<PAGE>
As filed with the Securities and Exchange Commission
on June 21, 1996
Securities Act File No. 333-04015
Investment Company Act File No. 811-07108
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
(CHECK APPROPRIATE BOX OR BOXES)
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 4
Exact Name of Registrant as Specified in Charter:
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
Address of Principal Executive Offices
(Number, Street, City, State, Zip Code):
1345 Avenue of the Americas
New York, New York 10105
Registrant's Telephone Number, Including Area Code:
(212) 969-1000
Name and Address (Number, Street, City, State, Zip Code)
Of Agent For Service:
EDMUND P. BERGAN, JR.
Senior Vice President and General Counsel
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of The Americas
New York, New York 10105
<PAGE>
With Copies to:
Thomas G. MacDonald Gary S. Schpero
Seward & Kissel Simpson Thacher & Bartlett
One Battery Park Plaza 425 Lexington Avenue
New York, New York 10004 New York, New York 10017
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as
practicable after the effective date of this Registration
Statement.
If any securities being registered on this form will be offered
on a delayed or continuous basis in reliance on Rule 415 under
the Securities Act of 1933, other than securities offered in
connection with a dividend reinvestment plan, check the following
box /X/
____________________
It is proposed that this filing will become effective when
declared effective pursuant to section 8(c)
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
_________________________________________________________________
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF OFFERING AGGREGATE
SECURITIES AMOUNT BEING PRICE PER OFFERING AMOUNT OF
BEING REGISTERED REGISTERED UNIT (1) PRICE(1) REGISTRATION FEE(2)
________________ ____________ _________ __________ ________________
Common Stock,
$.01 par value 3,605,295 $12.75 $45,967,511 $15,851
(1) Estimated pursuant to Rule 457(c) under the Securities Act of
1933 on the basis of market price per share on the New York
Stock Exchange on May 10, 1996.
(2) The registration fee was paid on May 17, 1996 in connection
with the initial filing of this Registration Statement on
that date.
The registrant hereby amends this Registration Statement under
the Securities Act of 1933 on such date or dates as may be
necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or
until the Registration Statement shall become effective on such
<PAGE>
date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE>
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
FORM N-2
CROSS-REFERENCE SHEET
Location in
N-2 Item Number Prospectus (Caption)
Part A
Item 1 Outside Front Cover........ Outside Front Cover Page
Item 2 Inside Front and Outside
Back Cover Page.......... Inside Front Cover Page;
Outside Back Cover Page
Item 3 Fee Table and Synopsis..... Expense Information;
Prospectus Summary
Item 4 Financial Highlights....... Financial Highlights
Item 5 Plan of Distribution....... Outside Front Cover page;
The Offer; Distribution
Arrangements
Item 6 Selling Shareholders....... Not Applicable
Item 7 Use of Proceeds............ Prospectus Summary; Use of
Proceeds; Investment
Objective and Policies
Item 8 General Description of the
Registrant............... Outside front cover page;
Prospectus Summary; The
Fund; Net Asset Value and
Market Price Information;
Investment Objective and
Policies; Special Risk
Considerations; Description
of Common Stock
Item 9 Management................. Prospectus Summary;
Management of the Fund;
Custodian; Transfer Agent,
Dividend-Paying Agent and
Registrar
<PAGE>
Item 10 Capital Stock, Long-term
Debt, and Other
Securities............... Dividends and Distribution;
Dividend Reinvestment Plan;
Taxation; The Offer;
Description of Common Stock
Item 11 Defaults and Arrears on
Senior Securities........ Not Applicable
Item 12 Legal Proceedings.......... Not Applicable
Item 13 Table of Contents of the
Statement of Additional
Information.............. Table of Contents of the
Statement of Additional
Information
PART B
Item 14 Cover Page................. Outside Front Cover Page
Item 15 Table of Contents.......... Outside Front Cover Page
Item 16 General Information and
History.................. Not Applicable
Item 17 Investment Objective and
Policies................. Certain Investment
Practices; Investment
Restrictions
Item 18 Management................. Management of the Fund
Item 19 Control Persons and
Principal Holders of
Securities............... Management of the Fund;
Certain Owners of Record
Item 20 Investment Advisory and
Other Services........... Management of the Fund
Item 21 Brokerage Allocation and
Other Practices.......... Brokerage and Portfolio
Transactions
Item 22 Tax Status................. Taxation
Item 23 Financial Statements....... Financial Statements
<PAGE>
PART C
Items 24-33 have been answered in order in Part C
<PAGE>
<PAGE>
SUBJECT TO COMPLETION DATED JUNE 21, 1996
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
2,884,235 SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF
RIGHTS TO SUBSCRIBE FOR SUCH SHARES
--------
Alliance World Dollar Government Fund, Inc. (the "Fund") is issuing to its
shareholders of record as of the close of business on June 21, 1996 (the
"Record Date") non-transferable rights ("Rights") entitling the holders thereof
to subscribe for an aggregate of 2,884,235 shares ("Shares") of the Fund's
Common Stock at the rate of one share of Common Stock for every three Rights
held (the "Offer"). Shareholders of record will receive one Right for each
whole share of Common Stock held on the Record Date. Shareholders who fully
exercise their Rights will be entitled to subscribe for additional shares of
Common Stock pursuant to the Over-Subscription Privilege as described herein.
The Fund may increase the number of Shares of Common Stock subject to
subscription by up to 25% of the Shares, or 721,058 Shares, for an aggregate
total of 3,605,293 Shares in order to cover over-subscription requests.
Fractional shares will not be issued upon the exercise of Rights; accordingly,
Rights will be exercisable only in integral multiples of three. The Rights are
non-transferable and, accordingly, may not be purchased or sold. The Rights
will not be admitted for trading on the New York Stock Exchange or any other
exchange. See "The Offer." THE SUBSCRIPTION PRICE PER SHARE (THE "SUBSCRIPTION
PRICE") WILL BE 95% OF THE LOWER OF (i) THE AVERAGE OF THE LAST REPORTED SALE
PRICES OF SHARES OF THE FUND'S COMMON STOCK ON THE NEW YORK STOCK EXCHANGE ON
THE DATE OF THE EXPIRATION OF THE OFFER (THE "PRICING DATE") AND ON THE FOUR
PRECEDING BUSINESS DAYS AND (ii) THE NET ASSET VALUE PER SHARE AS OF THE CLOSE
OF BUSINESS ON THE PRICING DATE.
The Fund announced the Offer after the close of trading on the New York Stock
Exchange on May 17, 1996. Shares of the Common Stock trade on that exchange
under the symbol "AWG". The net asset values per share of Common Stock at the
close of business on May 17, 1996 and June 21, 1996 were $13.56 and $ ,
respectively. The last reported sale prices of shares of the Common Stock on
the New York Stock Exchange on those dates were $12.50 and $ , respectively.
THE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON JULY 19, 1996 (THE
"EXPIRATION DATE"), UNLESS EXTENDED AS DESCRIBED HEREIN.
Upon the completion of the Offer, shareholders who do not fully exercise
their Rights will own a smaller proportional interest in the Fund than would be
the case if the Offer had not been made. In addition, because the Subscription
Price per Share will be less than the net asset value per share and because the
Fund will incur expenses in connection with the Offer, the Offer will result in
a dilution of net asset value per share for all shareholders. Such dilution
will disproportionately affect shareholders who do not exercise their Rights.
If the Subscription Price per Share were to be substantially less than the net
asset value per share, such dilution would be substantial. Shareholders will
have no right to rescind their subscriptions after receipt of their payment for
Shares by the Subscription Agent. See "Special Risk Considerations--Dilution
and the Effect of Non-Participation in the Offer." For a trading history of the
Fund see "Net Asset Value and Market Price Information."
(Continued on next page)
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
SUBSCRIPTION ESTIMATED PROCEEDS TO
PRICE(1) SALES LOAD(2) FUND(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share...............................
- --------------------------------------------------------------------------------
Total Maximum(4)........................
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
--------
SMITH BARNEY INC.
The date of this Prospectus is June , 1996.
<PAGE>
(Continued from the previous page)
The Fund is a non-diversified, closed-end management investment company. The
Fund's investment objective is to seek high current income by investing
exclusively in fixed income securities denominated in U.S. dollars. In seeking
to achieve this objective, the Fund invests substantially all of its assets in
(i) U.S. dollar-denominated debt obligations 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 ("Sovereign Debt Obligations") and
(ii) zero coupon obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities ("Zero Coupon Obligations"). Under normal
circumstances, the Fund invests at least 75% of its total assets in (i)
Sovereign Debt Obligations of a type customarily referred to as "Brady Bonds"
that are issued as part of debt restructurings and that are collateralized in
full as to principal due at maturity (but not as to interest) by Zero Coupon
Obligations having the same maturity ("Collateralized Brady Bonds") and (ii)
Zero Coupon Obligations. See "Investment Objective and Policies." There can be
no assurance that the Fund's investment objective will be achieved.
Investment in the Fund entails certain risks not associated with other
investments. The net asset value of the Fund's shares will change as the levels
of interest rates fluctuate. When interest rates decline, the net asset value
of the Fund's shares can be expected to rise. Conversely, when interest rates
rise, such net asset value can be expected to decline. In addition, because it
invests in Sovereign Debt Obligations, the Fund will be exposed to the direct
or indirect consequences of political, social and economic changes in various
emerging market countries. Furthermore, substantially all of the Fund's assets
may be invested in high yield, high risk debt securities that are low-rated
(i.e., below investment grade) or unrated and, in both cases, that are
considered to be predominantly speculative as regards the issuers' capacity to
pay interest and repay principal. SEE "SPECIAL RISK CONSIDERATIONS."
This Prospectus sets forth concisely information about the Fund that a
prospective investor ought to know before investing and should be retained for
future reference. A Statement of Additional Information dated June , 1996 (the
"SAI") containing additional information about the Fund has been filed with the
Securities and Exchange Commission and is incorporated by reference in its
entirety into this Prospectus. A copy of the SAI, the table of contents of
which appears on page 48 of this Prospectus, may be obtained without charge by
calling the Fund at (800) 227-4618.
The Fund's investment adviser and administrator is Alliance Capital
Management L.P. ("Alliance"), a leading international investment manager. See
"Management of the Fund." The address of the Fund is 1345 Avenue of the
Americas, New York, New York 10105 and its telephone number is (800) 733-8481,
Extension 347. All questions and inquiries relating to the Offer should be
directed to the Information Agent, Shareholder Communications Corporation, 17
State Street, New York, New York 10004, (800) 733-8481, Extension 347.
