shares, up to the number tendered for, will be
accepted for payment by a determination of the Fund's Board of Directors
followed by notice of acceptance to EquiServe Trust
4
Company, N.A. which is thereafter to make payment as directed by the
Fund with funds to be deposited with it by the Fund. See Section 6.
What action need I take if I decide not to tender my shares?
. None.
Does management encourage stockholders to participate in the tender offer, and
will they participate in the tender offer?
. No. Neither the Fund, its Board of Directors nor the Fund's investment
adviser is making any recommendation to tender or not to tender shares
in the tender offer. No director or officer of the Fund intends to
tender shares. See Section 10.
Will this be my last opportunity to tender shares to the Fund?
. Under the terms of the Fund's original prospectus undertaking, the Fund
is also to conduct a tender offer during each year after 2001, subject
to a policy that the Fund would not proceed with a tender offer in a
particular year if Fund shares have traded on the NYSE during a
specified 12 week period (the "Measurement Period") at an average price
at or above their net asset value ("NAV") or at an average discount from
NAV of less than 3%, determined on the basis of the average market price
per share and discounts as of the last trading day in each week. The
Measurement Period is required to commence on a date designated by the
Fund's Board of Directors which shall be no later than the end of the
first calendar quarter of that year. Pursuant to the undertaking, the
Fund may, but is not required to, conduct other tender offers. See
Section 2.
How do I obtain information?
. Questions and requests for assistance should be directed to EquiServe
Trust Company, N.A., the Depository for the tender offer, toll free at
(800) 426-5523. Requests for additional copies of the Offer to Purchase,
the Letter of Transmittal and all other tender offer documents should be
directed to Corporate Investor Communications, Inc., the Distribution
Agent for the tender offer, toll free at (800) 346-7885 (Attention:
Gloria Iatridis). If you do not own shares directly, you should obtain
this information and the documents from your broker, dealer, commercial
bank, trust company or other nominee, as appropriate.
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TABLE OF CONTENTS
Section Page
------- ----
Summary Term Sheet...................................................... 2
1. Price; Number of Shares............................................ 7
2. Purpose of the Offer; Plans or Proposals of the Fund............... 7
3. Certain Conditions of the Offer.................................... 8
4. Procedures for Tendering Shares.................................... 9
a. Proper Tender of Shares......................................... 9
b. Signature Guarantees and Method of Delivery..................... 9
c. Dividend Reinvestment Plan...................................... 10
d. Book-Entry Delivery............................................. 10
e. Guaranteed Delivery............................................. 11
f. Determinations of Validity...................................... 11
g. United States Federal Income Tax Withholding.................... 12
5. Withdrawal Rights.................................................. 12
6. Payment for Shares................................................. 13
7. Source and Amount of Funds......................................... 13
8. Price Range of Shares; Dividends/Distributions..................... 14
9. Selected Financial Information..................................... 14
Interest of Directors, Executive Officers and Certain Related
10. Persons............................................................ 16
11. Certain Effects of the Offer....................................... 17
12. Certain Information about the Fund................................. 17
13. Additional Information............................................. 17
14. Certain United States Federal Income Tax Consequences.............. 17
15. Amendments; Extension of Tender Period; Termination................ 19
16. Miscellaneous...................................................... 19
Exhibit A: Audited Financial Statements of the Fund for the Fiscal Years ended
September 30, 2000 and September 30, 1999.
6
1. Price; Number of Shares. Upon the terms and subject to the conditions of
the Offer, the Fund will accept for payment and purchase for cash up to
1,110,972 of its issued and outstanding Shares that are properly tendered
prior to 12:00 Midnight Eastern Time on April 27, 2001 (and not withdrawn in
accordance with Section 5). The Fund reserves the right to amend, extend or
terminate the Offer. See Sections 3 and 15. The Fund will not be obligated to
purchase Shares pursuant to the Offer under certain circumstances. See Section
3. The later of April 27, 2001 or the latest date to which the Offer is
extended is hereinafter called the "Expiration Date." The purchase price of
the Shares will be their NAV per Share determined as of the close of the
regular trading session of the NYSE on the date after the Expiration Date. The
Fund will not pay interest on the purchase price under any circumstances. The
NAV as of the close of the regular trading session of the NYSE on March 29,
2001 was $7.30 per Share. During the pendency of the Offer, current NAV
quotations can be obtained from the Depositary by calling (800) 426-5523
between the hours of 9:00 a.m. and 5:00 p.m. Eastern Time, Monday through
Friday (except holidays).
The Offer is being made to all Stockholders and is not conditioned upon
Stockholders tendering in the aggregate any minimum number of Shares. Pursuant
to the Fund's Prospectus dated October 22, 1993 (the "Prospectus"), however, a
Stockholder wishing to accept the Offer is required to tender all (but not
less than all) Shares owned by the Stockholder and all Shares attributed to
the Stockholder for federal income tax purposes under Section 318 of the
Internal Revenue Code of 1986, as amended (the "Code"), as of the date of
purchase of Shares by the Fund pursuant to the Offer. See Section 14
concerning the tax consequences of tendering Shares.
If more than 1,110,972 Shares are duly tendered pursuant to the Offer (and
not withdrawn as provided in Section 5), unless the Fund determines not to
purchase any Shares, the Fund will purchase Shares from tendering
Stockholders, in accordance with the terms and conditions specified in the
Offer, on a pro rata basis (disregarding fractions), in accordance with the
number of Shares duly tendered by or on behalf of each Stockholder (and not so
withdrawn). If Shares duly tendered by or on behalf of a Stockholder include
Shares held pursuant to the Fund's Dividend Reinvestment Plan, the proration
will be applied first with respect to other Shares tendered and only
thereafter, if and as necessary, with respect to Shares held pursuant to that
Plan. The Fund does not contemplate extending the Offer and increasing the
number of Shares covered thereby by reason of more than 1,110,972 Shares
having been tendered.
On March 14, 2001, there were 22,219,436 Shares issued and outstanding, and
there were 1,200 holders of record of Shares. Certain of these holders of
record were brokers, dealers, commercial banks, trust companies and other
institutions that held Shares in nominee name on behalf of multiple beneficial
owners.
2. Purpose of the Offer; Plans or Proposals of the Fund. The purpose of the
Offer is to fulfill an undertaking made in connection with the initial public
offering of the Shares, as set forth in the Fund's Prospectus. In the
Prospectus, the Fund indicated that, in recognition of the possibility that
the Shares might trade at a discount to NAV, the Fund's Board of Directors
(the "Board of Directors" or the "Board") had determined that it would be in
the interest of Stockholders to take action to attempt to reduce or eliminate
a market value discount from NAV.
In this regard, in the Prospectus, the Fund undertook to conduct a tender
offer for Shares during the second quarter of 1995 and each year thereafter
subject to a policy that the Fund would not proceed with the tender offer in a
particular year if Shares have traded on the principal securities exchange
where Shares are listed (at present the NYSE) at an average price at or above
NAV or at an average discount from NAV of less than 3% determined on the basis
of the average market prices per Share and discounts as of the last trading
day in each week (a "weekly valuation day") during a period of 12 calendar
weeks of the relevant year (the "Measurement Period"). The Measurement Period
is required to commence on a date designated by the Fund's Board of Directors
which shall be no later than the end of the first calendar quarter of that
year. On October 17, 2000, the Board fixed as the Measurement Period for
purposes of determining whether a mandatory tender offer was required to be
conducted during the second quarter of 2001, the 12 weeks ended February 2,
2001. The average trading price of the Shares on the weekly valuation days
during the Measurement Period was approximately
7
$7.109 per Share, and the average NAV per Share on the same days was
approximately $7.413, reflecting an average discount of 4.24%. Accordingly,
the Fund is conducting the Offer.
In addition to tender offers pursuant to the above-described undertaking,
the Board considers from time to time more frequent tender offers for Shares
and may consider other steps to reduce or eliminate the Fund's market value
discount from NAV such as open market repurchases of Shares. There can be no
assurance that the Board will authorize any such action. There can also be no
assurance that the Offer, other Share tender offers, Share repurchases or
other steps will result in the Shares trading at a price that approximates or
is equal to their NAV. The market price of the Shares will be determined by,
among other things, the relative demand for and supply of Shares in the
market, the Fund's investment performance, the Fund's dividends and yield, and
investor perception of the Fund's overall attractiveness as an investment as
compared with other investment alternatives.
Except as set forth above, as referred to in Section 7 or the last paragraph
of Section 10, or in connection with the operation of the Fund's Dividend
Reinvestment Plan, the Fund does not have any present plans or proposals and
is not engaged in any negotiations that relate to or would result in (a) any
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Fund or any of its subsidiaries; (b) other than in connection
with transactions in the ordinary course of the Fund's operations and for
purposes of funding the Offer, any purchase, sale or transfer of a material
amount of assets of the Fund or any of its subsidiaries; (c) any material
change in the Fund's present dividend rate or policy, or indebtedness or
capitalization of the Fund; (d) any change in the composition of the Board or
management of the Fund, including, but not limited to, any plans or proposals
to change the number or the term of members of the Board, to fill any existing
vacancies on the Board or to change any material term of the employment
contract of any executive officer; (e) any other material change in the Fund's
corporate structure or business, including any plans or proposals to make any
changes in the Fund's investment policy for which a vote would be required by
Section 13 of the Investment Company Act of 1940, as amended (the "1940 Act");
(f) any class of equity securities of the Fund to be delisted from a national
securities exchange or to cease to be authorized to be quoted in an automated
quotations system operated by a national securities association; (g) any class
of equity securities of the Fund becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Exchange Act; (h) the
suspension of the Fund's obligation to file reports pursuant to Section 15(d)
of the Exchange Act; (i) the acquisition by any person of additional
securities of the Fund, or the disposition of securities of the Fund; or (j)
any changes in the Fund's charter, bylaws or other governing instruments or
other actions that could impede the acquisition of control of the Fund.
3. Certain Conditions of the Offer. Notwithstanding any other provision of
the Offer or the Prospectus, the announced policy of the Board, which may be
changed by the Board, is that the Fund will not purchase shares pursuant to
the Offer if (a) such transaction, if consummated, would (i) result in the
delisting of the Shares from the NYSE (the NYSE having advised the Fund that
it would consider delisting if the aggregate market value of the outstanding
publicly held Shares is less than $5,000,000, the number of publicly held
Shares falls below 600,000 or the number of holders of 100 Shares or more
falls below 1,200) or (ii) impair the Fund's status as a regulated investment
company under the Code (which would make the Fund a taxable entity, causing
the Fund's income to be taxed at the corporate level in addition to the
taxation of Stockholders who receive dividends from the Fund); (b) the Fund
would not be able to liquidate portfolio securities in an orderly manner and
consistent with the Fund's investment objective and policies in order to
purchase Shares tendered pursuant to the Offer; (c) there is any (i) material
legal action or proceeding instituted or threatened which challenges, in the
Board's judgment, the Offer or otherwise materially adversely affects the
Fund, (ii) suspension of or limitation on prices for trading securities
generally on the NYSE or any foreign exchange on which portfolio securities of
the Fund are traded, (iii) declaration of a banking moratorium by Federal,
state or foreign authorities or any suspension of payment by banks in the
United States, New York State or in a foreign country which is material to the
Fund, (iv) limitation which affects the Fund or the issuers of its portfolio
securities imposed by Federal, state or foreign authorities on the extension
of credit by lending institutions or on the exchange of foreign currencies,
(v) commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States or any foreign
country that is material to the Fund, or (vi) other event or condition
8
which, in the Board's judgment, would have a material adverse effect on the
Fund or its Stockholders if Shares tendered pursuant to the Offer were
purchased; or (d) the Board determines that effecting the transaction would
constitute a breach of their fiduciary duty owed the Fund or its stockholders.
The Board may modify these conditions in light of experience.
The foregoing conditions are for the Fund's sole benefit and may be asserted
by the Fund regardless of the circumstances giving rise to any such condition
(including any action or inaction of the Fund), and any such condition may be
waived by the Fund, in whole or in part, at any time and from time to time in
its reasonable judgment. The Fund's failure at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right; the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts or circumstances; and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time. Any determination by the Fund concerning the events
described in this Section 3 shall be final and binding.
The Fund reserves the right, at any time during the pendency of the Offer,
to amend, extend or terminate the Offer in any respect. See Section 15.
4. Procedures for Tendering Shares.
a. Proper Tender of Shares. For Shares to be properly tendered pursuant to
the Offer, a properly completed and duly executed Letter of Transmittal (or a
copy or facsimile thereof) bearing original signature(s) and the original of
any required signature guarantee(s), all Shares actually, or as determined
under Section 318 of the Code constructively, owned by the tendering
Stockholder (see Sections 1 and 14) (in proper certificated or uncertificated
form), any other documents required by the Letter of Transmittal and the
Processing Fee must be received by the Depositary at the appropriate address
set forth on page 2 of this Offer before 12:00 Midnight Eastern Time on the
Expiration Date. Letters of Transmittal and certificates representing tendered
Shares should not be sent or delivered to the Fund. Stockholders who desire to
tender Shares registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact that firm to effect a tender on
their behalf.
Section 14(e) of the Exchange Act and Rule 14e-4 promulgated thereunder make
it unlawful for any person, acting alone or in concert with others, directly
or indirectly, to tender Shares in a partial tender offer for such person's
own account unless at the time of tender, and at the time the Shares are
accepted for payment, the person tendering has a net long position equal to or
greater than the amount tendered in (a) Shares and will deliver or cause to be
delivered such Shares for the purpose of tender to the Fund within the period
specified in the Offer, or (b) an equivalent security and, upon the acceptance
of his or her tender, will acquire Shares by conversion, exchange, or exercise
of such equivalent security to the extent required by the terms of the Offer,
and will deliver or cause to be delivered the Shares so acquired for the
purpose of tender to the Fund prior to or on the Expiration Date. Section
14(e) and Rule 14e-4 provide a similar restriction applicable to the tender or
guarantee of a tender on behalf of another person.