- --------
(1) Estimated on the basis of the [closing market price per share on the New
York Stock Exchange] on June , 1996.
(2) In connection with the Offer, Smith Barney Inc. (the "Dealer Manager") and
other broker-dealers soliciting the exercise of Rights will receive
soliciting fees equal to 2.50% of the Subscription Price per Share for each
Share issued pursuant to the exercise of the Rights and the Over-
Subscription Privilege. The Fund has also agreed to pay the Dealer Manager
a fee for financial advisory services and marketing assistance in
connection with the Offer equal to 1.25% of the Subscription Price per
Share for each Share issued upon exercise of the Rights and pursuant to the
Over-Subscription Privilege and has agreed to indemnify the Dealer Manager
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended (the "Securities Act"). See "Distribution
Arrangements."
(3) Before deduction of offering expenses incurred by the Fund, estimated at
$550,000, including up to $100,000 to be paid to the Dealer Manager in
reimbursement for its reasonable expenses. Funds received by check prior to
the final due date of this Offer will be deposited into a segregated
interest bearing account (which interest will be paid to the Fund
regardless of whether Shares are issued and sold by the Fund) at The Bank
of New York pending proration and distribution of Shares.
(4) Assumes all Rights are exercised at the Estimated Subscription Price.
Pursuant to the Over-Subscription Privilege, the Fund may at its discretion
increase the number of Shares subject to subscription by up to 25% of the
Shares offered hereby. If the Fund increases the number of Shares subject
to subscription by 25%, the aggregate maximum Estimated Subscription Price,
Estimated Sales Load and Estimated Proceeds to the Fund will be $ , $
and $ , respectively.
2
<PAGE>
EXPENSE INFORMATION
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of offering price) (l).......................... 3.75%
ANNUAL EXPENSES (as a percentage of net assets) (2)
Advisory fee (3)............................................................ 1.00%
Other expenses..............................................................
Administration fee (3).................................................... .15%
Other operating expenses.................................................. .28
-----
Total annual expenses......................................................... 1.43%
=====
</TABLE>
- --------
(1) Consists of Dealer Manager and soliciting fees. See "Distribution
Arrangements." The fees will be borne by all of the Fund's shareholders,
including those shareholders who do not exercise their Rights.
(2) Amounts based on the Fund's most recently completed fiscal year, except that
"Other expenses" are based on estimated amounts for the Fund's current
fiscal year and assume that the Fund's shareholders exercise their Rights to
purchase all of the Shares and purchase an additional 25% of the Shares
pursuant to the Over-Subscription Privilege. "Other expenses" do not include
expenses related to the issuance of the Shares, estimated at $550,000.
Annual expenses for the fiscal year ended October 31, 1995 were 1.55% as a
percentage of average net assets.
(3) See "Management of the Fund--Advisory Agreement" and "--Administration
Agreement" herein and in the SAI.
EXAMPLE
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming a 5% annual
return...................................... $51 $81 $113 $202
</TABLE>
The purpose of the foregoing table is to assist the investor in
understanding the various costs and expenses that a shareholder bears directly
or indirectly. The above example is based on an operating expense ratio of
1.43% and assumes reinvestment of all dividends and distributions at net asset
value. The example should not be considered a representation of future
expenses or annual rates of return; actual expenses or annual rates of return
may be greater or less than those shown.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information included elsewhere in this Prospectus and in the Statement
of Additional Information ("SAI") that is incorporated herein by reference.
Investors should carefully consider information set forth under the heading
"Special Risk Considerations."
THE OFFER
PURPOSE OF THE OFFER
The Board of Directors of Alliance World Dollar Government Fund, Inc. (the
"Fund") has determined that it would be in the best interests of the Fund and
its shareholders to increase the assets of the Fund available for investment,
thereby enabling the Fund to more fully take advantage of available investment
opportunities consistent with the Fund's investment objective of seeking high
current income by investing exclusively in fixed income securities denominated
in U.S. dollars. In reaching its decision, the Board of Directors was advised
by Alliance that the raising of new assets would enable the Fund to take
advantage of current opportunities in emerging market sovereign debt markets.
More specifically, Alliance advised the Board of Directors at a May 17, 1996
special meeting that relatively high interest rates then available on Brady
Bonds of emerging market countries provided an attractive investment
opportunity. In Alliance's view, these high interest rates were evidenced by
the "spread" between the yield on 30-year U.S. Treasury bonds and yields on
Brady Bonds of emerging market countries, which increased following the decline
in value of the Mexican currency in late 1994 and subsequent related events.
Alliance was also of the view that the relatively high interest rates on Brady
Bonds of emerging market countries could be expected to decline as conditions
in the market for such Brady Bonds stabilize, thus tending to increase the
market values of the Brady Bonds of emerging market countries and thereby
affording the Fund the opportunity to realize capital gains. For certain
historical information regarding the spread between yields on 30-year U.S.
Treasury bonds and those on Brady Bonds, see "The Offer--Purpose of the Offer."
Alliance also cited the improving credit quality of many emerging market
countries that issue Sovereign Debt Obligations. In addition, the Board of
Directors took into account the fact that a well-subscribed rights offering may
reduce the Fund's expense ratio and considered that such a rights offering
could result in an improvement in the liquidity of the trading market for
shares of the Fund's Common Stock, although no assurance can be given that
either of these results will be achieved. The Board of Directors also
considered alternatives to the Offer, including an underwritten offering of
shares and an offering of transferable rights to purchase shares, as well as
the proposed terms of the Offer, the estimated expenses of the Offer, and its
dilutive effect, including its effect on shareholders of the Fund who do not
exercise their Rights, and its implications for the Fund's dividend. The Board
also considered the possible impact of the Offer on the trading price of the
Fund's shares of Common Stock, the benefits and costs of utilizing a dealer
manager and soliciting brokers, the experience and capabilities of the Dealer
Manager, and the treatment of foreign shareholders under the Offer. In its
deliberations, the Board recognized that Alliance was subject to a conflict of
interest in recommending approval of the Offer. After careful consideration,
the Board of Directors unanimously voted to approve the Offer.
Alliance's view as to current investment opportunities available in the
sovereign debt markets is based on prevailing market conditions. There can be
no assurance that these conditions will not materially change prior to the
investment of the proceeds of the offering or thereafter, in which case the
benefits expected to be derived from the offering may not be realized. The
Board of Directors of the Fund may, at any time prior to the issuance and sale
of Shares by the Fund, determine to take such actions, which may include
withdrawal or cancellation of the offering, as it deems appropriate in light of
then prevailing market conditions. See "The Offer--Terms of the Offer."
4
<PAGE>
TERMS OF THE OFFER
The Fund is issuing to holders of its common stock, par value $.01 per share
(the "Common Stock"), of record on June 21, 1996 non-transferable Rights to
subscribe for an aggregate of 2,884,235 Shares (3,605,293 Shares if the Fund
increases the number of Shares available by up to 25% pursuant to the Over-
Subscription Privilege). Each shareholder is being issued one Right for each
whole share of Common Stock held on the Record Date. The Rights entitle the
holders thereof to subscribe for one Share for every three Rights held (1 for
3). Fractional Shares will not be issued upon the exercise of Rights;
accordingly, Rights will be exercisable only in integral multiples of three.
Rights may be exercised at any time during the Subscription Period, which
commences on June 21, 1996 and ends at 5:00 p.m., Eastern time, on July 19,
1996, unless extended by the Fund until 5:00 p.m., Eastern time, on a date not
later than July 26, 1996. Any shareholder who fully exercises all Rights issued
to him pursuant to the Primary Subscription will be entitled to request
additional Shares at the Subscription Price pursuant to the terms of the "Over-
Subscription Privilege."
The issuance and sale of the Shares is subject to the withdrawal or
cancellation of the offering by the Fund at any time prior to 5:00 p.m. Eastern
time on the Confirmation Date (as defined herein). In the event the Shares are
not issued and sold by the Fund, amounts paid for Shares will be returned to
subscribing shareholders. No interest will be paid to shareholders with respect
to such amounts.
OVER-SUBSCRIPTION PRIVILEGE
Any Shareholder who fully exercises all Rights issued to him (other than
those Rights that cannot be exercised because they represent the right to
acquire less than one Share) is entitled to subscribe for Shares which were not
otherwise subscribed for by others on Primary Subscription. If sufficient
shares are not available to honor all over-subscription requests, the Fund may,
at its discretion, issue up to an additional 25% of the shares available
pursuant to the Offer (up to 721,058 additional Shares) in order to cover such
over-subscription requests. Shares acquired pursuant to the Over-Subscription
Privilege are subject to allotment, which is more fully discussed under "The
Offer--Over-Subscription Privilege."
SUBSCRIPTION PRICE
The Subscription Price per Share for the Shares to be issued pursuant to the
Offer will be 95% of the lower of (i) the average of the last reported sale
prices of shares of the Fund's Common Stock on the New York Stock Exchange on
the date of the expiration of the Offer (the "Pricing Date") and on the four
preceding business days and (ii) the net asset value per share as of the close
of business on the Pricing Date. See "The Offer--Subscription Price."
DEALER MANAGER AND SOLICITING FEES
The Fund has agreed to pay to Smith Barney Inc. (the "Dealer Manager") and
other broker-dealers soliciting the exercise of Rights soliciting fees equal to
2.50% of the Subscription Price for each Share issued pursuant to the exercise
of Rights and pursuant to the Over-Subscription Privilege. The Fund has also
agreed to pay the Dealer Manager a fee for financial advisory services and
marketing assistance in connection with the Offer equal to 1.25% of the
Subscription Price per Share for each Share issued upon exercise of Rights and
pursuant to the Over-Subscription privilege, and to reimburse up to $100,000 of
the Dealer Manager's reasonable expenses incurred in connection with the Offer.
See "Distribution Arrangements."
5
<PAGE>
INFORMATION AGENT
The Information Agent for the Offer is:
SHAREHOLDER
COMMUNICATIONS CORPORATION
17 State Street
New York, New York 10004
Toll Free: (800) 733-8481, Extension 347
or
Call Collect: (212) 805-7000
IMPORTANT DATES TO REMEMBER
<TABLE>
<CAPTION>
EVENT DATE
----- ----
<S> <C>
Record Date.............................. June 21, 1996
Subscription Period...................... June 21, 1996 through July 19, 1996*
Expiration Date and Pricing Date......... July 19, 1996*
Subscription Certificates and Payment for
Shares Due**............................ July 19, 1996*
Notices of Guaranteed Delivery Due**..... July 19, 1996*
Payment for Guarantees of Delivery Due... July 24, 1996*
Confirmation to Participants............. August 1, 1996*
Final Payment for Shares................. August 15, 1996*
</TABLE>
- --------
* Unless the Offer is extended to a date not later than July 26, 1996.
** A shareholder exercising Rights must deliver either (i) a Subscription
Certificate and Payment for Shares or (ii) a Notice of Guaranteed Delivery
by the Expiration Date.
METHOD OF EXERCISE OF RIGHTS
The Rights are evidenced by subscription certificates ("Subscription
Certificates"), which will be mailed to shareholders as of the Record Date,
except as discussed below under "Foreign Restrictions." If a shareholder's
shares are held by Cede & Co. or any other depository or nominee on his or her
behalf, the Subscription Certificates will be mailed to Cede & Co. or such
depository or nominee. Rights may be exercised by completing and signing the
Subscription Certificate and mailing or otherwise delivering it to the
Subscription Agent. A shareholder may also exercise Rights by contacting his or
her broker, banker or trust company, which can arrange, on the shareholder's
behalf, to guarantee delivery of payment and of a properly completed and
executed Subscription Certificate ("Notice of Guaranteed Delivery"). Completed
Subscription Certificates or Notices of Guaranteed Delivery must be received by
the Subscription Agent prior to 5:00 p.m., Eastern time on the Expiration Date.
See "The Offer--Method of Exercise of Rights."
FOREIGN RESTRICTIONS
Subscription Certificates will not be mailed to shareholders whose addresses
are outside the United States (for these purposes the United States includes
its territories and possessions). The Rights to which those Subscription
Certificates relate will be held by the Subscription Agent for such
shareholders' accounts until instructions are received to exercise the Rights,
subject to applicable law. If no instructions are received prior to 5:00 p.m.
Eastern time on the Expiration Date, such Rights will expire. See "The Offer--
Foreign Restrictions."
6
<PAGE>
INFORMATION REGARDING THE FUND
THE FUND
Alliance World Dollar Government Fund, Inc. is a non-diversified, closed-end
management investment company. The Fund's investment objective is to seek high
current income by investing exclusively in fixed income securities denominated
in U.S. dollars. In seeking to achieve this objective, the Fund invests
substantially all of its assets in (i) U.S. dollar-denominated debt obligations
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
("Sovereign Debt Obligations") and (ii) zero coupon obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities ("Zero
Coupon Obligations"). Under normal circumstances, the Fund invests at least 75%
of its total assets in (i) Sovereign Debt Obligations of a type customarily
referred to as "Brady Bonds" that are issued as part of debt restructurings and
that are collateralized in full as to principal due at maturity (but not as to
interest) by Zero Coupon Obligations having the same maturity ("Collateralized
Brady Bonds") and (ii) Zero Coupon Obligations. The Fund, which emphasizes
investments in the Sovereign Debt Obligations of countries that are considered
emerging market countries at the time of purchase, will not invest 25% or more
of its total assets in the Sovereign Debt Obligations of any one country. At
April 30, 1996, 69.9% of the Fund's total assets were invested in Sovereign
Debt Obligations, including Collateralized Brady Bonds that represented 51.6%
of the Fund's total assets. At that date the Fund was invested in the
obligations of a total of twelve countries, with those of the United States
(consisting solely of Zero Coupon Obligations), Brazil, Venezuela, Argentina
and Bulgaria representing the Fund's five largest holdings, or 26.7%, 12.7%,
10.2%, 8.2% and 7.8%, respectively, of the Fund's investments in securities.
See "The Fund."
TENDER OFFERS AND SHARE REPURCHASES
In recognition of the fact that the Fund's shares have at times traded at a
discount and the possibility that the Fund's shares may trade at a discount in
the future, the Fund's Board of Directors has determined that it would be in
the interest of shareholders for the Fund to have the ability to take action to
attempt to reduce or eliminate market value discounts from net asset value. To
that end, the Board contemplates that the Fund may from time to time take
action either (i) to repurchase shares of its Common Stock in the open market
or (ii) to make an offer to purchase its shares of Common Stock from all
beneficial holders of its shares at a price per share equal to the net asset
value per share of the Common Stock determined at the close of business on the
day the offer terminates (a "Tender Offer"). The Board has each quarter
considered, and intends to continue each quarter to consider, the making of a
Tender Offer or open market repurchases of the Fund's shares. The Board may at
any time, however, decide that the Fund should not make a Tender Offer or
repurchase its shares in the open market. The Fund's shares have historically
traded at or near their net asset value. For example, during the fifty-two
weeks ended June 21, 1996, the Fund's shares traded at an average discount from
net asset value of %. To date, the Board has determined that the Fund not
conduct a Tender Offer or make open-market share repurchases.
In addition, the Fund will, except as described below, commence a Tender
Offer during the fourth quarter of 1997 (the "1997 Tender Offer"). However, the
Board has established a policy that, if shares of the Fund's Common Stock are
traded on the principal securities exchange where listed at or above net asset
value or at an average discount from net asset value of less than 5%,
determined on the basis of the discount as of the last trading day in each week
during a period of 12 calendar weeks prior to September 1, 1997, the Fund will
not proceed with the 1997 Tender Offer. If the Fund commences a Tender Offer,
the Board may determine not to purchase shares of the Fund's Common Stock
pursuant to the Tender Offer under certain conditions. If the Fund commences
the 1997 Tender Offer and the Board of Directors determines not to purchase
shares of the Common Stock as a consequence of any such condition, the Fund
will commence one or more additional tender offers (a "Subsequent Offer").
7
<PAGE>
If all shares tendered are not purchased pursuant to the 1997 Tender Offer or
a Subsequent Offer with respect to the 1997 Tender Offer by March 31, 1998, the
Fund's Articles of Incorporation require the Board of Directors to submit to
shareholders by no later than July 31, 1998 a proposal to convert the Fund to
an open-end investment company. If the Fund continues as a closed-end
investment company, the Fund will commence a tender offer during the fourth
quarter of 2002, a subsequent tender offer during 2003 or submit to
shareholders a proposal to convert the Fund to an open-end investment company
in 2003 as described more fully below. Conversion to an open-end investment
company would make the Fund's Common Stock redeemable in cash upon demand by
shareholders at the next determined net asset value less any redemption
charges. Conversion of the Fund to an open-end investment company could be
effected if approved by prescribed percentages applicable at various points in
time of the outstanding shares of the Fund. In the event submission of such a
proposal is required by the Fund's Articles of Incorporation and shareholder
approval of conversion to an open-end investment company is not obtained, the
Fund will continue as a closed-end investment company. See "Tender Offers and
Share Repurchases; Conversion to Open-End Status."
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes all its net investment income. Dividends from such net
investment income are declared and paid monthly to shareholders. All net
realized long- or short-term capital gains, if any, are distributed to
shareholders at least annually. To the extent practicable, the Fund attempts to
maintain a constant level of monthly distributions to shareholders although
there can be no assurance that it will be able to do so. In order to maintain
such monthly distributions, short-term capital gains may from time to time be
included in monthly distributions. See "Dividends and Distribution" below.
It is expected that no dividends or other distributions will be payable with
respect to the Shares offered hereby until September 1996. The Board of
Directors is expected to act in July 1996 to declare a dividend to be payable
in August to shareholders of record as of July 31, 1996. As the Confirmation
Date of the Offer, which is the date of issuance of the Shares for which
subscriptions are received, is August 1, 1996 (or a later date if the Offer is
extended), the dividend to be payable in August will not be payable with
respect to the Shares offered hereby, notwithstanding that the dividend will be
paid after the issuance of such Shares.
Based upon Alliance's analysis of current market conditions and the
expectation that the Fund will begin investing the net proceeds of the offering
on the Confirmation Date (subject to any extension of the Offer), it is not
anticipated that the dilution in the net asset value per share as a result of
the Offer will result in any dilution in the amount of monthly distributions
per share paid with respect to the Fund's shares of Common Stock, although
there can be no assurance that no such dilution will result. See "The Offer--
Dilution and Effect of Non-Participation in the Offer."
INFORMATION REGARDING THE ADVISER AND ADMINISTRATOR
Alliance Capital Management L.P., a Delaware limited partnership listed on
the New York Stock Exchange, serves as investment adviser and administrator to
the Fund. Alliance is a leading international investment manager supervising
client accounts with assets as of March 31, 1996 totaling more than $163
billion. See "Management of the Fund--Adviser and Administrator."
USE OF PROCEEDS
Assuming all Shares offered hereby are sold at the Estimated Subscription
Price, as defined below, of $ per Share, the net proceeds of the Offer are
estimated to be $ after payment of the Dealer Manager and soliciting fees and
estimated offering expenses. Expenses related to the issuance of the Shares
will be borne by the Fund and will reduce the net asset value of the Common
Stock. If the Fund increases the number of Shares subject to the Offer by 25%,
or 721,058 Shares, in order to satisfy over-subscriptions, the additional net
proceeds
8
<PAGE>
will be approximately $ . The net proceeds will be invested within
approximately one month following receipt by the Fund of payment for the Shares
in accordance with the Fund's investment objective and policies.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Dilution. Upon the completion of the Offer, shareholders who do not fully
exercise their Rights will own a smaller proportional interest in the Fund than
would be the case if the Offer had not been made. In addition, because the
Subscription Price of each Share will be less than the net asset value per
share of the Fund's Common Stock and because the Fund will incur expenses in
connection with the Offer, the Offer will result in a dilution of net asset
value per share for all shareholders, which will disproportionately affect
shareholders who do not exercise their Rights. Although it is not possible to
state precisely the amount of such decrease in net asset value because it is
not known at the date of this Prospectus how many Shares will be subscribed
for, or what the Subscription Price will be, such dilution might be
substantial. See "The Offer--Dilution and Effect of Non-Participation in the
Offer."
Debt Securities. The net asset value of the Fund's shares will change as the
levels of interest rates fluctuate. When interest rates decline, the value of a
portfolio of debt securities, such as that of the Fund's, can be expected to
rise. Conversely, when interest rates rise, the value of such a portfolio can
be expected to decline. Debt securities purchased at a discount tend to be
subject to greater price fluctuations in response to interest rate changes than
are ordinary interest-paying debt securities with similar maturities. Prices of
longer-term debt securities tend to be subject to greater fluctuations in
response to interest rate changes than those of shorter-term debt securities.