The acceptance of Shares by the Fund for payment will constitute a binding
agreement between the tendering Stockholder and the Fund upon the terms and
subject to the conditions of the Offer, including the tendering Stockholder's
representation that the Stockholder has a net long position in the Shares
being tendered within the meaning of Rule 14e-4 and that the tender of such
Shares complies with Rule 14e-4.
b. Signature Guarantees and Method of Delivery. No signature guarantee is
required if (a) the Letter of Transmittal is signed by the registered
holder(s) (including, for purposes of this document, any participant in The
Depository Trust Company ("DTC") book-entry transfer facility whose name
appears on DTC's security position listing as the owner of Shares) of the
Shares tendered thereby, unless such holder(s) has completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" in the Letter of Transmittal or (b) the Shares tendered are
tendered for the account of a firm (an "Eligible Institution") which is a
broker, dealer, commercial bank, credit union, savings association or other
entity and which is a member in good standing of a stock transfer
association's approved medallion program (such as STAMP, SEMP or MSP).
9
In all other cases, all signatures on the Letter of Transmittal must be
guaranteed by an Eligible Institution. See Instruction 5 of the Letter of
Transmittal.
If the Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered thereby, the signature(s) must correspond with the name(s) as
written on the face of the certificate(s) for the Shares tendered without
alteration, enlargement or any change whatsoever.
If any of the Shares tendered thereby are owned of record by two or more
joint owners, all such owners must sign the Letter of Transmittal.
If any of the tendered Shares are registered in different names (including
Shares constructively owned by the tendering Stockholder as determined under
Section 318 of the Code which must also be tendered--see Sections 1 and 14),
it is necessary to complete, sign and submit as many separate Letters of
Transmittal as there are different registrations.
If the Letter of Transmittal or any certificates for Shares tendered or
stock powers relating to Shares tendered are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and proper evidence satisfactory to the Fund of
their authority so to act must be submitted.
If the Letter of Transmittal is signed by the registered holder(s) of the
Shares transmitted therewith, no endorsements of certificates or separate
stock powers with respect to such Shares are required unless payment is to be
made to, or certificates for Shares not purchased are to be issued in the name
of, a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder(s) of the certificate(s) listed thereon, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s) for the Shares involved. Signatures on such certificates or
stock powers must be guaranteed by an Eligible Institution. See Section 6.
c. Dividend Reinvestment Plan. State Street Bank and Trust Company, the
Fund's Transfer Agent, holds Shares in uncertificated form for certain
Stockholders pursuant to the Fund's Dividend Reinvestment Plan. In addition to
tendering all of their other Shares, Stockholders wishing to accept the Offer
must tender all such uncertificated Shares. See Section 1 concerning the
manner in which any necessary proration will be made.
d. Book-Entry Delivery. The Depositary has established an account with
respect to the Shares at DTC for purposes of the Offer. Any financial
institution that is a participant in the DTC system may make book-entry
delivery of tendered Shares by causing DTC to transfer such Shares into the
Depositary's account at DTC in accordance with DTC's procedures for such
transfers. However, although delivery of Shares may be effected through book-
entry transfer into the Depositary's account at DTC, a Letter of Transmittal
(or a copy or facsimile thereof) properly completed and bearing original
signature(s) and the original of any required signature guarantee(s), or an
Agent's Message (as defined below) in connection with a book-entry transfer,
any other documents required by the Letter of Transmittal and the Processing
Fee, must in any case be received by the Depositary prior to 12:00 Midnight
Eastern Time on the Expiration Date at one of its addresses set forth on page
2 of this Offer, or the tendering Stockholder must comply with the guaranteed
delivery procedures described below.
The term "Agent's Message" means a message from DTC transmitted to, and
received by, the Depositary forming a part of a timely confirmation of a book-
entry transfer of Shares (a "Book-Entry Confirmation") which states that (a)
DTC has received an express acknowledgment from the DTC participant tendering
the Shares that are the subject of the Book-Entry Confirmation, (b) the DTC
participant has received and agrees to be bound by the terms of the Letter of
Transmittal, and (c) the Fund may enforce such agreement against the DTC
participant.
10
Delivery of documents to DTC in accordance with DTC's procedures does not
constitute delivery to the Depositary.
e. Guaranteed Delivery. Notwithstanding the foregoing, if a Stockholder
desires to tender Shares pursuant to the Offer and the certificates for the
Shares to be tendered are not immediately available, or time will not permit
the Letter of Transmittal and all documents required by the Letter of
Transmittal to reach the Depositary prior to 12:00 Midnight Eastern Time on
the Expiration Date, or a Stockholder cannot complete the procedures for
delivery by book-entry transfer on a timely basis, then such Stockholder's
Shares may nevertheless be tendered, provided that all of the following
conditions are satisfied:
(i) the tender is made by or through an Eligible Institution; and
(ii) a properly completed and duly executed Notice of Guaranteed Delivery
in the form provided by the Fund is received by the Depositary prior to
12:00 Midnight Eastern Time on the Expiration Date; and
(iii) the certificates for all such tendered Shares, in proper form for
transfer, or a Book-Entry Confirmation with respect to such Shares, as the
case may be, together with a Letter of Transmittal (or a copy or facsimile
thereof) properly completed and bearing original signature(s) and the
original of any required signature guarantee(s) (or, in the case of a book-
entry transfer, an Agent's Message), any documents required by the Letter
of Transmittal and the Processing Fee, are received by the Depositary prior
to 5:00 P.M. Eastern Time on the second NYSE trading day after the date of
execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Institution and a representation that the Stockholder owns the
Shares tendered within the meaning of, and that the tender of the Shares
effected thereby complies with, Rule 14e-4 under the Exchange Act, each in the
form set forth in the Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF ANY DOCUMENTS, INCLUDING SHARE CERTIFICATES, THE
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND
SOLE RISK OF THE TENDERING STOCKHOLDER. IF DOCUMENTS ARE SENT BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. Stockholders have the responsibility to cause their Shares
tendered (in proper certificated or uncertificated form), the Letter of
Transmittal (or a copy or facsimile thereof) properly completed and bearing
original signature(s) and the original of any required signature guarantee(s),
any other documents required by the Letter of Transmittal and the Processing
Fee, to be timely delivered. Timely delivery is a condition precedent to
acceptance of Shares for purchase pursuant to the Offer and to payment of the
purchase amount.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share certificates evidencing such Shares or a
Book-Entry Confirmation of the delivery of such Shares (if available), a
Letter of Transmittal (or a copy or facsimile thereof) properly completed and
bearing original signature(s) and the original of any required signature
guarantee(s) or, in the case of a book-entry transfer, an Agent's Message, any
other documents required by the Letter of Transmittal and the Processing Fee.
f. Determinations of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of tenders will be
determined by the Fund, in its sole discretion, which determination shall be
final and binding. The Fund reserves the absolute right to reject any or all
tenders determined not to be in appropriate form or not accompanied by the
Processing Fee or to refuse to accept for payment, purchase, or pay for, any
Shares if, in the opinion of the Fund's counsel, accepting, purchasing or
paying for such Shares would be unlawful. The Fund also reserves the absolute
right to waive any of the conditions of the Offer or any defect in any tender,
whether generally or with respect to any particular Share(s) or
Stockholder(s). The Fund's interpretations of the terms and conditions of the
Offer shall be final and binding.
11
NEITHER THE FUND, ITS BOARD OF DIRECTORS, THE INVESTMENT ADVISER, THE
DEPOSITARY NOR ANY OTHER PERSON IS OR WILL BE OBLIGATED TO GIVE ANY NOTICE OF
ANY DEFECT OR IRREGULARITY IN ANY TENDER, AND NONE OF THEM WILL INCUR ANY
LIABILITY FOR FAILURE TO GIVE ANY SUCH NOTICE.
g. United States Federal Income Tax Withholding. To prevent the imposition
of U.S. federal backup withholding tax equal to 31% of the gross payments made
pursuant to the Offer, prior to such payments each Stockholder accepting the
Offer who has not previously submitted to the Fund a correct, completed and
signed Form W-9 (for U.S. Stockholders) or Form W-8 BEN (or, if appropriate,
Form W-8IMY) (for non-U.S. Stockholders), or otherwise established an
exemption from such withholding, must submit the appropriate form to the
Depositary. See Section 14.
Under certain circumstances (see Section 14), the Depositary will withhold a
tax equal to 30% of the gross payments payable to a non-U.S. Stockholder
unless the Depositary determines that a reduced rate of withholding or an
exemption from withholding is applicable. (Exemption from backup withholding
tax does not exempt a non-U.S. Stockholder from the 30% withholding tax.) For
this purpose, a Non-U.S. Stockholder, is, in general, a Stockholder that is
not (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is subject to United States federal income taxation regardless of the
source of such income, or (iv) a trust if (A) a court within the United States
is able to exercise primary supervision over the administration of the trust
and (B) one or more U.S. persons have the authority to control all substantial
decisions of the trust (a "Non-U.S. Stockholder"). The Depositary will
determine a Stockholder's status as a Non-U.S. Stockholder and the
Stockholder's eligibility for a reduced rate of, or an exemption from,
withholding by reference to any outstanding certificates or statements
concerning such eligibility, unless facts and circumstances indicate that such
reliance is not warranted. A Non-U.S. Stockholder that has not previously
submitted the appropriate certificates or statements with respect to a reduced
rate of, or exemption from, withholding for which such Stockholder may be
eligible should consider doing so in order to avoid over-withholding. See
Section 14.
5. Withdrawal Rights. At any time prior to 5:00 P.M. Eastern Time on the
second day on which the NYSE is open for trading after the Expiration Date,
and, if the Shares have not by then been accepted for payment by the Fund, at
any time after May 25, 2001, any Stockholder may withdraw all, but not less
than all, of the Shares that the Stockholder has tendered.
To be effective, a written notice of withdrawal of Shares tendered must be
timely received by the Depositary at the appropriate address set forth on page
2 of this Offer. Stockholders may also send a facsimile transmission notice of
withdrawal, which must be timely received by the Depositary at (781) 575-4826,
and the original notice of withdrawal must be delivered to the Depositary by
overnight courier or by hand the next day. Any notice of withdrawal must
specify the name(s) of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn (which may not be less than all of the
Shares tendered by the Stockholder-See Sections 1 and 14) and, if one or more
certificates representing such Shares have been delivered or otherwise
identified to the Depositary, the name(s) of the registered owner(s) of such
Shares as set forth in such certificate(s) if different from the name(s) of
the person tendering the Shares. If one or more certificates have been
delivered to the Depositary, then, prior to the release of such
certificate(s), the certificate number(s) shown on the particular
certificate(s) evidencing such Shares must also be submitted and the signature
on the notice of withdrawal must be guaranteed by an Eligible Institution.
All questions as to the validity, form and eligibility (including time of
receipt) of notices of withdrawal will be determined by the Fund in its sole
discretion, which determination shall be final and binding. Shares properly
withdrawn will not thereafter be deemed to be tendered for purposes of the
Offer. Withdrawn Shares, however, may be re-tendered by following the
procedures described in Section 4 prior to 12:00 Midnight Eastern Time on the
Expiration Date. Except as otherwise provided in this Section 5, tenders of
Shares made pursuant to the Offer will be irrevocable.
12
NEITHER THE FUND, ITS BOARD OF DIRECTORS, THE INVESTMENT ADVISER, THE
DEPOSITARY NOR ANY OTHER PERSON IS OR WILL BE OBLIGATED TO GIVE ANY NOTICE OF
ANY DEFECT OR IRREGULARITY IN ANY NOTICE OF WITHDRAWAL, NOR SHALL ANY OF THEM
INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY SUCH NOTICE.
6. Payment for Shares. For purposes of the Offer, the Fund will be deemed to
have accepted for payment and purchased Shares that are tendered (and not
withdrawn in accordance with Section 5 pursuant to the Offer) when, as and if
it gives oral or written notice to the Depositary of its acceptance of such
Shares for payment pursuant to the Offer. Under the Exchange Act, the Fund is
obligated to pay for or return tendered Shares promptly after the termination,
expiration or withdrawal of the Offer. Upon the terms and subject to the
conditions of the Offer, the Fund will pay for Shares properly tendered as
soon as practicable after the Expiration Date. The Fund will make payment for
Shares purchased pursuant to the Offer by depositing the aggregate purchase
price therefor with the Depositary, which will make payment to Stockholders
promptly as directed by the Fund. The Fund will not pay interest on the
purchase price under any circumstances.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of: (a) a Letter of
Transmittal (or a copy thereof) properly completed and bearing original
signature(s) and any required signature guarantee(s), (b) such Shares (in
proper certificated or uncertificated form), (c) any other documents required
by the Letter of Transmittal and (d) the Processing Fee. Stockholders may be
charged a fee by a broker, dealer or other institution for processing the
tender requested. Certificates representing Shares tendered but not purchased
will be returned promptly following the termination, expiration or withdrawal
of the Offer, without further expense to the tendering Stockholder. The Fund
will pay any transfer taxes payable on the transfer to it of Shares purchased
pursuant to the Offer. If, however, tendered Shares are registered in the name
of any person other than the person signing the Letter of Transmittal, the
amount of any such transfer taxes (whether imposed on the registered owner or
such other person) payable on account of the transfer to such person of such
Shares will be deducted from the purchase price unless satisfactory evidence
of the payment of such taxes, or exemption therefrom, is submitted. The Fund
may not be obligated to purchase Shares pursuant to the Offer under certain
conditions. See Section 3.