Foreign Investments. By investing in Sovereign Debt Obligations, the Fund
will be exposed to the direct or indirect consequences of political, social and
economic changes in various countries. Foreign investment in certain Sovereign
Debt Obligations is restricted or controlled to varying degrees. These
restrictions or controls may at times limit or preclude foreign investment in
certain Sovereign Debt Obligations and increase the costs and expenses of the
Fund. Foreign issuers are also subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. issuers.
Low and Unrated Instruments. At any time, substantially all of the Fund's
assets may be invested in high yield, high risk debt securities that are low-
rated (i.e., below investment grade) or which are unrated but are of comparable
quality as determined by Alliance. Currently, Sovereign Debt Obligations of the
type in which the Fund will invest substantially all of its assets are
generally considered to have a credit quality below investment grade by
internationally recognized credit rating organizations such as Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P").
Debt securities rated below investment grade are those rated Ba1 or lower by
Moody's or BB+ or lower by S&P and are considered by those organizations to be
subject to greater risk of loss of principal and interest than higher-rated
securities and are considered to be predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal. Certain of the
Sovereign Debt Obligations in which the Fund may invest may be considered
comparable to securities having the lowest ratings for non-subordinated debt
instruments assigned by Moody's or S&P (i.e., rated C by Moody's or CCC or
lower by S&P). These securities are considered to have extremely poor prospects
of ever attaining any real investment standing, to have a current identifiable
vulnerability to default, to be unlikely to have the capacity to pay interest
and repay principal when due in the event of adverse business, financial or
economic conditions, and/or to be in default or not current in the payment of
interest or principal.
Extent of Trading Markets. No established secondary markets may exist for
many of the Sovereign Debt Obligations in which the Fund invests. Reduced
secondary market liquidity can have an adverse effect on the market price and
the Fund's ability to dispose of particular instruments when necessary to meet
its liquidity requirements or in response to specific economic events such as a
deterioration in the creditworthiness of the issuer.
9
<PAGE>
Securities Not Readily Marketable. The Fund may invest up to 50% of its total
assets in securities that are not readily marketable. Because of the absence of
a trading market for these investments, the Fund may not be able to realize
their value upon sale. The risks associated with these investments will be
accentuated in situations in which the Fund's operations require cash, such as
when the Fund tenders for its shares of Common Stock or pays distributions, and
could result in the Fund borrowing to meet short-term cash requirements or
incurring capital losses on the sale of these investments.
Non-Diversified Status. The Fund is a "non-diversified" investment company
and therefore may invest in a smaller number of issuers than would a
diversified investment company. Accordingly, an investment in the Fund may,
under certain circumstances, present greater risk to an investor than would an
investment in a diversified investment company.
Discount from Net Asset Value. Shares of closed-end investment companies
frequently trade at a discount from net asset value. Since the commencement of
operations of the Fund in November 1992, the Fund's shares have traded at
different times at a discount from and at a premium above their net asset
value. During the fifty-two week period ended June 21, 1996, the Fund's shares
traded at an average discount from net asset value of %. The Fund cannot
predict whether its shares will in the future trade at a premium above or
discount from net asset value. The risk of its shares trading at a discount is
a risk separate from the risk of a decline in net asset value. See "Net Asset
Value and Market Price Information."
Charter Provisions. Certain anti-takeover provisions will make a change in
the Fund's business or management more difficult without the approval of the
Fund's Board of Directors and may have the effect of depriving stockholders of
an opportunity to sell their shares at a premium above the prevailing market
price. See "Description of Common Stock--Certain Anti-Takeover Provisions of
the Articles of Incorporation and Bylaws."
10
<PAGE>
FINANCIAL HIGHLIGHTS
PER SHARE DATA, RATIOS AND CERTAIN SUPPLEMENTAL DATA
The following information as to per share data, ratios and certain
supplemental data for each of the periods shown below, except for the six
months ended April 30, 1996, has been audited by Ernst & Young LLP,
independent auditors, as stated in their report included in the SAI. This
information should be read in conjunction with the financial statements and
notes thereto included in the SAI, copies of which can be obtained by
shareholders.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED YEAR ENDED NOVEMBER 2, 1992*
APRIL 30, OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
1996 1995 1994 1993
----------- ----------- ----------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.88 $ 11.08 $ 22.09 $ 13.82 (a)
INCOME FROM INVESTMENT
OPERATIONS
Net investment income... .70 1.51 (b) 1.32 1.54
Net realized and
unrealized gain (loss)
on investments......... 1.32 .71 (5.66) 8.19
Net increase (decrease)
in net asset value from
operations............. 2.02 2.22 (4.34) 9.73
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net
investment income...... (.70) (1.42) (1.39) (1.46)
Distributions from net
realized gains......... - - (4.96) -
Distributions in excess
of net realized gains.. - - (.09) -
Tax return of capital
distribution........... - - (.23) -
Total distributions..... (.70) (1.42) (6.67) (1.46)
Net asset value, end of
period................. $ 13.20 $ 11.88 $ 11.08 $ 22.09
Market value, end of
period................. $ 12.875 $ 11.75 $ 13.00 $ 20.375
TOTAL RETURN (C)
Total investment return
based on:
Market value.......... 15.64% 2.78% (7.52)% 59.14%
Net asset value....... 17.26% 21.92% (27.29)% 72.53%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000's
omitted)............... $114,212 $102,757 $93,528 $164,622
Ratio of expenses to
average net assets..... 1.52%(d) 1.55% 1.43% 1.44%(d)
Ratio of net investment
income to average net
assets................. 10.88%(d) 14.12% 9.08% 9.79%(d)
Portfolio turnover
rate................... 134% 441% 395% 417%
</TABLE>
- --------
* Commencement of operations.
(a) Net of offering costs of $.13 per share.
(b) Based on average shares outstanding.
(c) Total investment return based on market value is calculated assuming a
purchase of common stock at the market price on the opening of the first
day and a sale at the market price on the closing of the last day of the
period reported and total investment return based on net asset value is
calculated based on the Fund's net asset value on such days. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to
be reinvested at prices obtained under the Fund's Dividend Reinvestment
Plan. Generally, total investment return based on net asset value will be
higher than total investment return based on market value in periods where
there is an increase in the discount or a decrease in the premium of the
market value to the net asset value from the beginning to the end of such
periods. Conversely, total investment return based on net asset value will
be lower than total investment return based on market value in periods
where there is a decrease in the discount or an increase in the premium of
the market value to the net asset value from the beginning to the end of
such periods. Total investment return calculated for a period of less than
one year is not annualized.
(d) Annualized
11
<PAGE>
PERFORMANCE INFORMATION
The following unaudited table sets forth the average annual total return of
the Fund and that of the J.P. Morgan Emerging Market Bond Index (the "EMBI")
for the one- and three- year periods ended April 30, 1996 and for the period
from the commencement of the Fund's operations on November 2, 1992 through
April 30, 1996.
<TABLE>
<CAPTION>
THE FUND
-------------------------
PERIOD ENDED BASED ON NET BASED ON
APRIL 30, 1996 ASSET VALUE MARKET VALUE EMBI
-------------- ------------ ------------ -----
<S> <C> <C> <C>
One year...................................... 41.48% 27.89% 41.15%
Three years................................... 13.02% 11.90% 14.00%
Since November 2, 1992........................ 17.79% 14.54% 15.69%
</TABLE>
Total return of the Fund based on market value is calculated assuming a
purchase of Common Stock of the Fund at the market price on the opening of the
first day and a sale at the market price on the closing of the last day of the
period, and total return based on net asset value is calculated based on the
Fund's net asset value on such days. Dividends and distributions, if any, are
assumed to be reinvested at prices obtained under the Fund's dividend
reinvestment plan. See "Dividend Reinvestment Plan."
The EMBI is constructed by J.P. Morgan Securities Inc. as a total-return
index intended to create a benchmark that objectively reflects returns from
price gains or losses and interest income on a "passive" portfolio, considered
at all times to be fully invested, that tracks the traded market for U.S.
dollar-denominated Brady Bonds and similar sovereign restructured bonds. The
EMBI is market capitalization weighted based on publicly known amounts
outstanding and includes only available obligations with a minimum principal
amount of $500 million outstanding that meet a specified standard of
liquidity. Individual bond returns are calculated based on daily changes in
bid prices and on interest earned according to exact coupon accrued and
payment conventions.
The composition of the Fund's portfolio is not identical to the composition
of the EMBI. At April 30, 1996, the portfolio securities of the Fund had a
combined market value of $155,216,424 and included nineteen issues from twelve
countries including the United States. At April 30, 1996, the securities
included in the EMBI had a combined market capitalization of $86.85 billion
and included twenty-five issues from nine countries. Other differences between
the Fund's portfolio and the EMBI include the percentages invested in
obligations of particular countries, the EMBI's stricter limitation on
illiquid investments, the fact that the Fund invests in obligations other than
Brady Bonds and similar sovereign restructured bonds, the fact that the Fund
is limited in its ability to invest in uncollateralized Brady Bonds and the
fact that the Fund is not at all times fully invested.
THE FOREGOING TABLE IS PROVIDED FOR ILLUSTRATIVE PURPOSES ONLY. IT IS NOT
INTENDED TO PREDICT THE FUTURE PERFORMANCE OF THE FUND'S PORTFOLIO OR AN
ANTICIPATED RETURN ON THE COMMON STOCK OF THE FUND. INVESTORS ARE CAUTIONED
THAT INVESTMENT IN THE EMBI IS NOT POSSIBLE AND THAT THE EMBI DOES NOT TAKE
INTO ACCOUNT TRANSACTION AND OTHER EXPENSES TYPICALLY ASSOCIATED WITH AN
INVESTMENT IN A CLOSED-END INVESTMENT COMPANY.