Any tendering Stockholder or other payee who has not previously submitted a
correct, completed and signed Form W-8 BEN (or, if appropriate, Form W-8IMY)
or Form W-9, as necessary, and who fails to complete fully and sign either the
Form W-8 BEN (or, if appropriate, Form W-8IMY) or Form W-9 in the Letter of
Transmittal and provide that form to the Depositary, may be subject to federal
backup withholding tax of 31% of the gross proceeds paid to such Stockholder
or other payee pursuant to the Offer. See Section 14 regarding this tax as
well as possible withholding at the rate of 30% (or lower applicable treaty
rate) on the gross proceeds payable to tendering Non-U.S. Stockholders.
7. Source and Amount of Funds. The total cost to the Fund of purchasing
1,110,972 of its issued and outstanding Shares pursuant to the Offer would be
$8,110,096 (based on a price per Share of $7.30, the NAV as of the close of
the regular trading session of the NYSE on March 29, 2001). On March 29, 2001,
the aggregate value of the Fund's net assets was $162,413,793.
To pay the aggregate purchase price of Shares accepted for payment pursuant
to the Offer, the Fund anticipates that funds will first be derived from any
cash on hand and then from the proceeds from the sale of portfolio securities
held by the Fund. The selection of which portfolio securities to sell, if any,
will be made by the Investment Adviser, taking into account investment merit,
relative liquidity and applicable investment restrictions and legal
requirements. The Fund reserves the right to finance a portion of the Offer
through temporary borrowing.
The purchase of Shares by the Fund will decrease the net assets of the Fund
and, therefore, have the effect of increasing the Fund's expense ratio. In
addition, the purchases may have an adverse effect on the Fund's investment
performance.
13
Because the Fund may sell portfolio securities to raise cash for the
purchase of Shares, during the pendency of the Offer, and possibly for a short
time thereafter, the Fund may hold a greater than normal percentage of its
assets in cash and cash equivalents, which would tend to decrease the Fund's
net income. As of March 29, 2001, cash and cash equivalents constituted
approximately 9.63% of the Fund's total assets.
Under some market circumstances, it may be necessary for the Fund to raise
cash by liquidating portfolio securities in a manner that could reduce the
market value of such securities and, thus, reduce both the NAV of the Shares
and the proceeds from the sale of such securities. Liquidating portfolio
securities, if necessary, may also lead to the premature disposition of
portfolio investments and additional transaction costs. Depending upon the
timing of such sales, any such decline in NAV may adversely affect any
tendering Stockholders whose Shares are accepted for purchase by the Fund, as
well as those Stockholders who do not sell Shares pursuant to the Offer.
Stockholders who retain their Shares may be subject to certain other effects
of the Offer. See Section 11.
8. Price Range of Shares; Dividends/Distributions. The following table sets
forth, for the periods indicated, the high and low NAVs per Share and the high
and low closing sale prices per Share as reported on the NYSE Composite Tape,
and the amounts of cash dividends/distributions per Share paid during such
periods.
Net Asset
Value Market Price
--------- -------------- Dividends/
High Low High Low Distributions
Fiscal Year (ending September 30) ---- ---- ------- ------ -------------
1999
1st Quarter............................ 9.01 8.01 10.50 8.375 .3675
2nd Quarter............................ 8.81 8.15 9.9375 8.6875 .3375
3rd Quarter............................ 9.16 8.51 11.4375 9.6875 .3375
4th Quarter............................ 8.78 8.27 10.875 10.00 .3375
2000
1st Quarter............................ 9.13 8.36 10.3125 8.25 .275
2nd Quarter............................ 9.29 8.84 9.4375 8.4375 .2875
3rd Quarter............................ 8.99 7.98 9.00 8.0625 .30
4th Quarter............................ 8.53 8.08 9.375 8.3125 .30
2001
1st Quarter............................ 8.10 7.00 8.625 6.1875 .28
2nd Quarter (through March 29, 2001)... 7.82 7.23 8.42 6.875 .23
As of the close of business on March 29, 2001, the Fund's NAV was $7.30 per
Share, and the high, low and closing prices per Share on the NYSE on that date
were $7.85, $7.76 and $7.76, respectively. During the pendency of the Offer,
current NAV quotations can be obtained by contacting the Depositary in the
manner indicated in Section 1.
The tendering of Shares, unless and until shares tendered are accepted for
payment and purchase, will not affect the record ownership of any such
tendered Shares for purposes of entitlement to any dividends payable by the
Fund.
9. Selected Financial Information. Set forth below is a summary of selected
financial information for the Fund as of and for the fiscal years ended
September 30, 2000 and September 30, 1999, and for the quarters ended December
31, 2000 and December 31, 1999. The information with respect to the two fiscal
years has been excerpted from the Fund's audited financial statements
contained in its Annual Reports to Stockholders for these years, and the
information with respect to the two quarters has been excerpted from the
Fund's unaudited financial statements for these periods. A copy of the two
audited statements is included as Exhibit A to this Offer to Purchase. The
summary of selected financial information set forth below is qualified in its
entirety by reference to such statements and the financial information, the
notes thereto and related matter contained therein.
14
SUMMARY OF SELECTED FINANCIAL INFORMATION
For the Periods Indicated Below
Year Ended Year Ended Quarter Ended Quarter Ended
September 30, 2000 September 30, 1999 December 31, 2000 December 31, 1999
------------------ ------------------ ----------------- -----------------
(Audited) (Audited) (Unaudited) (Unaudited)
------------------ ------------------ ----------------- -----------------
STATEMENT OF OPERATIONS
Investment income..... $ 30,575,118 $ 33,171,518 $ 7,297,089 $ 8,480,336
Expenses.............. 6,735,046 5,942,629 1,644,832 1,615,408
------------ ------------ ------------ ------------
Net investment
income............... 23,840,072 27,228,889 5,652,257 6,864,928
------------ ------------ ------------ ------------
Net gain (loss) on
investment and option
transactions......... (4,825,948) 6,991,752 (16,317,319) 15,319,421
------------ ------------ ------------ ------------
Net increase
(decrease) in net
assets from
operations........... $ 19,014,124 $ 34,220,641 $(10,665,062) $ 22,184,349
============ ============ ============ ============
STATEMENT OF ASSETS AND
LIABILITIES (AT END OF PERIOD)
Total assets.......... $241,408,671 $261,089,306 $213,479,865 $260,806,251
Total liabilities..... 61,755,506 76,471,386 50,706,500 59,481,076
------------ ------------ ------------ ------------
Net assets............ $179,653,165 $184,617,920 $162,773,365 $201,325,175
============ ============ ============ ============
Net asset value per
Share................ $ 8.09 $ 8.39 $ 7.33 $ 9.12
Shares outstanding.... 22,196,375 22,003,240 22,196,375 22,066,661
SELECTED DATA FOR A
SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
Income From Investment
Operations
Net investment income
(a).................. $ 1.08 $ 1.25 $ .25 $ .31
Net realized and
unrealized gain
(loss) on investment
and option
transactions......... (.22) .34 (.73) .70
------------ ------------ ------------ ------------
Net increase
(decrease) in net
asset value from
operations........... .86 1.59 (.48) 1.01
------------ ------------ ------------ ------------
Dividends and
Distributions
Dividends from net
investment income.... (1.02) (1.25) (.28) (.28)
Distributions in
excess of net
investment income.... -0- (.13) -0- -0-
Tax return of
capital.............. (.14) -0- -0- -0-
------------ ------------ ------------ ------------
Total dividends and
distributions........ (1.16) (1.38) (.28) (.28)
------------ ------------ ------------ ------------
Net asset value, end
of period............ $ 8.09 $ 8.39 $ 7.33 $ 9.12
------------ ------------ ------------ ------------
Market value, end of
period............... $ 8.50 $ 10.25 $ 6.75 $ 8.375
------------ ------------ ------------ ------------
RATIOS
Expenses to average
net assets........... 2.70% 2.46% 3.04%(b) 2.57%(b)
Expenses to average
net assets excluding
interest expense..... 1.09% 1.11% 1.14%(b) 1.12%(b)
Net investment income
to average net
assets............... 9.55% 11.27% 10.43%(b) 10.91%(b)
TOTAL INVESTMENT RETURN
Total investment
return based on: (c)
Market value.......... (5.41)% 27.06% (17.37)% (16.19)%
Net asset value....... 9.99% 18.69% (5.75)% 10.94%
- --------
(a) Based on average shares outstanding.
(b) Annualized.
(c) Total investment return is calculated assuming a purchase of Shares on the
opening of the first day and a sale on the closing of the last day of the
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 the total investment return
based on market value in periods where there is an increase in the
discount or a decrease in the premium of the market value to the net asset
value from the beginning to the end of such periods. Conversely, total
investment return based on net asset value will be lower than total
investment return based on market value in periods where there is a
decrease in the discount or an increase in the premium of the market value
to the net asset value from the beginning to the end of such periods.
Total investment return calculated for a period of less than one full year
is not annualized.
15
10. Interest of Directors, Executive Officers and Certain Related
Persons. The directors and executive officers of the Fund and the aggregate
number and percentage of the Shares each of them beneficially owns is set
forth in the table below. The address of each of them is in care of the Fund
at 1345 Avenue of the Americas, New York, New York 10105. It is the policy of
the Boards of Directors of all registered investment companies to which the
Investment Adviser provides investment advisory services, including the Fund
(collectively, the "Alliance Fund Complex"), that each Director will invest
specified minimum amounts and an overall total of at least $150,000 in shares
of investment companies within the Alliance Fund Complex. As of March 29,
2001, the directors of the Fund as a group beneficially owned less than 1% of
the Shares. The Investment Adviser does not own any Shares.
Number of Percentage of
Shares Beneficially Shares Beneficially
Name and Position Owned Owned
----------------- ------------------- -------------------
John D. Carifa, Chairman.............. 0 0
Wayne D. Lyski, President............. 0 0
Edmund P. Bergan, Jr., Secretary...... 0 0
Kathleen A. Corbet, Senior Vice
President............................ 0 0
Gregory Dube, Senior Vice President... 0 0
Mark D. Gersten, Treasurer and Chief
Financial Officer.................... 0 0
Ruth Block, Director.................. 3000 0.130%
David H. Dievler...................... 0 0
John H. Dobkin, Director.............. 0 0
William H. Foulk, Jr., Director....... 500 0.0022%
Dr. James M. Hester, Director......... 0 0
Clifford L. Michel, Director.......... 1000 0.0044%
Donald J. Robinson, Director.......... 1500 0.0067%
Pursuant to an Advisory Agreement dated as of October 22,1993 with the
Investment Adviser (a copy of which is incorporated by reference as an exhibit
to Schedule TO filed with the Securities and Exchange Commission-See Section
13), the Fund employs the Investment Adviser to manage the investment and
reinvestment of the assets of the Fund. The Investment Adviser, whose business
address and telephone numbers are 1345 Avenue of the Americas, New York, New
York 10105 and (212) 969-1000, has been the Fund's investment adviser since
the Fund's commencement of operations. For services provided by the Investment
Adviser under the Investment Advisory Agreement, the Fund pays the Investment
Adviser a fee computed and paid monthly in arrears on the last day of each
calendar month at an annualized rate of .75% of the Fund's average weekly net
assets. For purposes of calculating this fee, average weekly net assets are
determined on the basis of the Fund's average net assets for each weekly
period (ending on Friday) ending during the month. The net assets for each
weekly period are determined by averaging the net assets on the Friday of such
weekly period with the net assets on the Friday of the immediately preceding
weekly period. When a Friday is not a Fund business day, the calculation is
determined with reference to the net assets of the Fund on the Fund business
day immediately preceding such Friday. During the fiscal years ended September
30, 2000 and September 30, 1999, the Fund paid to the Investment Adviser fees
totaling $1,867,443 and $1,815,161, respectively, pursuant to the Investment
Advisory Agreement.
During the past sixty days, there have not been any transactions involving
Shares that were effected by the Fund. Based upon the Fund's records and upon
information provided to the Fund, there have not been any transactions in
Shares that were effected during such period by any director or executive
officer of the Fund, any person controlling the Fund, any director or
executive officer of any corporation or other person ultimately in control of
the Fund, any associate or minority-owned subsidiary of the Fund or any
executive officer or director of any subsidiary of the Fund. Based upon
information provided or available to the Fund, no director, officer or
affiliate of the Fund intends to tender Shares pursuant to the Offer. The
Offer does not, however, restrict the purchase of shares pursuant to the Offer
from any such person.
16
11. Certain Effects of the Offer. The purchase of Shares pursuant to the
Offer will have the effect of increasing the proportionate interest in the
Fund of Stockholders who do not tender Shares. All Stockholders remaining
after the Offer will be subject to any increased risks associated with the
reduction in the number of outstanding shares and the reduction in the Fund's
assets resulting from payment for the tendered Shares, such as any greater
volatility due to decreased portfolio diversification and proportionately
higher expenses. Under certain circumstances, the need to raise cash in
connection with the purchase of Shares pursuant to the Offer may have an
adverse effect on the Fund's NAV and/or income per Share. See Section 7. All
Shares purchased by the Fund pursuant to the Offer will be retired and
thereafter will be authorized and unissued shares.
12. Certain Information about the Fund. The Fund was incorporated in
Maryland on August 10, 1993 and is registered as a non-diversified, closed-end
management investment company under the 1940 Act. The Fund's primary
investment objective is to seek high current income. Its secondary investment
objective is capital appreciation. In seeking to achieve these objectives, the
Fund invests at least 35% of its total assets in U.S. corporate fixed income
securities. The balance of the Fund's investment portfolio is invested in (a)
fixed income securities issued or guaranteed by foreign governments, including
participations in loans between foreign governments and financial
institutions, and interests in entities organized and operated for the purpose
of restructuring the investment characteristics of instruments issued or
guaranteed by foreign governments and (b) non-U.S. corporate fixed income
securities. Substantially all of the Fund's assets are to be invested in high
yield, high risk securities that are low-rated (i.e., below investment grade),
or of comparable quality and unrated, and that are considered to be
predominately speculative as regards the issuer's capacity to pay interest and
repay principal. The Fund is permitted to invest up to 50% of its total assets
in securities that are not readily marketable.
Reference is made to Sections 2, 8 and 9 and to the financial statements
referred to in Section 9.
The principal executive office and business address of the Fund is located
at 1345 Avenue of the Americas, New York, New York 10105. The Fund's business
telephone number is (212) 969-1000.
13. Additional Information. An Issuer Tender Offer Statement on Schedule TO
(the "Schedule TO") including the exhibits thereto, filed with the Securities
and Exchange Commission (the "SEC"), provides certain additional information
relating to the Offer, and may be inspected and copied at the prescribed rates
at the SEC's public reference facilities at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, 7 World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of the Schedule TO and the exhibits are available
on the EDGAR Database on the SEC's Web site at http://www.sec.gov and copies
of this information may also be obtained, after paying a duplicating fee, by
electronic request at the following E-mail address: publicinfo@sec.gov or by
writing the SEC's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
14. Certain United States Federal Income Tax Consequences. The following
discussion is a general summary of the U.S. federal income tax consequences of
a sale of Shares pursuant to the Offer based on current U.S. federal income
tax law, including applicable Treasury regulations and Internal Revenue
Service rulings. Each Stockholder should consult the Stockholder's tax advisor
for a full understanding of the tax consequences of such a sale, including
potential state, local and foreign taxation by jurisdictions of which the
Stockholder is a citizen, resident or domiciliary. In view of the requirement
of the Offer that a tendering Stockholder must tender, or cause the tender of,
both all of the Shares owned by the Stockholder and all of the Shares
attributed to the Stockholder under Section 318 of the Code as of the date of
purchase of Shares by the Fund pursuant to the Offer, tax advisors should also
be consulted regarding the application of the constructive ownership rules of
Section 318. In general, Section 318 provides that Shares owned by certain
family members of a tendering Stockholder, and by certain entities in which
the Stockholder has a direct or indirect interest, are treated as owned by the
Stockholder for purposes of determining the federal income tax consequences of
a sale of Shares pursuant to the Offer.
U.S. Stockholders. It is anticipated that Stockholders (other than tax
exempt persons) who are citizens and/or residents of the U.S., corporations,
partnerships or other entities created or organized in or under the laws of
the U.S. or any political subdivision thereof, estates the income of which is
subject to U.S. federal income
17
taxation regardless of the source of such income, and trusts if (A) a court
within the United States is able to exercise primary supervision over the
administration of the trust and (B) one or more United States persons have the
authority to control all substantial decisions of the trust ("U.S.
Stockholders"), and who sell Shares pursuant to the Offer will recognize gain
or loss for U.S. federal income tax purposes equal to the difference between
the amount of cash they receive pursuant to the Offer and their adjusted tax
basis in the Shares sold. The sale date for tax purposes will be the date the
Fund accepts shares for purchase. This gain or loss will be capital gain or
loss if the Shares sold are held by the tendering U.S. Stockholder at the time
of sale as a capital asset and will be treated as either long-term or short-
term if the Shares have been held at that time for more than one year or one
year or less, respectively. Any such long-term capital gain realized by a non-
corporate U.S. Stockholder will be taxed at a maximum rate of 20%. This U.S.
federal income tax treatment, however, is based on the expectation that not
all Stockholders will tender their Shares pursuant to the Offer and that the
continuing ownership interest in the Fund of tendering Stockholders will be
sufficiently reduced. It is therefore possible that the cash received for the
Shares purchased would be taxable as a distribution by the Fund, rather than
as a gain from the sale of the Shares. In that event, the cash received by a
U.S. Stockholder will be taxable as a dividend, i.e., as ordinary income, to
the extent of the U.S. Stockholder's allocable share of the Fund's current or
accumulated earnings and profits, with the excess of the cash received over
the portion so taxable constituting a non-taxable return of capital to the
extent of the U.S. Stockholder's tax basis in the Shares sold and with any
remaining excess of such cash being treated as either long-term or short-term
capital gain from the sale of the Shares depending on how long they were held
by the U.S. Stockholder. If cash received by a U.S. Stockholder is taxable as
a dividend, the Stockholder's tax basis in the purchased shares will be
considered transferred to the remaining shares held by the Stockholder. In the
case of a tendering U.S. Stockholder that is a corporation treated as
receiving a distribution from the Fund pursuant to the Offer, special basis
adjustments may also be applicable with respect to any Shares of such a U.S.
Stockholder not purchased pursuant to the Offer.
Under the "wash sale" rules under the Code, loss recognized on Shares sold
pursuant to the Offer will ordinarily be disallowed to the extent a U.S.
Stockholder acquires Shares within 30 days before or after the date the Shares
are purchased pursuant to the Offer and, in that event, the basis and holding
period of the Shares acquired will be adjusted to reflect the disallowed loss.
The Depositary may be required to withhold 31% of the gross proceeds paid to
a U.S. Stockholder or other payee pursuant to the Offer unless either: (a) the
U.S. Stockholder has completed and submitted to the Depositary an IRS Form W-
9, providing the U.S. Stockholder's employer identification number or social
security number as applicable, and certifying under penalties of perjury that:
(a) such number is correct; (b) either (i) the U.S. Stockholder is exempt from
backup withholding, (ii) the U.S. Stockholder has not been notified by the
Internal Revenue Service that the U.S. Stockholder is subject to backup
withholding as a result of an under-reporting of interest or dividends, or
(iii) the Internal Revenue Service has notified the U.S. Stockholder that the
U.S. Stockholder is no longer subject to backup withholding; or (c) an
exception applies under applicable law. A Form W-9 is included as part of the
Letter of Transmittal for U.S. Stockholders.
Non-U.S. Stockholders. The U.S. federal income taxation of a Non-U.S.
Stockholder on a sale of Shares pursuant to the Offer depends on whether this
transaction is "effectively connected" with a trade or business carried on in
the U.S. by the Non-U.S. Stockholder as well as the tax characterization of
the transaction as either a sale of the Shares or a distribution by the Fund,
as discussed above for U.S. Stockholders. If the sale of Shares pursuant to
the Offer is not so effectively connected and if, as anticipated for U.S.
Stockholders, it gives rise to gain or loss, any gain realized by a Non-U.S.
Stockholder upon the tender of Shares pursuant to the Offer will not be
subject to U.S. federal income tax or to any U.S. tax withholding, provided,
however, that such a gain will be subject to U.S. federal income tax at the
rate of 30% (or such lower rate as may be applicable under a tax treaty) if
the Non-U.S. Stockholder is a non-resident alien individual who is physically
present in the United States for more than 182 days during the taxable year of
the sale. If, however, U.S. Stockholders are deemed to receive a distribution
from the Fund with respect to Shares they tender, the cash received by a
tendering Non-U.S. Stockholder will also be treated for U.S. tax purposes as a
distribution by the Fund, with the cash then being characterized in the same
manner as described above for U.S. Stockholders. In such an event, the portion
18
of the distribution treated as a dividend to the Non-U.S. Stockholder would be
subject to a U.S. withholding tax at the rate of 30% (or such lower rate as
may be applicable under a tax treaty) if the dividend does not constitute
effectively connected income. If the amount realized on the tender of Shares
by a Non-U.S. Stockholder is effectively connected income, regardless of
whether the tender is characterized as a sale or as giving rise to a
distribution from the Fund for U.S. federal income tax purposes, the
transaction will be treated and taxed in the same manner as if the Shares
involved were tendered by a U.S. Stockholder.
Non-U.S. Stockholders should provide the Depositary with a completed Form W-
8 BEN (or, if appropriate, Form W-8IMY) in order to avoid 31% backup
withholding on the cash they receive from the Fund regardless of how they are
taxed with respect to their tender of the Shares involved. A copy of Form W-8
BEN (or, if appropriate, Form W-8IMY) is provided with the Letter of
Transmittal for Non-U.S. Stockholders.
15. Amendments; Extension of Tender Period; Termination. The Fund reserves
the right, at any time during the pendency of the Offer, to amend, extend or
terminate the Offer in any respect. Without limiting the manner in which the
Fund may choose to make a public announcement of such an amendment, extension
or termination, the Fund shall have no obligation to publish, advertise or
otherwise communicate any such public announcement, except as provided by
applicable law (including Rule 14e-1(d) promulgated under the Exchange Act)
and by the requirements of the NYSE (including the listing agreement with
respect to the Shares).
Except to the extent required by applicable law (including Rule 13e-4(f)(1)
promulgated under the Exchange Act), the Fund will have no obligation to
extend the Offer. In the event that the Fund is obligated to, or elects to,
extend the Offer, the purchase price for each Share purchased pursuant to the
Offer will be the per Share NAV determined as of the close of the regular
trading session of the NYSE on the date after the Expiration Date as extended.
No Shares will be accepted for payment until on or after the new Expiration
Date.
16. Miscellaneous. The Offer is not being made to, nor will the Fund accept
tenders from, or on behalf of, owners of Shares in any jurisdiction in which
the making of the Offer or its acceptance would not comply with the securities
or "blue sky" laws of that jurisdiction. The Fund is not aware of any
jurisdiction in which the making of the Offer or the acceptance of tenders of,
purchase of, or payment for, Shares in accordance with the Offer would not be
in compliance with the laws of such jurisdiction. The Fund, however, reserves
the right to exclude Stockholders in any jurisdiction in which it is asserted
that the Offer cannot lawfully be made or tendered Shares cannot lawfully be
accepted, purchased or paid for. So long as the Fund makes a good-faith effort
to comply with any state law deemed applicable to the Offer, the Fund believes
that the exclusion of holders residing in any such jurisdiction is permitted
under Rule 13e-4(f)(9) promulgated under the Exchange Act. In any jurisdiction
where the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on the Fund's
behalf by one or more brokers or dealers licensed under the laws of such
jurisdiction.
ACM MANAGED DOLLAR INCOME FUND, INC.
April 2, 2001
19
EXHIBIT A
PORTFOLIO OF INVESTMENTS
September 30, 2000 ACM Managed Dollar Income Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Principal Principal
Amount Amount
(000) U.S. $ Value (000) U.S. $ Value
- ---------------------------------------------------------------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS--60.0% Russian Federation
SOVEREIGN DEBT 2.25%, 3/31/30 (a)........ $12,250 $ 4,731,562
SECURITIES--49.5% 12.75%, 6/24/28........... 17,500 15,207,500
ARGENTINA--1.6% ----------
Republic of Argentina 23,238,102
10.25%, 7/21/30............. $ 3,500 $ 2,856,875 ----------
----------
TRINIDAD & TOBAGO--1.1%
BRAZIL--12.3% Republic of Trinidad & Tobago
Republic of Brazil 9.75%, 7/01/20 (a)........ 2,000 2,025,000
14.50%, 10/15/09............ 20,000 22,000,000 ----------
----------
TURKEY--1.2%
COLOMBIA--1.4% Republic of Turkey
Republic of Colombia 11.875%, 1/15/30.......... 1,180 1,180,000
8.375%, 2/15/27............. 4,000 2,565,200 12.375%, 6/15/09.......... 960 985,200
---------- ----------
2,165,200
ECUADOR--1.4% ----------
Republic of Ecuador
12.00%, 11/15/12 (a)........ 3,500 2,458,750 VENEZUELA--3.0%
---------- Republic of Venezuela
9.25%, 9/15/27............ 8,000 5,410,400
MEXICO--10.1% ----------
United Mexican States Total Sovereign Debt Securities
Series XW (cost $88,109,088)........ 89,003,477
10.375%, 2/17/09............ 12,500 13,562,500 ----------
United Mexican States
11.375%, 9/15/16............ 4,000 4,640,000 COLLATERALIZED BRADY BONDS--8.3%
---------- BRAZIL--4.4%.................
18,202,500 Federal Republic of Brazil...
---------- Discount FRN
PANAMA--1.4% 7.625%, 4/15/24........... 10,000 7,913,000
Republic of Panama ----------
10.75%, 5/15/20............. 2,500 2,440,750
---------- BULGARIA--2.1%
Republic of Bulgaria
PHILIPPINES--1.1% Discount FRN
Republic of Philippines Series A
9.875%, 1/15/19............. 2,500 2,050,000 7.75%, 7/28/24............ 5,000 3,825,000
---------- ----------
QATAR--2.0% MEXICO--1.1%
State of Qatar United Mexican States
9.75%, 6/15/30 (a).......... 2,000 2,055,000 Discount FRN
9.75%, 6/15/30.............. 1500 1,535,700 7.515%, 12/31/19.......... 2,000 2,065,000
---------- ----------
3,590,700
---------- VENEZUELA--0.7%
Republic of Venezuela
RUSSIA--12.9% Discount FRN
Ministry Finance of Russia Series W-A
Series IV 7.5625%, 3/31/20.......... 1,500 1,215,000
3.00%, 5/14/03.............. 5,800 3,299,040 ----------
Total Collateralized Brady Bonds
(cost $14,412,079)...... 15,018,000
----------
A-1
PORTFOLIO OF INVESTMENTS (continued) ACM Managed Dollar Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Principal
Amount Amount
(000) U.S. $ Value (000) U.S. $ Value
- ------------------------------------------------------------------------------------------------------------------------------------
NON-COLLATERALIZED CSC Holdings, Inc.