12
<PAGE>
THE OFFER
PURPOSE OF THE OFFER
The Board of Directors of the Fund has determined that it would be in the
best interests of the Fund and its shareholders to increase the assets of the
Fund available for investment, thereby enabling the Fund to more fully take
advantage of available investment opportunities consistent with the Fund's
investment objective of seeking high current income by investing exclusively
in fixed income securities denominated in U.S. dollars. In reaching its
decision, the Board of Directors was advised by Alliance that the raising of
new assets would enable the Fund to take advantage of current opportunities in
emerging market sovereign debt markets. More specifically, Alliance advised
the Board of Directors at a May 17, 1996 special meeting that relatively high
interest rates then available on Brady Bonds of emerging market countries
provided an attractive investment opportunity. In Alliance's view, these high
interest rates were evidenced by the "spread" between the yield on 30-year
U.S. Treasury bonds and yields on Brady Bonds of emerging market countries,
which increased following the decline in value of the Mexican currency in late
1994 and subsequent related events. Alliance was also of the view that the
relatively high interest rates on Brady Bonds of emerging market countries
could be expected to decline as conditions in the market for such Brady Bonds
stabilize, thus tending to increase the market values of the Brady Bonds of
emerging market countries and thereby affording the Fund the opportunity to
realize capital gains. Alliance also cited the improving credit quality of
many emerging market countries that issue Sovereign Debt Obligations.
The following table, which sets forth the reported average yields during the
calendar quarters specified of the securities that constitute the EMBI and 30-
year U.S. Treasury bonds and the spread between those yields, is intended to
illustrate the changes in those spreads during the existence of the Fund.
<TABLE>
<CAPTION>
30-YEAR U.S.
QUARTER ENDED EMBI TREASURY BOND SPREAD
------------- ----- ------------- ------
<S> <C> <C> <C>
December 1992.................................. 12.24% 7.40% 4.84%
March 1993..................................... 11.40 6.93 4.47
June 1993...................................... 10.60 6.67 3.93
September 1993................................. 9.72 6.03 3.69
December 1993.................................. 8.69 6.36 2.33
March 1994..................................... 11.99 7.10 4.89
June 1994...................................... 13.45 7.62 5.83
September 1994................................. 13.01 7.82 5.19
December 1994.................................. 15.11 7.88 7.23
March 1995..................................... 17.12 7.45 9.67
June 1995...................................... 13.60 6.65 6.95
September 1995................................. 13.21 6.50 6.71
December 1995.................................. 12.04 5.95 6.09
March 1996..................................... 12.57 6.67 5.90
</TABLE>
THIS TABLE IS PROVIDED FOR ILLUSTRATIVE PURPOSES ONLY AND DOES NOT REFLECT
ANY PAST OR PRESENT, AND IS NOT INTENDED TO PREDICT ANY FUTURE, YIELD OF THE
FUND. NOTHING IN THIS TABLE IS MEANT TO BE, NOR SHOULD BE INTERPRETED AS,
PREDICTIVE OF ANY FUTURE PERFORMANCE OF THE FUND. U.S. TREASURY BONDS ARE
DIRECT OBLIGATIONS OF, AND ARE GUARANTEED AS TO PRINCIPAL AND INTEREST BY, THE
UNITED STATES. FOR A DESCRIPTION OF THE EMBI AND THE LIMITATIONS OF DRAWING
COMPARISONS THERETO, SEE "FINANCIAL HIGHLIGHTS--PERFORMANCE INFORMATION."
In addition, in making its determination the Board of Directors took into
account the fact that a well-subscribed rights offering may reduce the Fund's
expense ratio, which may be of long-term benefit to shareholders, although no
assurance can be given that this result will be achieved. In addition, the
Board of Directors considered that such a rights offering could result in an
improvement in the liquidity of the trading market for shares of the Fund's
Common Stock on the New York Stock Exchange, where the shares are listed
13
<PAGE>
and traded, although no assurance can be given that this result will be
achieved. The Board of Directors also considered alternatives to the Offer,
including an underwritten offering of shares and an offering of transferable
rights to purchase shares, as well as the proposed terms of the Offer, the
estimated expenses of the Offer, and its dilutive effect, including its effect
on shareholders of the Fund who do not exercise their Rights, and its
implications for the Fund's dividend. The Board also considered the possible
impact of the Offer on the trading price of the Fund's shares of Common Stock,
the benefits and costs of utilizing a dealer manager and soliciting brokers,
the experience and capabilities of the Dealer Manager, and the treatment of
foreign shareholders under the Offer. In its deliberations, the Board
recognized that Alliance was subject to a conflict of interest in recommending
approval of the Offer. After careful consideration, the Board of Directors
unanimously voted to approve the Offer.
Alliance's view as to current investment opportunities available in the
sovereign debt markets is based on prevailing market conditions. There can be
no assurance that these conditions will not materially change prior to the
investment of the proceeds of the offering or thereafter, in which case the
benefits expected to be derived from the offering may not be realized. The
Board of Directors of the Fund may, at any time prior to the issuance and sale
of Shares by the Fund, determine to take such actions, which may include
withdrawal or cancellation of the offering, as it deems appropriate in light
of then prevailing market conditions. See "--Terms of the Offer."
Alliance will benefit from the Offer because its advisory and administrative
fees are based on the average weekly net assets of the Fund. See "Management
of the Fund--Advisory Agreement," and "--Administration Agreement."
The Fund may, in the future and at its discretion, choose to make additional
rights offerings from time to time for a number of shares and on terms that
may or may not be similar to the Offer. Any such future rights offerings will
be made in accordance with the Investment Company Act of 1940, as amended (the
"1940 Act").
TERMS OF THE OFFER
The Fund is issuing to holders of its common stock, par value $.01 per share
(the "Common Stock"), of record on June 21, 1996 non-transferable Rights to
subscribe for an aggregate of 2,884,235 Shares (3,605,293 Shares if the Fund
increases the number of Shares available by up to 25% pursuant to the Over-
Subscription Privilege). Each shareholder is being issued one Right for each
whole share of Common Stock held on the Record Date. The Rights entitle the
holders thereof to subscribe for one Share for every three Rights held (1 for
3). Fractional Shares will not be issued upon the exercise of Rights;
accordingly, Rights will be exercisable only in integral multiples of three.
Rights may be exercised at any time during the Subscription Period, which
commences on June 21, 1996 and ends at 5:00 p.m., Eastern time, on July 19,
1996, unless extended by the Fund until 5:00 p.m., Eastern time, on a date not
later than July 26, 1996. A shareholder's right to acquire during the
Subscription Period at the Subscription Price one Share for every three Rights
held is hereinafter referred to as the "Primary Subscription."
Any shareholder who fully exercises all Rights issued to such shareholder
pursuant to the Primary Subscription will be entitled to request additional
Shares at the Subscription Price pursuant to the terms of the "Over-
Subscription Privilege" (as described below). Shares available, if any,
pursuant to the Over-Subscription Privilege are subject to allotment and may
be subject to increase, as is more fully discussed below under "Over-
Subscription Privilege." For purposes of determining the maximum number of
Shares a shareholder may acquire pursuant to the Offer, broker-dealers whose
Shares are held of record by Cede & Co. ("Cede"), the nominee for The
Depository Trust Company, or by any other depository or nominee, will be
deemed to be the holders of the Rights that are issued to Cede or such other
depository or nominee on their behalf.
As fractional Shares will not be issued, shareholders who receive fewer than
three Rights or have fewer than three Rights remaining will be unable to
purchase Shares upon the exercise of such Rights and will not be entitled to
receive any cash in lieu thereof, although such shareholders may request
Shares pursuant to the Over-Subscription Privilege.
Shareholders will have no right to rescind their subscriptions after receipt
of their payment for Shares by the Subscription Agent.
14
<PAGE>
The issuance and sale of the shares of Common Stock offered hereby is
subject to the withdrawal or cancellation of the offering by the Fund at any
time prior to 5:00 p.m. Eastern time on the Confirmation Date (as defined
herein). In the event the Common Stock offered hereby is not issued and sold
by the Fund, amounts paid for Shares will be returned to subscribing
shareholders. No interest will be paid to shareholders with respect to such
amounts.
OVER-SUBSCRIPTION PRIVILEGE
To the extent shareholders do not exercise all Rights issued to them
pursuant to the Primary Subscription, any underlying Shares represented by
Rights will be offered by means of the Over-Subscription Privilege to
shareholders who have exercised all the Rights issued to them (other than
those Rights that cannot be exercised because they represent the right to
acquire less than one share) and who desire to acquire additional Shares at
the Subscription Price. Only shareholders who exercise all Rights issued to
them may indicate on the Subscription Certificate (as defined below) the
number of additional Shares desired pursuant to the Over-Subscription
Privilege. If sufficient Shares remain as a result of unexercised Rights, all
over-subscription requests will be honored in full. If sufficient Shares are
not available to honor all over-subscription requests, the Fund may, at its
discretion, issue up to an additional 25% of the Shares available pursuant to
the Offer (up to 721,058 additional Shares) in order to cover such over-
subscription requests. Regardless of whether the Fund issues the additional
Shares, to the extent Shares are not available to honor all over-subscription
requests, the available Shares will be allocated among those who over-
subscribe based on the number of Rights originally issued to them by the Fund,
so that the number of Shares issued to shareholders who subscribe pursuant to
the Over-Subscription Privilege will generally be in proportion to the number
of Shares held by them on the Record Date. The allocation process may involve
a series of allocations in order to assure that the total number of Shares
available for over-subscription requests is distributed on a pro rata basis.
The issuance of Shares in the Primary Subscription and pursuant to the Over-
Subscription Privilege is subject to certain conditions with respect to any
"Principal Shareholder" of the Fund described in "Description of Common
Stock--Certain Anti-Takeover Provisions of the Articles of Incorporation and
Bylaws."
The Fund will not offer or sell any Shares that are not subscribed for
pursuant to the Primary Subscription or the Over-Subscription Privilege.
SUBSCRIPTION PRICE
The Subscription Price per Share for the Shares to be issued pursuant to the
Offer will be 95% of the lower of (i) the average of the last reported sale
prices of shares of the Fund's Common Stock on the New York Stock Exchange on
the date of the expiration of the Offer (the "Pricing Date") and on the four
preceding business days and (ii) the net asset value per share as of the close
of business on the Pricing Date. For example, if the average of the last
reported sale prices on the New York Stock Exchange on the Pricing Date and on
the four preceding business days of a share of the Fund's Common Stock is
$12.00, and the net asset value is $10.00, the Subscription Price will be
$9.50 (95% of $10.00). If, however, the average of the last reported sale
prices of shares on that exchange on the Pricing Date and on the four
preceding business days is $12.00, and the net asset value as of the close of
business on the Pricing Date is $14.00, the Subscription Price will be $11.40
(95% of $12.00). See "Description of Common Stock."