BRADY BONDS--0.6% 9.25%, 11/01/05............. $ 1,000$ 1,012,500
PERU--0.6% Echostar DBS Corp.
Republic of Peru FLIRB 9.25%, 2/01/06.............. 1,000 991,250
3.75%, 3/07/17 (b) $ 1,850$ 1,040,625 Echostar DBS Corp.
----------- 9.375%, 2/01/09............. 1,000 985,000
Total Non-Collateralized NTL Communications Corp.
Brady Bonds Series B
(cost $993,104)................. 1,040,625 11.50%, 10/01/08............ 2,000 1,940,000
----------- -----------
6,306,562
LOAN PARTICIPATION--1.6% -----------
MOROCCO--1.6%
Kingdom of Morocco CHEMICALS--3.2%
Loan Participation FRN Huntsman ICI Chemicals
Series A 10.125%, 7/01/09............ 2,250 2,219,062
7.75%, 1/01/09 Lyondell Chemical Company
(cost $2,722,562)............... 3,100 2,789,662 10.875%, 5/01/09............ 1,800 1,748,250
----------- Sterling Chemicals, Inc.
Total Sovereign Debt Obligations Series B
(cost $106,236,833)............. 107,851,764 12.375%, 7/15/06............ 1,250 1,268,750
----------- Trans-Resources, Inc.
Series B
U.S. CORPORATE DEBT 10.75%, 3/15/08............. 3,750 543,750
OBLIGATIONS--45.9% -----------
BANKING--1.1% 5,779,812
Bank United Corporation -----------
8.875%, 5/01/07................. 2,000 1,937,494
-----------
BROADCASTING &
MEDIA--1.5% COMMUNICATIONS-
Allbritton Communications FIXED--11.6%
Series B Colo.com
8.875%, 2/01/08................. 500 470,000 13.875%, 3/15/10 (a)........ 1,000 1,025,000
Fox Family Worldwide, Inc. Econophone, Inc.
9.25%, 11/01/07................. 2,000 1,905,000 13.50%, 7/15/07............. 4,000 2,220,000
10.25%, 11/01/07 (c)............... 500 361,250 Exodus Communications
----------- 11.625%, 7/15/10 (a)........ 1,000 1,007,500
2,736,250 Global Crossing Holding, Ltd.
----------- 9.50%, 11/15/09............ 2,000 2,000,000
Level 3 Communications
BUILDING & 11.00%, 3/15/08............. 1,750 1,680,000
CONSTRUCTION--0.4% McLeodUSA, Inc.
Morrison Knudsen Corporation 10.50%, 3/01/07 (c)......... 1,000 825,000
11.00%, 7/01/10 (a)............. 650 656,500 Metromedia Fiber Network
----------- 10.00%, 12/15/09............ 2,000 1,880,000
Nextel Partners, Inc.
CABLE--3.5% 11.00%, 3/15/10 (a)......... 600 606,000
Adelphia Communications Nextlink Communications
10.875%, 10/01/10............... 450 443,250 10.50%, 12/01/09............ 2,000 1,840,000
Charter Communication Holdings PSINet, Inc.
10.25%, 1/15/10................. 950 934,562 11.00%, 8/01/09............. 1,200 786,000
A-2
ACM Managed Dollar Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Principal
Amount Amount
(000) U.S. $ Value (000) U.S. $ Value
- ------------------------------------------------------------------------------------------------------------------------------------
.
Tritel PCS, Inc. ENTERTAINMENT &
12.75%, 5/15/09 (c)..............$ 1,250 $ 850,000 LEISURE--1.3%
Viatel, Inc. Marvel Enterprises, Inc.
11.50%, 3/15/09.................. 2,750 1,471,250 12.00%, 6/15/09................ $ 3,000 $ 2,422,500
Williams Communications ----------
Group, Inc.
11.70%, 8/01/08 (a).............. 2,000 1,920,000 FINANCE--0.6%
Winstar Communications, Inc. MBNA America Bank
12.75%, 4/15/10 (a).............. 2,545 1,857,850 7.75%, 9/15/05................. 1,000 1,008,787
14.75%, 4/15/10 (a)(c)........... 3,000 975,000 GAMING--2.0%
---------- Mandalay Resort Group
20,943,600 10.25%, 8/01/07 (a)............ 1,000 1,036,250
---------- Mohegan Tribal Gaming
COMMUNICATIONS- 8.75%, 1/01/09................. 1,000 995,000
MOBILE--3.9% Park Place Entertainment
Crown Castle Int'l Corp. 9.375%, 2/15/07................ 1,500 1,530,000
10.75%, 8/01/11.................. 1,000 1,032,500 ----------
Dobson/Sygnet Communications 3,561,250
12.25%, 12/15/08................. 750 746,250 ----------
Iridium LLC Capital Corp. HEALTHCARE--1.5%
Series B HCA - The Healthcare Company
14.00%, 7/15/05 (d).............. 5,000 200,000 8.75%, 9/01/10................. 1,000 1,023,168
Nextel Communications, Inc. Iasis Healthcare Corporation
9.375%, 11/15/09................. 1,500 1,470,000 13.00%, 10/15/09............... 800 830,000
Spectrasite Holdings, Inc. Triad Hospitals Holdings
12.875%, 3/15/10 (c)............. 2,750 1,430,000 Series B
TeleCorp PCS, Inc. 11.00%, 5/15/09................ 750 772,500
10.625%, 7/15/10 (a)............. 1,500 1,522,500 ----------
11.625%, 4/15/09 (c)............. 1,000 682,500 2,625,668
---------- ----------
7,083,750
---------- HOTELS & LODGING--0.3%
CONSUMER Host Marriott LP
MANUFACTURING--1.5% 9.25%, 10/01/07 (a)............ 650 644,313
Generac Portable Products, LLC ----------
11.25%, 7/01/06.................. 4,000 2,615,000
---------- INDUSTRIAL--5.4%
ENERGY--2.6% Allied Waste North America
Chesapeake Energy Corp. Series B
Series B 10.00%, 8/01/09................ 1,800 1,579,500
9.625%, 5/01/05.................. 1,000 997,500 Flowserve Corporation
EOTT Energy Partners LP 12.25%, 8/15/10 (a)............ 1,000 1,027,500
11.00%, 10/01/09................. 1,500 1,590,000 Global Telesystems, Inc.
Gothic Production Corp. 9.875%, 2/15/05................ 2,000 870,000
Series B Kaiser Aluminum & Chemicals
11.125%, 5/01/05................. 1,000 1,052,500 9.875%, 2/15/02................ 1,500 1,488,750
PSEG Energy Holdings Russell-Stanley Holdings, Inc.
9.125%, 2/10/04 (a).............. 1,000 1,023,582 10.875%, 2/15/09............... 5,000 1,875,000
---------- Tenent Healthcare Corporation
4,663,582 7.875%, 1/15/03................ 1,000 997,500
---------- Universal Compression, Inc.
9.875%, 2/15/08 (c)............ 1,250 971,875
A-3
PORTFOLIO OF INVESTMENTS (continued) ACM Managed Dollar Income Fund
- ------------------------------------------------------------------------------------------------------------------------------
Principal Principal
Amount Amount
(000) U.S. $ Value (000) U.S. $ Value
- ------------------------------------------------------------------------------------------------------------------------------
Waste Management, Inc. CANADA--2.3%
6.875%, 5/15/09................$ 1,000 $ 913,214 360Networks, Inc.
---------- 13.00%, 5/01/08............ $ 700 $ 640,500
9,723,339 Doman Industries Limited
---------- 12.00%, 7/01/04............ 2,000 1,997,500
METAL/MINERALS--0.4% Pierce Leahy Command
Republic Technologies Company
13.75%, 7/15/09................ 4,000 740,000 8.125%, 5/15/08............ 1,500 1,410,000
---------- ----------
PAPER PACKAGING--1.2% 4,048,000
Crown Paper Co. ----------
11.00%, 9/01/05 (d)............ 5,000 1,150,000
Riverwood International Corp.
10.625%, 8/01/07............... 1,000 1,006,250 HONG KONG--1.7%
---------- Guangdong Enterprises
2,156,250 8.875%, 5/22/07 (a)(d)..... 7,900 3,160,000
---------- ----------
PLASTICS--0.9%
Foamex LP
13.50%, 8/15/05 (e)............ 2,000 1,600,000 KOREA--1.1%
---------- Hanvit Bank
TECHNOLOGY--1.0% 12.75%, 3/01/10 (b)........ 2,000 2,030,000
Concentric Networks ----------
12.75%, 12/15/07............... 100 100,500
Viasystems, Inc.
9.75%, 6/01/07................. 1,750 1,658,125 MEXICO--2.4%
---------- Innova S. de R.L.
1,758,625 12.875%, 4/01/07........... 4,500 4,275,000
---------- ----------
UTILITIES - ELECTRIC
& GAS--2.0%
AES Corporation NETHERLANDS--3.7%
9.375%, 9/15/10................ 1,500 1,530,000 Cellco Finance
Cogentrix Energy, Inc. 15.00%, 8/01/05............ 4,000 4,130,000
8.75%, 10/15/08 (a)............ 1,000 1,002,500 Hermes Europe Railtel
Dominion Resources 10.375%, 1/15/09........... 500 252,500
Series B United Pan-Europe
7.625%, 7/15/05................ 1,000 1,014,911 Communications
---------- Series B
3,547,411 13.75%, 2/01/10 (c)........ 1,000 457,500
---------- Versatel Telecom International
Total U.S. Corporate Debt Obligations 11.875%, 7/15/09........... 2,000 1,740,000
(cost $107,336,747)............ 82,510,693 ----------
---------- 6,580,000
UNITED KINGDOM--1.5% ----------
NON-U.S. CORPORATE DEBT Avecia Group PLC
OBLIGATIONS--16.4% 11.00%, 7/01/09............ 1,200 1,188,000
ARGENTINA--3.7% Comcast UK Cable Partners
IMPSA Metalurgicas Pescarm 11.20%, 11/15/07 (c)....... 1,500 1,447,500
9.50%, 5/31/02 (a)............. 5,000 3,162,500 ----------
Supercanal Holdings, SA 2,635,500
12.00%, 11/07/02 (d)........... 3,477 3,477,625 ----------
---------- Total Non-U.S. Corporate
6,640,125 Debt Obligations
---------- (cost $29,428,323)......... 29,368,625
A-4
ACM Managed Dollar Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Principal
Amount Amount
(000) U.S. $ Value (000) U.S. $ Value
- ------------------------------------------------------------------------------------------------------------------------------------
.............................
CONVERTIBLE COMMON STOCK &
PREFERRED STOCK--0.1% WARRANTS--0.5%
PSINet, Inc. OpTel, Inc. Common
7.00% (a) Stock (h)(i)............... 8,500 85
(cost $600,000)................$ 15,000$ 264,375 Republic Technology
warrants, expiring
NON-CONVERTIBLE 7/15/09 (h)(j)............. 4,000 40
PREFERRED STOCK--3.8% Uniroyal Technology Corp.
CSC Holdings, Inc. warrants, expiring
Series M 6/01/03 (h)(k)........... 60,000 855,000
11.125% (f).................... 16,701 1,774,481 -----------
Global Crossing Holding, Ltd Total Common Stock & Warrants
10.50% (g)..................... 10,000 1,022,500 (cost $593,730)............ 855,125
Intermedia Communication -----------
Series B
13.50% (f)..................... 775 744,000 TIME DEPOSIT--2.4%
Nextel Communications, Inc. Societe Generale
Series E 6.688%, 10/02/00
11.125% (f).................... 3,326 3,209,590 (cost $4,400,000).......... 4,400 4,400,000
---------- -----------
Total Non-Convertible
Preferred Stock TOTAL INVESTMENTS--129.1%
(cost $6,951,492).............. 6,750,571 (cost $255,547,125)........ 232,001,153
---------- -----------
Other assets less liabilities--(29.1%) (52,347,988)
NET ASSETS--100%.............. $179,653,165
============
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2000, these securities amounted to $32,161,682 or 17.9% of net assets.
(b) Coupon changes periodically based upon a predetermined schedule. Stated
interest rate in effect as of September 30, 2000.
(c) 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.
(d) Security is in default and is non-income producing.
(e) Illiquid security, valued at fair value (see Note A).
(f) Paid-in-kind preferred, quarterly stock payments.
(g) Paid-in-kind preferred, semi-annual stock payments. (h) Non-income
producing security.
(i) Common stock, par value is $0.01 per share.
(j) Each warrant entitles the holder to purchase one share of Class D Common
Stock at $0.01 per share. The warrants are exercisable until 7/15/09. (k)
Each warrant entitles the holder to purchase one share of Common Stock at
$2.1875 per share. The warrants are exercisable until 6/01/03.
Glossary of Terms:
FLIRB Front Loaded Interest Reduction Bond.
FRN Floating Rate Note.