The Fund announced the Offer after the close of trading on the New York
Stock Exchange on May 17, 1996. The net asset values per share of Common Stock
at the close of business on May 17, 1996 and June 21, 1996 were $13.56 and
$ , respectively, and the last reported sale prices of shares of the Fund's
Common Stock on the New York Stock Exchange on those dates were $12.50 and
$ , respectively. [On June 21, 1996, the Fund's Common Stock was trading at a
discount to its net asset value.]
NON-TRANSFERABILITY OF RIGHTS
The Rights are non-transferable and, therefore, may not be purchased or
sold. The Rights will not be admitted for trading on the New York Stock
Exchange or any other exchange. However, the Shares issued pursuant to the
exercise of Rights and the Over-Subscription Privilege will be authorized for
listing on the New York Stock Exchange, subject to official notice of
issuance.
15
<PAGE>
EXPIRATION OF THE OFFER
The Offer will expire at 5:00 p.m., Eastern time, on July 19, 1996, unless
extended by the Fund until 5:00 p.m., Eastern time, to a date not later than
July 26, 1996. The Rights will expire on the Expiration Date and thereafter
may not be exercised. Any extension of the Offer will be followed as promptly
as practicable by announcement thereof. Without limiting the manner in which
the Fund may choose to make such announcement, the Fund will not, unless
otherwise required by law, have any obligation to publish, advertise or
otherwise communicate any such announcement other than by making a release to
the Dow Jones News Service or such other means of announcement as the Fund
deems appropriate.
SUBSCRIPTION AGENT
The Subscription Agent is First Data Investor Services Group, Inc., which will
receive, for its administrative, processing, invoicing and other services as
subscription agent, a fee estimated to be $40,000, plus reimbursement for
out-of-pocket expenses expected to be $2,000. Shareholder communications should
be directed to First Data Investor Services Group, Inc., 53 State Street, Stop
Code BOS 850, Boston, Massachusetts 02109 (telephone 1-800-331-1710).
Shareholders may also consult their brokers or nominees for information. SIGNED
SUBSCRIPTION CERTIFICATES MUST BE SENT TO FIRST DATA INVESTOR SERVICES GROUP,
INC., by one of the methods described below. Alternatively, a Notice of
Guaranteed Delivery may also be sent to any of the addresses listed below. The
Fund will accept only Subscription Certificates or Notices of Guaranteed
Delivery received prior to 5:00 p.m., Eastern time, on the Expiration Date. See
"--Method of Exercise of Rights" below.
(1) BY FIRST CLASS MAIL:
The Subscription Agent for Alliance World Dollar Government Fund, Inc.
Corporate Reorganization
P.O. Box 9061
Boston, MA 02205-8686
(2) BY EXPRESS MAIL OR OVERNIGHT COURIER:
The Subscription Agent for Alliance World Dollar Government Fund, Inc.
Corporate Reorganization
Two Heritage Drive
North Quincy, MA 02171
(3) BY HAND:
The Subscription Agent for Alliance World Dollar Government Fund, Inc.
c/o BancBoston Trust Company of New York
55 Broadway
3rd Floor
New York, NY 10006
(4) BY FACSIMILE:
FOR NOTICE OF GUARANTEED DELIVERY ONLY
(617) 774-4519, with the original Subscription Certificate to be sent by
one of the methods described in (1), (2) or (3)
Confirm facsimile by telephone to: (617) 774-4511
DELIVERY TO AN ADDRESS OTHER THAN THOSE ABOVE DOES NOT CONSTITUTE VALID
DELIVERY.
METHOD OF EXERCISE OF RIGHTS
The Rights are evidenced by subscription certificates ("Subscription
Certificates"), which will be mailed to shareholders as of the Record Date,
except as discussed below under "Foreign Restrictions." If a shareholder's
16
<PAGE>
shares are held by Cede or any other depository or nominee on his or her
behalf, the Subscription Certificates will be mailed to Cede or such
depository or nominee. Rights may be exercised by completing and signing the
Subscription Certificate and mailing or otherwise delivering it to the
Subscription Agent at one of the addresses set forth above together with
payment for the Shares as described below under "--Payment for Shares." A
shareholder may also exercise Rights by contacting his or her broker, banker
or trust company, which can arrange, on the shareholder's behalf, to guarantee
delivery of payment and of a properly completed and executed Subscription
Certificate ("Notice of Guaranteed Delivery"). Fractional Shares will not be
issued, and shareholders who receive, or who have remaining, fewer than three
Rights will not be able to purchase any Shares upon the exercise of such
Rights (although such shareholders may subscribe for Shares pursuant to the
Over-Subscription Privilege). Completed Subscription Certificates or Notices
of Guaranteed Delivery must be received by the Subscription Agent prior to
5:00 p.m., Eastern time, on the Expiration Date at one of the offices of the
Subscription Agent at one of the addresses set forth above.
Shareholders Who Are Registered Record Owners. Shareholders who are
registered record owners can choose between either option set forth under "--
Payment for Shares" below. If a shareholder who is a registered record owner
chooses option (2) below, an additional fee may be charged by the firm
guaranteeing delivery for this service. If time is of the essence, option (2)
will permit delivery of the Subscription Certificate and payment after the
Expiration Date.
Shareholders Whose Shares Are Held By A Nominee. Shareholders whose shares
are held by a nominee, such as a broker or trustee, must contact that nominee
to exercise their Rights. In that case, the nominee will complete the
Subscription Certificate on behalf of the investor and arrange for proper
payment by one of the methods set forth under "--Payment for Shares" below.
Nominees. Nominees who hold shares for the account of others should notify
the beneficial owners of such shares of the Offer as soon as possible to
ascertain such beneficial owners' intentions and to obtain instructions with
respect to the Rights. If the beneficial owner so instructs, the nominee
should complete the Subscription Certificate and submit it to the Subscription
Agent with the proper payment by one of the methods described under "--Payment
for Shares" below.
FOREIGN RESTRICTIONS
Subscription Certificates will not be mailed to shareholders whose addresses
are outside the United States (for these purposes the United States includes
its territories and possessions). The Rights to which those Subscription
Certificates relate will be held by the Subscription Agent for such
shareholders' accounts until instructions are received to exercise the Rights,
subject to applicable law. If no instructions are received prior to 5:00 p.m.
Eastern Time on the Expiration Date, such Rights will expire.
INFORMATION AGENT
Any questions or requests for assistance may be directed to the Information
Agent at its address or telephone number listed below:
THE INFORMATION AGENT FOR THE OFFER IS:
SHAREHOLDER
COMMUNICATIONS CORPORATION
17 State Street
New York, New York 10004
Toll Free: (800) 733-8481, Extension 347
or
Call Collect: (212) 805-7000
Shareholders may also contact their brokers or nominees for information with
respect to the Offer.
17
<PAGE>
The Information Agent will receive a fee for its services as information
agent estimated to be $10,000, plus reimbursement for its out-of-pocket
expenses related to the Offer expected to be $20,000.
PAYMENT FOR SHARES
Shareholders who acquire Shares during the Primary Subscription or pursuant
to the Over-Subscription Privilege may choose between the following methods of
payment:
(1) A shareholder can send the Subscription Certificate, together with
payment for the Shares acquired during the Primary Subscription and for
additional Shares requested pursuant to the Over-Subscription Privilege to
the Subscription Agent, calculating the total payment on the basis of an
estimated Subscription Price of $ per Share. To be accepted, such
payment, together with the properly completed and executed Subscription
Certificate, must be received by the Subscription Agent at one of the
Subscription Agent's offices at the addresses set forth above prior to 5:00
p.m., Eastern time, on the Expiration Date. A PAYMENT PURSUANT TO THIS
METHOD MUST BE IN UNITED STATES DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A
BANK LOCATED IN THE UNITED STATES, MUST BE PAYABLE TO ALLIANCE WORLD DOLLAR
GOVERNMENT FUND, INC. AND MUST ACCOMPANY A PROPERLY COMPLETED AND EXECUTED
SUBSCRIPTION CERTIFICATE FOR SUCH SUBSCRIPTION CERTIFICATE TO BE ACCEPTED.
(2) Alternatively, subscription instructions will be accepted by the
Subscription Agent if, prior to 5:00 p.m., Eastern time, on the Expiration
Date, the Subscription Agent has received a Notice of Guaranteed Delivery
by facsimile or otherwise from a bank, trust company, or New York Stock
Exchange member guaranteeing delivery to First Data Investor Services
Group, Inc. of (i) payment of the full Subscription Price for the Shares
subscribed for during the Primary Subscription and any additional Shares
subscribed for pursuant to the Over-Subscription Privilege, and (ii) a
properly completed and executed Subscription Certificate. The Subscription
Agent will not honor a Notice of Guaranteed Delivery if a properly
completed and executed Subscription Certificate and full payment for the
shares are not received by the Subscription Agent by the close of business
on July 24, 1996, the third business day after the Expiration Date, unless
the Offer is extended.
On the ninth business day following the Expiration Date (the "Confirmation
Date"), August 1, 1996, unless the Offer is extended, a confirmation notice
will be sent by the Subscription Agent to each participating shareholder (or,
if the shareholder's Shares are held by Cede or any other depository or
nominee, to Cede or such depository or nominee), showing (i) the number of
Shares acquired pursuant to the Primary Subscription, (ii) the number of
Shares, if any, allocated pursuant to the Over-Subscription Privilege, (iii)
the per Share and total purchase price for the Shares, and (iv) any additional
amount payable by such shareholder to the Fund or any excess to be refunded by
the Fund to such shareholder, in each case based on the Subscription Price as
determined on the Pricing Date. If any shareholder exercises the right to
acquire Shares pursuant to the Over-Subscription Privilege, any such excess
payment that would otherwise be refunded to him will be applied by the Fund
toward payment for Shares acquired pursuant to exercise of the Over-
Subscription Privilege. Any additional payment required from a shareholder
must be received by the Subscription Agent within ten business days after the
Confirmation Date, August 15, 1996, unless the offer is extended. Any excess
payment to be refunded by the Fund to shareholders will be mailed by the
Subscription Agent to them promptly. All payments by a shareholder must be in
U.S. dollars by money order or check drawn on a bank located in the United
States of America and payable to ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
The Subscription Agent will deposit all checks received by it prior to the
final due date into a segregated interest bearing account (which interest will
accrue to the benefit of the Fund regardless of whether Shares are issued and
sold by the Fund) at The Bank of New York pending distribution of the Shares.