A-5
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000 ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $255,547,125)...... $ 232,001,153
Cash......................................................... 81,303
Interest receivable.......................................... 7,262,689
Receivable for investment securities sold.................... 1,958,798
Dividend receivable.......................................... 71,692
Prepaid expenses and other assets............................ 33,036
-----------
Total assets................................................. 241,408,671
-----------
LIABILITIES
Loan payable................................................. 57,500,000
Payable for investment securities purchased.................. 3,581,034
Interest payable............................................. 290,104
Advisory fee payable......................................... 163,694
Administrative fee payable................................... 32,732
Accrued expenses and other liabilities....................... 187,942
-----------
Total liabilities............................................ 61,755,506
-----------
NET ASSETS...................................................... $ 179,653,165
==============
COMPOSITION OF NET ASSETS
Common stock, at par......................................... $ 221,964
Additional paid-in capital................................... 296,226,749
Distributions in excess of net investment income............. (728,523)
Accumulated net realized loss on investment transactions..... (92,521,053)
Net unrealized depreciation of investments................... (23,545,972)
-----------
$ 179,653,165
==============
NET ASSET VALUE PER SHARE (based on 22,196,375 shares
outstanding)................................................. $8.09
=====
- --------------------------------------------------------------------------------
See notes to financial statements.
A-6
STATEMENT OF OPERATIONS
Year Ended September 30, 2000 ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 29,835,392
Dividends 739,726
-----------
$ 30,575,118
EXPENSES
Advisory fee 1,867,443
Administrative fee 373,469
Loan fees 99,461
Printing 85,262
Custodian 79,317
Audit and legal 77,008
Transfer agency 43,312
Directors' fees and expenses 36,773
Registration fees 32,363
Miscellaneous 28,023
-----------
Total expenses before interest expense 2,722,431
Interest expense 4,012,615
-----------
Total expenses 6,735,046
------------
Net investment income 23,840,072
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions (552,590)
Net realized gain on written option transactions 48,678
Net change in unrealized appreciation/depreciation of investments (4,322,036)
-----------
Net loss on investments (4,825,948)
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 19,014,124
=============
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
September 30, 2000 September 30, 1999
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 23,840,072$ $ 27,228,889
Net realized loss on investment and written option transactions (503,912) (56,696,741)
Net change in unrealized appreciation/depreciation
of investments and other assets (4,322,036) 63,688,493
----------- -----------
Net increase in net assets from operations 19,014,124 34,220,641
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income (22,550,509) (27,228,889)
Distributions in excess of net investment income -0- (2,893,503)
Tax return of Capital (3,123,919) -0-
----------- -----------
Net decrease in net assets resulting from dividends to shareholders (25,674,428) (30,122,392)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in the issuance of Common Stock 1,695,549 3,599,304
----------- -----------
Total increase (decrease) (4,964,755) 7,697,553
NET ASSETS
Beginning of period 184,617,920 176,920,367
----------- -----------
End of period $ 179,653,165 $ 184,617,920
================= ================
- --------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
A-7
STATEMENT OF CASH FLOWS
For the Year Ended September 30, 2000 ACM Managed Dollar Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH FROM OPERATING ACTIVITIES
Interest and dividends received................... $ 26,002,792
Interest expense paid............................. (3,896,091)
Operating expenses paid........................... (2,707,484)
-----------------
Net increase in cash from operating activities....... $ 19,399,217
INVESTING ACTIVITIES
Purchases of long-term investments................ (331,852,591)
Proceeds from disposition of long-term investments 331,666,740
Proceeds from options written..................... 48,678
Sales of short-term investments net............... 7,273,000
-----------------
Net increase in cash from investing activities....... 7,135,827
FINANCING ACTIVITIES(a)
Cash dividends and distributions paid............. (26,454,245)
-----------------
Net decrease in cash from financing activities....... (26,454,245)
-----------------
Net increase in cash................................. 80,799
Cash at beginning of period.......................... 504
-----------------
Cash at end of period................................ $ 81,303
=================
- ------------------------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM
OPERATIONS TO NET INCREASE IN CASH FROM OPERATING
ACTIVITIES
Net increase in net assets from operations........... $ 19,014,125
ADJUSTMENTS
Decrease in dividend and interest receivable...... $ 41,008
Accretion of bond discount........................ (4,613,334)
Decrease in accrued expenses and other assets..... 14,946
Increase in interest payable...................... 116,524
Net loss on investments........................... 4,825,948
-----------------
Total adjustments.................................... 385,092
-----------------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES....... $ 19,399,217
=================
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Non-cash financing activities not included herein consist of reinvestment
of dividends and distributions.
See notes to financial statements.
A-8
NOTES TO FINANCIAL STATEMENTS
September 30, 2000 ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
NOTE A: Significant Accounting Policies
ACM Managed Dollar Income Fund, Inc. (the "Fund") was incorporated under the
laws of the State of Maryland on August 10, 1993 and is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The financial statements have been prepared in conformity
with 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, and securities listed on a
foreign securities exchange whose operations are similar to the United States
over-the-counter market and securities listed on a national securities exchange
whose primary market is believed to be over-the-counter are valued at the mean
of the closing bid and asked price provided by two or more dealers regularly
making a market in such securities. U.S. government securities and other debt
securities which mature in 60 days or less are valued at amortized cost unless
this method does not represent fair value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by, or in accordance with procedures approved by, the Board of
Directors. Fixed income securities may be valued on the basis of prices provided
by a pricing service when such prices are believed to reflect the fair market
value of such securities. Listed put and call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that day, such
securities will be valued at the closing bid prices on that day.
2. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially all
of its investment company taxable income and net realized gains, if applicable,
to shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Dividend income is recorded on the ex-dividend
date. Investment transactions are accounted for on the date the investments are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts as adjustments to interest income.
4. 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 a tax
return of capital, resulted in a decrease in distributions in excess of net
investment income and a corresponding decrease in additional paid-in-capital.
This reclassification had no effect on net assets.
A-9
NOTES TO FINANCIAL STATEMENTS (continued) ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
NOTE B: Advisory and Administrative Fees
Under the terms of the Investment Advisory Agreement, the Fund pays Alliance
Capital Management, L.P. (the "Adviser") an advisory fee equal to an annualized
rate of .75 of 1% of the average adjusted weekly net assets of the Fund during
the month.
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Adviser, the Fund reimburses AFS for
costs relating to servicing phone inquiries for the Fund. The Fund reimbursed
AFS $2,000 during the year ended September 30, 2000.
Under the terms of an Administration Agreement, the Fund pays Princeton
Administrators, L.P (the "Administrator") a monthly fee equal to the annualized
rate of .15 of 1% of the average adjusted weekly net assets of the Fund during
the month. The Administrator prepares financial and regulatory reports for the
Fund and provides clerical and other services.
- --------------------------------------------------------------------------------
NOTE C: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments,
options and U.S. government securities) aggregated $319,426,571 and
$330,268,514, respectively, for the year ended September 30, 2000. There were no
purchases or sales of U.S. government or government agency obligations for the
year ended September 30, 2000.
At September 30, 2000, the cost of investments, for federal income tax purposes
was $255,696,633. According, gross unrealized appreciation of investments was
$5,221,649 and gross unrealized depreciation of investments was $28,917,129,
resulting in net unrealized depreciation of $23,695,480.
At September 30, 2000, the Fund had a capital loss carryforward of $82,090,920
of which $57,455,739 expires in the year 2007 and $24,635,181 expires in the
year 2008.
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
$10,280,625 during the fiscal year. These carryover losses may be used to offset
future capital gains. To the extent they are so used, future capital gains will
not be distributed to shareholders until they exceed available capital loss
carryovers.
1. Options Transactions
For hedging and investment purposes, the Fund purchases and writes (sells) put
and call options on U.S. and foreign securities exchanges and over-the-counter
markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk of
loss of the premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired through
the exercise of call options is increased by premiums paid. The proceeds from
securities sold through the exercise of put options are decreased by the
premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from options
written. The difference between the premium and the amount paid on effecting a
closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase transaction, as a realized loss. If a call option is exercised,
the premium is added to the proceeds from
A-10
ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
the sale of the underlying security in determining whether the Fund has realized
a gain or loss. If a put option is exercised, the premium reduces the cost basis
of the security purchased by the Fund. In writing an option, the Fund bears the
market risk of an unfavorable change in the price of the security underlying the
written option. Exercise of an option written by the Fund could result in the
Fund selling or buying a security at a price different from the current market
value.
Transactions in options written for the year ended September 30, 2000 were as
follows:
Number of
Contracts Premiums
--------- --------
Options outstanding at
the beginning of year.... -0- $ -0-
Options written............. 100,000 48,678
Options terminated in
closing purchase
transactions............. -0- -0-
Options expired............. (100,000) (48,678)
-------- -------
Options oustanding at
September 30, 2000....... $ -0- $ -0-
======== =======
2. Interest Rate Swap Agreements
The Fund may enter into interest rate swaps on sovereign debt obligations to
protect itself from interest rate fluctuations on the underlying debt
instruments and for investment purposes. A swap is an agreement that obligates
two parties to exchange a series of cash flows at specified intervals based upon
or calculated by reference to changes in specified prices or rates for a
specified amount of an underlying asset. The payment flows are usually netted
against each other, with the difference being paid by one party to the other.
Risks may arise as a result of the failure of another party to the swap contract
to comply with the terms of the swap contract. The loss incurred by the failure
of a counterparty is generally limited to the net interest payment to be
received by the Fund, and/or the termination value at the end of the contract.
Therefore, the Fund considers the creditworthiness of each counterparty to a
swap contract in evaluating potential credit risk. Additionally, risks may arise
from unanticipated movements in interest rates or in the value of the underlying
securities.
The Fund records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid in the interest
period. Net interest received or paid on these contracts is recorded as interest
income (or as an offset to interest income). Fluctuations in the value of swap
contracts are recorded for financial statement purposes as net unrealized
appreciation or depreciation on interest rate swap contracts.
At September 30, 2000, the Fund had no outstanding interest rate swap contracts.
NOTE D: Capital Stock
There are 300,000,000 shares of $.01 par value capital stock authorized. Of the
22,196,375 shares of Common Stock outstanding at September 30, 2000, the Adviser
owned 7,100 shares.
During the year ended September 30, 2000 and for the year ended September 30,
1999 the Fund issued 193,135 and 380,881 shares, respectively, in connection
with the dividend reinvestment plan.
A-11
NOTES TO FINANCIAL STATEMENTS (continued) ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
NOTE E: Bank Borrowing
The Fund entered into a Revolving Credit Agreement with Citibank, N.A. which was
renewed on March 23, 1998. The maximum credit available is $95,000,000 and the
amount outstanding as of September 30, 2000 was $57,500,000 with an average
interest rate of 6.87%. Interest payments on current borrowings are based on the
London Interbank Offered Rate plus a premium. The average daily amount of the
loan outstanding during the year ended September 30, 2000 was approximately
$57,500,000 with a related weighted average annualized interest rate of 6.98%.
The Fund is also obligated to pay Citibank, N.A. a facility fee computed at the
rate of .125 of 1% per annum on the average daily unused portion of the
revolving credit.
NOTE F: Concentration of Risk
Investing in securities of foreign companies and foreign governments involves
special risks which include the possibility of future political and economic
development which could adversely affect the value of such securities. Moreover,
securities of many foreign companies and foreign governments and their markets
may be less liquid and their prices more volatile than those of comparable U.S.
companies and the United States Government. The Fund invests in the sovereign
debt obligations of countries that are considered emerging market countries at
the time of purchase. Therefore, the Fund is susceptible to governmental factors
and economic and debt restructuring developments adversely affecting the
economies of these emerging market countries. In addition, these debt
obligations may be less liquid and subject to greater volatility than debt
obligations of more developed countries.
A-12
FINANCIAL HIGHLIGHTS ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
Year Ended September 30,
------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Net asset value, beginning of period................$ 8.39 $ 8.18 $15.84 $13.08 $10.42
------ ------ ------ ------ ------
Income From Investment Operations
Net investment income.................................1.08(a) 1.25(a) 1.41(a) 1.45(a) 1.27
Net realized and unrealized gain (loss) on
investment and option transactions.................(.22) .34 (6.30) 2.62 2.65
---- --- ----- ---- ----
Net increase (decrease) in net asset
value from operations.............................. .86 1.59 (4.89) 4.07 3.92
--- ---- ----- ---- ----
Less: Dividends and Distributions
Dividends from net investment income (1.02) (1.25) (1.56) (1.31) (1.26)
Distributions in excess from net
investment income.................................. -0- (.13) -0- -0- -0-
Distributions from net realized
gains on investments............................... -0- -0- (1.21) -0- -0-
Tax return of capital distribution....................(.14) -0- -0- -0- -0-
---- - - - -
Total dividends and distributions (1.16) (1.38) (2.77) (1.31) (1.26)
----- ----- ----- ----- -----
Net asset value, end of period $.8.09 $ 8.39 $ 8.18 $15.84 $13.08
====== ====== ======= ====== ======
Market value, end of period $.8.50 $10.25 $9.3125 $15.00 $11.75
====== ====== ======= ====== ======
Total Return(b)
Total investment return based on:
Market value (5.41)% 27.06% (23.44)% 40.87% 33.53%
Net asset value....................................9.99% 18.69% (36.22)% 33.64% 40.86%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $179,853 $184,618 $176,920 $336,514 $370,546
Ratio of expenses to average net assets...............2.70% 2.46% 2.56% 2.36% 2.59%
Ratio of expenses to average net assets
excluding interest expense (c).....................1.09% 1.11% 1.03% 1.01% 1.07%
Ratio of net investment income to
average net assets.................................9.55% 11.27% 8.19% 8.00% 8.79%
Portfolio turnover rate............................... 134% 223% 208% 274% 443%
- -------------------------------------------------------------------------------------------------------------------------
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of the 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 the total investment return
based on market value in periods where there is an increase in the discount
or a decrease in the premium of the market value to the net asset value
from the beginning to the end of such periods. Conversely, total investment
return based on net asset value will be lower than total investment return
based on market value in periods where there is a decrease in the discount
or an increase in the premium of the market value to the net asset value
from the beginning to the end of such periods. Total investment return
calculated for a period of less than one year is not annualized.
(c) Net interest expense of 1.61%, 1.35%, 1.53%, 1.35% and 1.52%, respectively,
on loan agreements (See Note E).
A-13
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors ACM Managed Dollar Income Fund,
Inc.
We have audited the accompanying statement of assets and liabilities of ACM
Managed Dollar Income Fund, Inc. (the "Fund"), including the portfolio of
investments, as of September 30, 2000, and the related statements of operations
and cash flows for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with 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 September 30, 2000, 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
Managed Dollar Income Fund, Inc. at September 30, 2000, the results of its
operations and its cash flows for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated periods, in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
New York, New York
November 6, 2000
A-14
PORTFOLIO OF INVESTMENTS
September 30, 2000 ACM Managed Dollar Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Principal
Amount Amount
(000) U.S. $ Value (000) U.S. $ Value
- ------------------------------------------------------------------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS--60.5% VENEZUELA--3.9%
OTHER SOVEREIGN DEBT Republic of Venezuela
OBLIGATIONS--40.4% 9.25%, 9/15/27.............. $ 11,000 $ 7,260,000
ARGENTINA--4.6% ----------
Republic of Argentina Total Other Sovereign Debt
9.75%, 9/19/27.............. $ 3,000 $ 2,520,000 Obligations
12.125%, 2/25/19.............. 6,000 6,000,000 (cost $76,231,630).......... 74,597,775
---------- ----------
8,520,000
---------- NON-COLLATERALIZED
BRADY BONDS--16.0%
BRAZIL--7.2%
COLOMBIA--4.5% Republic of Brazil--C Bonds
Republic of Colombia 8.00%, 4/15/14 (c).......... 13,148 8,366,178
8.625%, 4/01/08............... 5,000 4,025,000 Republic of Brazil
9.75%, 4/23/09................ 5,000 4,287,500 NMB L FRN
---------- 5.9375%, 4/15/09............ 7,000 4,926,600
8,312,500 ----------
---------- 13,292,778
----------
BULGARIA--3.8%
KAZAKHSTAN--2.7% Republic of Bulgaria IAB
Republic of Kazakhstan FRN
13.625%, 10/18/04 (a)......... 5,000 4,975,000 6.50%, 7/28/11.............. 10,000 7,088,000
---------- ----------
PERU--2.1%
LEBANON--1.6% Republic of Peru FLIRB
Republic of Lebanon 3.75%, 3/07/17 (d).......... 7,000 3,771,600
10.25%, 10/06/09 (a).......... 3,000 3,003,750 ----------
----------
VENEZUELA--2.9%
Republic of Venezuela
MEXICO--9.9% FLIRB
United Mexican States Series A
Series XW 6.875%, 3/31/07 (d)......... 7,143 5,392,814
10.375%, 2/17/09.............. 18,000 18,265,500 ----------
---------- Total Non-Collateralized
Brady Bonds
(cost $29,651,053).......... 29,545,192
RUSSIA--7.8% ----------
Ministry Finance of Russia
Series VI
3.00%, 5/14/06................ 26,750 5,451,650 LOAN PARTICIPATION--4.1%
Russian Principal Loans FRN MOROCCO--4.1%
6.0625%, 12/15/20 (b)......... 7,250 634,375 Kingdom of Morocco
Russian Federation Loan Participation FRN
8.75%, 7/24/05................ 20,000 8,250,000 Series A
---------- 5.906%, 1/01/09
14,336,025 (cost $7,873,314)........... 9,048 7,645,238
---------- ----------
TURKEY--5.4% Total Sovereign Debt Obligations
Republic of Turkey (cost $113,755,997)......... 111,788,205
12.375%, 6/15/09.............. 10,000 9,925,000 -----------
----------
A-15
PORTFOLIO OF INVESTMENTS (continued) ACM Managed Dollar Income Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Principal Principal
Amount Amount
(000) U.S. $ Value (000) U.S. $ Value
- -----------------------------------------------------------------------------------------------------------------------------------
..
U.S. CORPORATE DEBT OBLIGATIONS--48.4% ENERGY--4.5%
AGRICULTURE--1.8% Continental Resources, Inc.
Trans-Resources, Inc. 10.25%, 8/01/08.................$ 5,000 $ 4,150,000
Series B Eott Energy Partners LP
10.75%, 3/15/08 .................$3,750 $ 3,393,750 11.00%, 10/01/09................ 4,000 4,060,000
---------- ----------
BROADCASTING & 8,210,000
CABLE--0.5% ----------
Classic Cable, Inc.
9.375%, 8/01/09 (a)...............1,000 970,000 GROCERY--1.4%
---------- DiGiorgio Corp. Series B
10.00%, 6/15/07................. 2,750 2,557,500
BROADCASTING & ----------
MEDIA--1.5%
Marvel Enterprises, Inc.
12.00%, 6/15/09...................3,000 2,745,000 LEISURE &
---------- ENTERTAINMENT--1.1%
TVN Entertainment Corp.
CHEMICALS--1.0% 14.00%, 8/01/08 (a)............. 5,000 2,000,000
Royster-Clark, Inc. warrants, expiring
10.25%, 4/01/09 (a)...............2,000 1,800,000 8/01/08 (e)(f).................. 5,000 12,500
---------- ----------
2,012,500
----------
COMMUNICATIONS--12.3%
Econophone, Inc.
13.50%, 7/15/07...................4,000 4,295,000 METAL/MINERALS--7.0%
Logix Communications ACME Metals, Inc.
Enterprises, Inc. 10.875%, 12/15/07 (b)........... 6,000 1,110,000
12.25%, 6/15/08...................5,000 4,325,000 Commonwealth Aluminum Corp.
Viatel, Inc. 10.75%, 10/01/06................ 3,000 3,003,750
11.50%, 3/15/09...................6,000 5,790,000 Doe Run Resources Corp.
Williams Communications Series B
Group, Inc. 11.25%, 3/15/05................. 6,000 4,950,000
10.875%, 10/01/09.................4,000 3,969,960 Republic Technology, Inc.
Winstar Communications, Inc. 13.75%, 7/15/09 (a)............. 4,000 3,820,000
11.00%, 3/15/08...................5,000 4,343,750 ----------
---------- 12,883,750
22,723,710 ----------
---------- PAPER PACKAGING--4.9%
Riverwood International
CONSUMER 10.25%, 4/01/06................. 4,000 3,950,000
MANUFACTURING--3.4% Russell-Stanley Holdings, Inc.
Generac Portable Products, LLC 10.875%, 2/15/09................ 5,000 5,075,000
11.25%, 7/01/06...................4,000 4,120,000 ----------
International Knife and Saw, Inc. 9,025,000
11.375%, 11/15/06.................2,740 2,130,350 ----------
---------- PETROLEUM PRODUCTS--1.6%
6,250,350 Chesapeake Energy Corp.
---------- Series B
9.625%, 5/01/05................. 3,000 2,887,500
A-16
ACM Managed Dollar Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Principal
Amount Amount
(000) U.S. $ Value (000) U.S. $ Value
- ------------------------------------------------------------------------------------------------------------------------------------
PLASTICS--2.6% PHILIPPINES--2.6%
Foamex LP Bayan Telecommunications
13.50%, 8/15/05................ $ 5,000 $ 4,868,750 13.50%, 7/15/06 (a).......... $ 5,000 $ 4,750,000
---------- ----------
TECHNOLOGY--1.6% UNITED KINGDOM--1.9%
PSINet, Inc. ZSC Specialty Chemicals Plc.
11.00%, 8/01/09 (a)............ 3,000 2,977,500 11.00%, 7/01/09 (a).......... 3,500 3,530,625
---------- ----------
TELECOMMUNICATIONS--3.2%
GST Equipment Funding, Inc.
13.25%, 5/01/07................ 5,000 5,250,000 Total Non-U.S. Corporate
Iridium LLC Capital Corp. Debt Obligations
Series B (cost $32,507,847)........... 31,191,500
14.00%, 7/15/05 (b)............ 5,000 575,000 ----------
----------
5,825,000
---------- NON-CONVERTIBLE
PREFERRED STOCK--3.0%
Nextel Communications, Inc.
Series E
Total U.S. Corporate Debt Obligations 11.125% (g)
(cost $105,696,839)............ 89,130,310 (cost $5,824,890)............ 5,669 5,569,792
---------- ----------
NON-U.S. CORPORATE DEBT
OBLIGATIONS--16.9% COMMON STOCKS &
ARGENTINA--5.5% WARRANTS--0.5%
Compania Alimentos Fargo OpTel, Inc.
13.25%, 8/01/08................ 4,500 3,498,750 Common Stock (e)(h).......... 8,500 85
IMPSA Metalurgicas Pescarm Uniroyal
9.50%, 5/31/02 (a)............. 5,000 3,162,500 Technology Corp. (e)(i)...... 30,000 225,000
Supercanal Holdings, SA Viatel, Inc.
12.00%, 11/07/02............... 3,478 3,477,625 Common Stock (e)(h).......... 24,191 713,635
---------- ----------
10,138,875
----------
CANADA--1.6% Total Common Stock & Warrants
Repap New Brunswick (cost $56,890)............... 938,720
11.50%, 6/01/04 (a)............ 3,000 3,030,000 ----------
----------
HONG KONG--1.3% TIME DEPOSIT--6.3%
Guangdong Enterprises State Street Bank & Trust Co.
8.875%, 5/22/07 (a)............ 10,400 2,392,000 4.875%, 10/01/99
---------- (cost $11,673,000)........... 11,673 11,673,000
----------
MEXICO--2.2%
Innova, S. de R.L.
12.875%, 4/01/07............... 5,000 4,037,500 TOTAL INVESTMENTS--135.6%
---------- (cost $269,515,463).......... 250,291,527
Other assets less liabilities--(35.6%) (65,673,607)
NETHERLANDS--1.8% ----------
DGS International
Finance Co. BV
10.00%, 6/01/07 (a)............ 5,000 3,312,500 NET ASSETS--100%................ $ 184,617,920
---------- -----------
A-17
PORTFOLIO OF INVESTMENTS (continued) ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
1999, these securities amounted to $39,723,875 or 21.5% of net assets.
(b) Security is in default and is non-income producing.
(c) Coupon consists of 5.00% cash payment and 3.00% paid-in-kind.
(d) Coupon changes periodically upon a predetermined schedule. Stated interest
rate in effect at September 30, 1999.
(e) Non-income producing security.
(f) Each warrant entitles the holder to purchase 10.777 shares at an exercise
price of $0.01 per share. Expires 8/01/08.
(g) Paid-in-kind preferred, quarterly stock payments.
(h) Common stock, par value is $0.01 per share.
(i) Each warrant entitles the holder to purchase one share at an exercise price
of $4.375 per share. Expires 6/01/03.
Glossary of Terms:
FLIRB Front Loaded Interest Reduction Bond.
FRN Floating Rate Note.
IAB Interest Arrears Bond.
NMB New Money Bonds.
PDI Past Due Interest.
See notes to financial statements.