Whichever of the two methods described above is used, issuance and delivery
of certificates for the Shares purchased are subject to collection of checks
and actual payment pursuant to any Notice of Guaranteed Delivery.
SHAREHOLDERS WILL HAVE NO RIGHT TO RESCIND THEIR SUBSCRIPTIONS AFTER RECEIPT
OF THEIR PAYMENT FOR SHARES BY THE SUBSCRIPTION AGENT.
18
<PAGE>
If a shareholder who acquires Shares pursuant to the Primary Subscription or
Over-Subscription Privilege does not make payment of any additional amounts
due, the Fund reserves the right to take any or all of the following actions:
(i) sell such subscribed and unpaid-for Shares to other shareholders, (ii)
apply any payment actually received by it toward the purchase of the greatest
whole number of Shares that could be acquired by such holder upon exercise of
the Primary Subscription and/or Over-Subscription Privilege, and/or (iii)
exercise any and all other rights or remedies to which it may be entitled,
including, without limitation, set-off against payments actually received by
it with respect to such subscribed Shares and/or to enforce the relevant
guaranty of payment.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE FUND WILL BE AT THE ELECTION AND RISK OF THE RIGHTS
HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES AND
PAYMENT BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY
TO THE FUND AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., EASTERN TIME, ON THE
EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE
BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT,
BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Fund, whose determinations
will be final and binding. The Fund in its sole discretion may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise of any
Right. Subscriptions will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
Fund determines in its sole discretion. The Fund will not be under any duty to
give notification of any defect or irregularity in connection with the
submission of Subscription Certificates or incur any liability for failure to
give such notification.
NOTICE OF NET ASSET VALUE DECLINE
The Fund has, pursuant to the Securities and Exchange Commission's
regulatory requirements, undertaken that, if subsequent to June 21, 1996, the
effective date of the Fund's Registration Statement, the Fund's net asset
value declines more than 10% from its net asset value as of that date, the
Fund will suspend the Offer until it amends this Prospectus. In such event,
the Fund will notify shareholders of any such decline and thereby permit them
the opportunity to cancel their subscription prior to the extended expiration
date as defined herein.
DELIVERY OF SHARE CERTIFICATES
Except as noted below in this paragraph, share certificates for all Shares
acquired during the Primary Subscription and pursuant to the Over-Subscription
Privilege will be mailed promptly after the expiration of the Offer and full
payment for the Shares subscribed for has been received and cleared.
Participants in the Fund's Dividend Reinvestment Plan (the "Plan") will have
any Shares acquired during the Primary Subscription or pursuant to the Over-
Subscription Privilege credited to their shareholder dividend reinvestment
accounts in the Plan. Share certificates will not be issued for Shares
credited to Plan accounts. Shareholders whose shares of Common Stock are held
of record by Cede or by any other depository or nominee on their behalf or
their broker-dealers' behalf will have any Shares acquired during the Primary
Subscription or pursuant to the Over-Subscription Privilege credited to the
account of Cede or such other depository or nominee.
FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER
For U.S. federal income tax purposes, neither the receipt nor the exercise
of the Rights by shareholders will result in taxable income to holders of
Common Stock, and no loss will be realized if the Rights expire without
exercise. A shareholder's holding period for a Share acquired upon exercise of
a Right begins with the date of exercise. Assuming that the fair market value
of the Rights on the date of distribution is less than 15% of the fair market
value of the shares of Common Stock on that date, and that a shareholder does
not make the election described below, a shareholder's basis for determining
gain or loss upon the sale of a Share acquired upon the
19
<PAGE>
exercise of a Right will be equal to the sum of the Subscription Price per
Share and any servicing fee charged to the shareholder by the shareholder's
broker, bank or trust company. A shareholder's gain or loss recognized upon a
sale of a Share acquired upon the exercise of a Right will be capital gain or
loss (assuming the Share is held as a capital asset at the time of sale) and
will be long-term capital gain or loss if the Share has been held at the time
of sale for more than one year.
The following portion of this discussion assumes that the fair market value
of the Rights upon the date of distribution will be less than 15% of the fair
market value of the shares of Common Stock outstanding on that date. In these
circumstances, a shareholder's basis in the Rights received in the Offer will
be zero unless the shareholder elects to allocate his basis in those Shares of
the Fund which he originally owned between such shares and the Rights issued
in the Offer. This allocation is based upon the relative fair market values of
such shares and of the Rights as of the date of issuance of the Rights. Thus,
if such an election is made, the shareholder's basis in the shares originally
owned will be reduced by an amount equal to the basis allocated to the Rights.
This election must be made in a statement attached to the shareholder's
federal income tax return for the year in which the Rights are received.
However, if an electing shareholder does not exercise the Rights, no loss will
be recognized and no portion of the shareholder's basis in the Shares will be
allocated to the unexercised Rights. If an electing Shareholder does exercise
the Rights, the basis of any Shares acquired through exercise of the Rights
will be increased by the basis allocated to such Rights. Accordingly,
shareholders should consider the advisability of making the election described
above if the shareholder intends to exercise the Rights.
The foregoing is a general summary of the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), and U.S. Treasury
regulations currently in effect, and does not cover state or local taxes. The
Code and regulations are subject to change by legislative or administrative
action. Shareholders should consult their tax advisors regarding specific
questions as to federal, state or local taxes. See "Taxation" below in this
Prospectus and in the SAI.
EMPLOYEE PLAN CONSIDERATIONS
Shareholders that are employee benefit plans subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), including 401(k)
plans, as well as individual retirement accounts ("IRAs") and other plans
eligible for special tax treatment under the Code or subject to Section 4975
of the Code (each a "Plan"), should be aware that additional contributions to
the Plan (other than rollover contributions or trustee-to-trustee transfers
from another Plan) in order to exercise Rights, when taken together with
contributions previously made, may result in the imposition of an excise tax
for excess or nondeductible contributions. In the case of Plans qualified
under Section 401(a) of the Code and certain other Plans, additional cash
contributions could also cause the maximum contribution limitations of Section
415 of the Code or other qualification rules to be violated. Plans and certain
other tax exempt entities, including governmental plans, should also be aware
that if they borrow in order to finance their exercise of Rights, they become
subject to the tax on unrelated business taxable income under Section 511 of
the Code. If any portion of an IRA is used as security for a loan, the portion
so used is also treated as distributed to the IRA depositor. Plan counsel
should be consulted if additional contributions or borrowing to exercise
Rights are contemplated. Plan counsel should also be consulted concerning the
ERISA fiduciary responsibility requirements, and ERISA and Code prohibited
transaction rules, that may affect a Plan's exercise of Rights.
DILUTION AND EFFECT OF NON-PARTICIPATION IN THE OFFER
Upon the completion of the Offer, shareholders who do not fully exercise
their Rights will own a smaller proportional interest in the Fund than would
be the case if the Offer had not been made. In addition, because the
Subscription Price of each Share will be less than the net asset value per
share of the Fund's Common Stock and because the Fund will incur expenses in
connection with the Offer, the Offer will result in a dilution of net asset
value per share for all shareholders, which will disproportionately affect
shareholders who do not exercise their Rights. Although it is not possible to
state precisely the amount of such decrease in net asset value because it is
not known at the date of this Prospectus how many Shares will be subscribed
for, or what the Subscription Price
20
<PAGE>
will be, such dilution might be substantial. For example, assuming all Rights
are exercised at the estimated Subscription Price per Share, including up to
an additional 25% of the Shares which may be issued to satisfy over-
subscription requests, and after deducting all expenses related to the Offer,
the Fund's net asset value as of June 21, 1996 of $ per share would be
reduced by approximately , or %. Expenses related to the Offer will be
borne by the Fund and will reduce the net asset value of the Fund's Common
Stock.
IMPORTANT DATES TO REMEMBER
<TABLE>
<CAPTION>
EVENT DATE
----- ----
<S> <C>
Record Date.............................. June 21, 1996
Subscription Period...................... June 21, 1996 through July 19, 1996*
Expiration Date and Pricing Date......... July 19, 1996*
Subscription Certificates and Payment for
Shares Due** ........................... July 19, 1996*
Notices of Guaranteed Delivery Due**..... July 19, 1996*
Payment for Guarantees of Delivery Due... July 24, 1996*
Confirmation to Participants............. August 1, 1996*
Final Payment for Shares................. August 15, 1996*
</TABLE>
- --------
* Unless the Offer is extended to a date not later than July 26, 1996.
** A shareholder exercising Rights must deliver either (i) a Subscription
Certificate and Payment for Shares or (ii) a Notice of Guaranteed Delivery
by the Expiration Date.
DIVIDENDS PAYABLE WITH RESPECT TO OFFERED SHARES
It is expected that no dividends or other distributions will be payable with
respect to the Shares offered hereby until September 1996. The Board of
Directors is expected to act in July 1996 to declare a dividend to be payable
in August to shareholders of record as of July 31, 1996. As the Confirmation
Date of the Offer, which is the date of issuance of the Shares for which
subscriptions are received, is August 1, 1996 (or a later date if the Offer is
extended), the dividend to be payable in August will not be payable with
respect to the Shares offered hereby, notwithstanding that the dividend will
be paid after the issuance of such Shares.
Based upon Alliance's analysis of current market conditions and the
expectation that the Fund will begin investing the net proceeds of the
offering on the Confirmation Date (subject to any extension of the Offer), it
is not anticipated that the dilution in the net asset value per share as a
result of the Offer will result in any dilution in the level of monthly
distributions per share paid with respect to the Fund's shares of Common
Stock, although there can be no assurance that no such dilution will result.
See "The Offer--Dilution and Effect of Non-Participation in the Offer."