A-18
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999 ACM Managed Dollar Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $269,515,463)......................$ 250,291,527
Cash.......................................................................... 504
Interest receivable........................................................... 7,375,389
Receivable for investment securities sold..................................... 3,357,024
Prepaid expenses and other assets............................................. 64,862
------
Total assets.................................................................. 261,089,306
-----------
LIABILITIES
Loan payable.................................................................. 57,500,000
Payable for investment securities purchased................................... 15,921,193
Dividend payable.............................................................. 2,475,365
Interest payable.............................................................. 173,580
Advisory fee payable.......................................................... 169,894
Administrative fee payable.................................................... 33,976
Accrued expenses and other liabilities........................................ 197,378
-------
Total liabilities............................................................. 76,471,386
----------
NET ASSETS $ 184,617,920
================
COMPOSITION OF NET ASSETS
Common stock, at par $ 220,032
Additional paid-in capital.................................................... 297,657,051
Distributions in excess of net investment income.............................. (2,018,086)
Accumulated net realized loss on investment transactions...................... (92,017,141)
Net unrealized depreciation of investments.................................... (19,223,936)
-----------
$ 184,617,920
================
NET ASSET VALUE PER SHARE (based on 22,003,240 shares outstanding)............... $8.39
=====
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
A-19
STATEMENT OF OPERATIONS
Year Ended September 30, 1999 ACM Managed Dollar Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest.......................................................................... $ 32,719,443
Dividends......................................................................... 452,075
---------
$ 33,171,518
EXPENSES
Advisory fee...................................................................... 1,815,161
Administrative fee................................................................ 363,027
Loan fees......................................................................... 102,614
Audit and legal................................................................... 101,863
Reports and notices to shareholders............................................... 92,517
Custodian......................................................................... 69,446
Transfer agency................................................................... 37,069
Directors' fees................................................................... 35,940
Registration fees................................................................. 33,205
Amortization of organization expenses............................................. 474
Miscellaneous..................................................................... 28,365
---------
Total expenses before interest expense............................................ 2,679,681
Interest expense.................................................................. 3,262,948
---------
Total expenses.................................................................... 5,942,629
----------
Net investment income............................................................. 27,228,889
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions...................................... (56,696,741)
Net change in unrealized depreciation of investments and other assets............. 63,688,493
----------
Net gain on investments........................................................... 6,991,752
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS........................................... $ 34,220,641
=============
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
September 30, 1999 September 30, 1998
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income.............................................................$ 27,228,889 $ 30,275,798
Net realized loss on investment transactions...................................... (56,696,741) (31,929,017)
Net change in unrealized appreciation/depreciation
of investments and other assets................................................. 63,688,493 (103,671,471)
---------- ------------
Net increase (decrease) in net assets from operations............................. 34,220,641 (105,324,690)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income............................................................. (27,228,889) (33,486,944)
Distributions in excess of net investment income.................................. (2,893,503) -0-
Net realized gain on investments.................................................. -0- (25,704,945)
---------- ------------
Net decrease in net assets resulting from dividends & distributions to
shareholders.................................................................... (30,122,392) (59,191,889)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in the issuance of Common Stock............... 3,599,304 4,922,505
---------- ------------
Total increase (decrease)......................................................... 7,697,553 (159,594,074)
NET ASSETS
Beginning of year................................................................. 176,920,367 336,514,441
----------- ------------
End of year (including undistributed net investment income
of $1,169,785 at September 30, 1998)...................................... $ 184,617,920 $ 176,920,367
============= ==============
- ------------------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
A-20
STATEMENT OF CASH FLOWS
For the Year Ended September 30, 1999 ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH FROM OPERATING ACTIVITIES
Interest and dividends received.......................................................$ 31,790,926
Interest expense paid.................................................................. (3,199,423)
Operating expenses paid................................................................ (2,626,398)
----------
Net increase in cash from operating activities............................................ $ 25,965,105
INVESTING ACTIVITIES
Purchases of long-term investments.....................................................(520,266,790)
Proceeds from disposition of long-term investments..................................... 517,888,800
Purchases of short-term investments, net............................................... (4,726,625)
----------
Net decrease in cash from investing activities............................................ (7,104,615)
FINANCING ACTIVITIES(a)
Cash dividends and distributions paid.................................................. (26,480,238)
Proceeds from borrowings............................................................... 7,000,000
----------
Net decrease in cash from financing activities............................................ (19,480,238)
-----------
Net decrease in cash...................................................................... (619,748)
Cash at beginning of year................................................................. 620,252
-----------
Cash at end of year....................................................................... $ 504
============
- ------------------------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM
OPERATIONS TO NET INCREASE IN CASH FROM OPERATING
ACTIVITIES
Net increase in net assets from operations................................................ $ 34,220,641
ADJUSTMENTS
Decrease in interest receivable........................................................$ 1,878,884
Accretion of bond discount............................................................. (3,259,476)
Decrease in accrued expenses and other assets.......................................... 53,283
Increase in interest payable........................................................... 63,525
Net gain on investments................................................................ (6,991,752)
----------
Total adjustments......................................................................... (8,255,536)
----------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES............................................ $ 25,965,105
============
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Non-cash financing activities not included herein consist of reinvestment
of dividends and distributions. See notes to financial statements.
A-21
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
NOTE A: Significant Accounting Policies
ACM Managed Dollar Income Fund, Inc. (the "Fund") was incorporated under the
laws of the State of Maryland on August 10, 1993 and is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end management
investment company. The financial statements have been prepared in conformity
with generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. Security Valuation
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are generally
valued at the last reported sale price or, if there was no sale on such day, the
last bid price quoted on such day. If no bid prices are quoted, then the
security is valued at the mean of the bid and asked prices as obtained on that
day from one or more dealers regularly making a market in that security.
Securities traded on the over-the-counter market, and securities listed on a
foreign securities exchange whose operations are similar to the United States
over-the-counter market and securities listed on a national securities exchange
whose primary market is believed to be over-the-counter are valued at the mean
of the closing bid and asked price provided by two or more dealers regularly
making a market in such securities. U.S. government securities and other debt
securities which mature in 60 days or less are valued at amortized cost unless
this method does not represent fair value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by, or in accordance with procedures approved by, the Board of
Directors. Fixed income securities may be valued on the basis of prices provided
by a pricing service when such prices are believed to reflect the fair market
value of such securities. Listed put and call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that day, such
securities will be valued at the closing bid prices on that day.
2. Organization Expenses
Organization expenses of approximately $40,000 were deferred and were amortized
on a straight-line basis through October 1998.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute substantially all
of its investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. Investment Income and Investment Transactions
Interest income is accrued daily. Dividend income is recorded on the ex-dividend
date. Investment transactions are accounted for on the date the investments are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts as adjustments to interest income.
5. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gain distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences do not require such
reclassification.
A-22
ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
During the current fiscal year, permanent differences, primarily due to book to
tax differences on accrual of income, resulted in a net decrease in accumulated
net realized loss on investment transactions, a net decrease in distributions in
excess of net investment income and a corresponding increase in additional
paid-in capital. This reclassification had no effect on net assets.
- --------------------------------------------------------------------------------
NOTE B: Advisory, Administrative Fees, and Other Transactions with Affiliates
Under the terms of the Investment Advisory Agreement, the Fund pays Alliance
Capital Management, L.P. (the "Adviser") an advisory fee equal to an annualized
rate of .75 of 1% of the average adjusted weekly net assets of the Fund during
the month.
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Adviser, the Fund reimburses AFS for
costs relating to servicing phone inquiries for the Fund. The Fund reimbursed
AFS $1,935 during the year ended September 30, 1999.
Under the terms of an Administration Agreement, the Fund pays Princeton
Administrators, L.P (the "Administrator") a monthly fee equal to the annualized
rate of .15 of 1% of the Fund's average adjusted weekly net assets. The
Administrator prepares certain financial and regulatory reports for the Fund and
provides clerical and other services.
- --------------------------------------------------------------------------------
NOTE C: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments,
options and U.S. government securities) aggregated $535,556,084 and
$521,783,261, respectively, for the year ended September 30, 1999. There were no
purchases or sales of U.S. government or government agency obligations for the
year ended September 30, 1999.
At September 30, 1999, the cost of investments, including options purchased, for
federal income tax purposes was $270,391,981. Accordingly, gross unrealized
appreciation of investments was $4,868,094 and gross unrealized depreciation of
investments was $24,968,548, resulting in net unrealized depreciation of
$20,100,454.
At September 30, 1999, the Fund had a capital loss carryforward of $57,455,739
which expires in the year 2007.
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
$33,684,884 during the fiscal year. To the extent that the carryover losses are
used to offset future capital gains, it is probable that gain offset will not be
distributed to shareholders.
1. Options Transactions
For hedging and investment purposes, the Fund purchases and writes (sells) put
and call options on U.S. and foreign government securities that are traded on
U.S. and foreign securities exchanges and over-the-counter markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk of
loss of the premium and a change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired through
the exercise of call options is increased by premiums paid. The proceeds from
securities sold through the exercise of put options are decreased by the
premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the
A-23
NOTES TO FINANCIAL STATEMENTS (continued) ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
Fund on the expiration date as realized gains from options written. The
difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is also treated as a
realized gain, or if the premium is less than the amount paid for the closing
purchase transaction, as a realized loss. If a call option is exercised, the
premium received is added to the proceeds from the sale of the underlying
security in determining whether the Fund has realized a gain or loss. If a put
option is exercised, the premium received reduces the cost basis of the security
purchased by the Fund. In writing an option, the Fund bears the market risk of
an unfavorable change in the price of the security underlying the written
option. Exercise of an option written by the Fund could result in the Fund
selling or buying a security at a price different from the current market value.
There were no transactions in options written for the year ended September 30,
1999.
2. Interest Rate Swap Agreements
The Fund may enter into interest rate swaps on sovereign debt obligations to
protect itself from interest rate fluctuations on the underlying debt
instruments and for investment purposes. A swap is an agreement that obligates
two parties to exchange a series of cash flows at specified intervals based upon
or calculated by reference to changes in specified prices or rates for a
specified amount of an underlying asset. The payment flows are usually netted
against each other, with the difference being paid by one party to the other.
Risks may arise as a result of the failure of another party to the swap contract
to comply with the terms of the swap contract. The loss incurred by the failure
of a counterparty is generally limited to the net interest payment to be
received by the Fund, and/or the termination value at the end of the contract.
Therefore the Fund considers the creditworthiness of each counterparty to a swap
contract in evaluating potential credit risk. Additionally, risks may arise from
unanticipated movements in interest rates or in the value of the underlying
securities.
The Fund records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid in the interest
period. Net interest received or paid on these contracts is recorded as interest
income (or as an offset to interest income). Fluctuations in the value of swap
contracts are recorded for financial statement purposes as net unrealized
appreciation or depreciation on interest rate swap contracts.
At September 30, 1999, the Fund had no outstanding interest rate swap contracts.
NOTE D: Capital Stock
There are 300,000,000 shares of $.01 par value capital stock authorized. Of the
22,003,240 shares of Common Stock outstanding at September 30, 1999, the Adviser
owned 7,100 shares.
During the years ended September 30, 1999 and September 30, 1998, the Fund
issued 380,881 and 378,603 shares, respectively, in connection with the dividend
reinvestment plan.
NOTE E: Bank Borrowing
The Fund entered into a Revolving Credit Agreement with Citibank, N.A. which was
renewed on March 23, 1998. The maximum credit available is $95,000,000 and the
amount outstanding as of September 30, 1999 was $57,500,000 with an average
interest rate of 6.07%. Interest payments on current borrowings are based on the
London Interbank Offered Rate plus a premium. The average daily amount of the
loan outstanding during the year ended September 30, 1999 was approximately
$54,984,932 with a related weighted average annualized interest rate of 5.93%.
The Fund is also obligated to pay Citibank, N.A. a facility fee computed at the
rate of .125 of 1% per annum on the average daily unused portion of the
revolving credit.
A-24
ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
NOTE F: Concentration of Risk
Investing in securities of foreign companies and foreign governments involves
special risks which include the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies and foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies and the United States Government. The Fund invests in
the sovereign debt obligations of countries that are considered emerging market
countries at the time of purchase. Therefore, the Fund is susceptible to
governmental factors and economic and debt restructuring developments adversely
affecting the economics of these emerging market countries. In addition, these
debt obligations may be less liquid and subject to greater volatility than debt
obligations of more developed countries.
A-25
FINANCIAL HIGHLIGHTS ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
Selected Data For A Share Of Common Stock Outstanding Throughout Each Year
Year Ended September 30,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Net asset value, beginning of year.............. $ 8.18 $ 15.84 $ 13.08 $ 10.42 $ 11.29
--------- ----------- ------------ ------------ ------------
Income From Investment Operations
Net investment income............................. 1.25(a) 1.41(a) 1.45(a) 1.27 1.32
Net realized and unrealized gain (loss) on
investment and option transactions............. .34 (6.30) 2.62 2.65 (.85)
--- ----- ---- ---- ----
Net increase (decrease) in net asset
value from operations.......................... 1.59 (4.89) 4.07 3.92 .47
---- ----- ---- ---- ---
Less: Dividends and Distributions
Dividends from net investment income.............. (1.25) (1.56) (1.31) (1.26) (1.32)
Distributions in excess of net
investment income.............................. (.13) -0- -0- -0- -0-
Distributions from net realized
gains on investments........................... -0- (1.21) -0- -0- -0-
Tax return of capital distribution................ -0- -0- -0- -0- (.02)
---- ----- ---- ---- ---
Total dividends and distributions................. (1.38) (2.77) (1.31) (1.26) (1.34)
----- ----- ----- ----- -----
Net asset value, end of year................. $ 8.39 $ 8.18 $ 15.84 $ 13.08 $ 10.42
=========== ============ ============ ============ ============
Market value, end of year.................... $ 10.25 $ 9.3125 $ 15.00 $ 11.75 $ 9.875
=========== ============ ============ ============ ============
Total Return(b)
Total investment return based on:
Market value................................... 27.06% (23.44)% 40.87% 33.53% .92%
Net asset value................................ 18.69% (36.22)% 33.64% 40.86% 6.11%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) $..184,618 $ 176,920 $ 336,514 $ 370,546 $ 295,013
Ratio of expenses to average net assets........... 2.46% 2.56% 2.36% 2.59% 2.83%
Ratio of expenses to average net assets
excluding interest expense (c)................. 1.11% 1.03% 1.01% 1.07% 1.17%
Ratio of net investment income to
average net assets............................. 11.27% 8.19% 8.00% 8.79% 10.56%
Portfolio turnover rate........................... 223% 208% 274% 443% 344%
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of the 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 the total investment return
based on market value in periods where there is an increase in the discount
or a decrease in the premium of the market value to the net asset value
from the beginning to the end of such periods. Conversely, total investment
return based on net asset value will be lower than total investment return
based on market value in periods where there is a decrease in the discount
or an increase in the premium of the market value to the net asset value
from the beginning to the end of such periods.
(c) Net interest expense of 1.35%, 1.53%, 1.35%, 1.52% and 1.66% respectively,
on loan agreements (See Note E).
A-26
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ACM Managed Dollar Income Fund
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors ACM Managed Dollar Income Fund,
Inc.
We have audited the accompanying statement of assets and liabilities of ACM
Managed Dollar Income Fund, Inc. (the "Fund"), including the portfolio of
investments, as of September 30, 1999, and the related statements of operations
and cash flows for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of September 30, 1999, 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
Managed Dollar Income Fund, Inc. at September 30, 1999, the results of its
operations and its cash flows for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated periods, in conformity with generally
accepted accounting principles.
/S/ ERNST & YOUNG LLP
New York, New York
November 12, 1999
A-27