THE FUND
Alliance World Dollar Government Fund, Inc. is a non-diversified, closed-end
management investment company. The Fund's investment objective is to seek high
current income by investing exclusively in fixed income securities denominated
in U.S. dollars. In seeking to achieve this objective, the Fund invests
substantially all of its assets in Sovereign Debt Obligations and Zero Coupon
Obligations. Under normal circumstances, the Fund invests at least 75% of its
total assets in (i) Collateralized Brady Bonds and (ii) Zero Coupon
Obligations. The Fund, which emphasizes investments in the Sovereign Debt
Obligations of countries that are considered emerging market countries at the
time of purchase, will not invest 25% or more of its total assets in the
Sovereign Debt Obligations of any one country. The Fund may invest up to 50%
of its assets in securities that are not readily marketable. At April 30,
1996, 69.9% of the Fund's total assets were invested in Sovereign Debt
Obligations, including Collateralized Brady Bonds that represented 51.6% of
the Fund's total assets. At that date the Fund was invested in the obligations
of a total of twelve countries. Those countries, and the corresponding
percentage of the market value of the Fund's investments in securities as of
April 30, 1996 represented by the obligations of each, are as follows:
21
<PAGE>
<TABLE>
<S> <C>
Algeria............................................................. 0.9%
Argentina........................................................... 8.2%
Brazil.............................................................. 12.7%
Bulgaria............................................................ 7.8%
Ecuador............................................................. 6.9%
Mexico.............................................................. 5.1%
Morocco............................................................. 5.6%
Nigeria............................................................. 4.9%
Panama.............................................................. 4.4%
Poland.............................................................. 6.6%
Venezuela........................................................... 10.2%
United States*...................................................... 26.7%
------
Total............................................................. 100.0%
======
</TABLE>
- --------
* Consisted solely of Zero Coupon Obligations.
Alliance Capital Management L.P., a Delaware limited partnership listed on
the New York Stock Exchange, serves as investment adviser and administrator to
the Fund. Alliance is a leading international investment manager supervising
client accounts with assets as of March 31, 1996 totaling more than $163
billion. See "Management of the Fund--Adviser and Administrator."
The Fund was incorporated under the laws of the State of Maryland on August
20, 1992 and is registered under the 1940 Act. It commenced investment
operations on November 2, 1992 after an initial public offering of 7,250,000
shares of Common Stock. The net proceeds of the offering were approximately
$101,137,500. The Fund's outstanding Common Stock is listed and traded on the
New York Stock Exchange under the symbol "AWG". For the six months ended April
30, 1996 the average weekly trading volume of the Fund's shares was 156,154
shares and the aggregate net assets of the Fund at April 30, 1996 were
$114,212,201. There are currently 8,652,707 shares of Common Stock
outstanding. The Fund's principal office is located at 1345 Avenue of the
Americas, New York, New York 10105 and its telephone number is (800) 733-8481,
extension 347.
USE OF PROCEEDS
Assuming all Shares offered hereby are sold at the Estimated Subscription
Price of $ per Share, the net proceeds of the Offer are estimated to be $
after payment of the Dealer Manager and soliciting fees and estimated offering
expenses. Expenses related to the issuance of the Shares will be borne by the
Fund and will reduce the net asset value of the Common Stock. If the Fund
increases the number of Shares subject to the Offer by 25%, or 721,058 Shares,
in order to satisfy over-subscriptions, the additional net proceeds will be
approximately $ . The net proceeds will be invested within approximately one
month following receipt by the Fund of payment for the Shares in accordance
with the Fund's investment objective and policies. Pending such investment,
the proceeds may be invested in U.S. dollar-denominated bank deposits, short-
term debt or money market instruments rated high quality by any nationally
recognized statistical rating service, or if not so rated, of equivalent
investment quality as determined by Alliance. All proceeds of the Offer will
be paid to the Fund in U.S. dollars.
22
<PAGE>
NET ASSET VALUE AND MARKET PRICE INFORMATION
The outstanding shares of Common Stock of the Fund are listed on the New
York Stock Exchange and the Shares issued in the Offer will be authorized for
listing on that exchange, subject to official notice of issuance. The
following table shows, for each fiscal quarter for the two most recently
completed fiscal years and the current fiscal year, (i) the high and low sale
prices per share of Common Stock of the Fund, as reported in the consolidated
transaction reporting system, (ii) the net asset value per share of the Fund
as determined on the date closest to each quotation, and (iii) the percentage
by which the shares of Common Stock of the Fund traded at a premium over or
discount from the Fund's net asset value per share, represented by the
quotation.
<TABLE>
<CAPTION>
PREMIUM (OR
DISCOUNT) AS A
PERCENTAGE OF
MARKET PRICE NET ASSET VALUE NET ASSET VALUE
--------------- --------------- ---------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
------------- ------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
January 31, 1994................ $22.500 $17.500 22.41 17.29 0.40% 1.21%
April 30, 1994.................. $18.250 $14.000 17.25 11.60 5.80% 20.69%
July 31, 1994................... $15.250 $13.000 12.59 11.19 21.13% 16.18%
October 31, 1994................ $13.875 $13.000 11.96 11.07 16.01% 17.43%
January 31, 1995................ $13.000 $ 9.875 11.13 9.35 16.80% 5.61%
April 30, 1995.................. $11.375 $ 9.000 10.25 8.41 10.98% 7.02%
July 31, 1995................... $11.875 $11.000 11.89 10.78 -0.13% 2.04%
October 31, 1995................ $11.875 $10.750 12.06 11.16 -1.53% -3.67%
January 31, 1996................ $13.750 $11.375 14.00 11.64 -1.79% -2.28%
April 30, 1996.................. $14.000 $11.875 14.27 12.26 -1.89% -3.14%
July 31, 1996*..................
</TABLE>
- --------
* Through June 21, 1996.
The Fund's shares have generally traded at or near their net asset value per
share. At the close of business on June 21, 1996, the Fund's net asset value
was $ per share while the closing market price of the Common Stock on the
New York Stock Exchange was $ per share representing a % [premium
above/discount from] net asset value on such day.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Fund's investment objective is to seek high current income by investing
exclusively in fixed income securities denominated in U.S. dollars. In seeking
to achieve this objective, the Fund invests substantially all of its assets in
(i) U.S. dollar-denominated debt 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 ("Sovereign Debt Obligations") and
(ii) zero coupon obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities ("Zero Coupon Obligations"). Under normal
circumstances, the Fund invests at least 75% of its total assets in (i)
Sovereign Debt Obligations of a type customarily referred to as "Brady Bonds"
that are issued as part of debt restructurings and that are collateralized in
full as to principal due at maturity by Zero Coupon Obligations having the
same maturity ("Collateralized Brady Bonds") and (ii) Zero Coupon Obligations.
Sovereign Debt Obligations held by the Fund will take the form of bonds,
notes, bills, debentures, warrants, short-term paper, loan participations,
loan assignments and interests issued by entities organized and operated for
the purpose of restructuring the investment characteristics of other Sovereign
Debt Obligations. Sovereign Debt Obligations held by the Fund generally are
not traded on a securities exchange. The Fund is not subject to restrictions
on the maturities of the Sovereign Debt Obligations it holds.
23
<PAGE>
The Fund's investment objective and its policy of under normal circumstances
investing at least 75% of its total assets in Collateralized Brady Bonds and
Zero Coupon Obligations are fundamental and cannot be changed without the
approval of a majority of the Fund's outstanding voting securities, which, as
used in this Prospectus, means the lesser of (i) 67% of the shares represented
at a meeting at which more than 50% of the outstanding shares are present in
person or represented by proxy and (ii) more than 50% of the outstanding
shares. The Fund's other investment policies, which are not designated as
fundamental policies, may be changed without shareholder approval. The Fund
will not change its non-fundamental investment policies without
contemporaneous notice to its shareholders. The Fund is designed primarily for
long-term investment, and investors should not consider it a trading vehicle.
As with all investment companies, there can be no assurance that the Fund's
investment objective will be achieved.
The Fund emphasizes investments in the Sovereign Debt Obligations of
countries that are considered emerging market countries at the time of
purchase. As used in this Prospectus, an "emerging market country" is any
country that is considered to be an emerging or developing country by the
International Bank for Reconstruction and Development (more commonly referred
to as the "World Bank"). In selecting and allocating assets among the
countries in which the Fund will invest, Alliance develops a long-term view of
those countries and engages in an analysis of sovereign risk by focusing on
factors such as a country's public finances, monetary policy, external
accounts, financial markets, stability of exchange rate policy and labor
conditions. The Fund is not required to invest any specified minimum amount of
its total assets in Sovereign Debt Obligations of issuers located in any
particular country. The Fund will not invest 25% or more of its total assets
in the Sovereign Debt Obligations of any one country. Substantially all of the
Fund's assets may be invested in high yield, high risk debt securities that
are low-rated (i.e., below investment grade) or unrated and in both cases that
are considered to be predominantly speculative as regards the issuer's
capacity to pay interest and repay principal. See "Special Risk
Considerations." The Fund may invest in other investment companies whose
investment objectives and policies are consistent with those of the Fund.
A substantial portion of the Fund's investments (including certain Brady
Bonds and all Zero Coupon Obligations) will be in (i) securities that were
initially issued at a discount from their face value (collectively, "Discount
Obligations") and (ii) securities purchased by the Fund at a price less than
their stated face amount or, in the case of Discount Obligations, at a price
less than their issue price plus the portion of "original issue discount"
previously accrued thereon, i.e., purchased at a "market discount." Under
current federal tax law and in furtherance of its investment objective of
seeking high current income, the Fund accrues as current income each year a
portion of the original issue and/or market discount at which each such
obligation is purchased by the Fund even though the Fund does not receive
during the year cash interest payments on the obligation corresponding to the
accrued discount. Under the minimum distribution requirements of the Code, the
Fund may be required to pay out as an income distribution each year an amount
significantly greater than the total amount of cash interest that the Fund has
actually received as interest during the year. Such distributions will be made
from the cash assets of the Fund, from borrowings or by liquidation of
portfolio securities, if necessary. The risks associated with holding
securities not readily marketable may be accentuated at such times. See
"Investment Objective and Policies--Borrowing," "Special Risk Considerations--
Securities Not Readily Marketable" below and "Taxation--United States Federal
Income Taxation of the Fund--Zero Coupon and Other Discount Obligations" in
the SAI.
For temporary defensive purposes, the Fund may vary from its investment
policies during periods in which conditions in the securities markets for
Collateralized Brady Bonds and Zero Coupon Obligations or other economic or
political conditions warrant. Under such circumstances, the Fund may reduce
its position in Collateralized Brady Bonds or Zero Coupon Obligations and
invest in (i) debt securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities ("U.S. Government Securities") other than Zero
Coupon Obligations, and (ii) the following U.S. dollar-denominated
investments: (a) indebtedness rated Aa or better by Moody's Investors Service,
Inc. ("Moody's") or AA or better by Standard & Poor's Ratings Service ("S&P"),
or if not so rated, of equivalent investment quality as determined by
Alliance, (b) certificates of deposit, bankers' acceptances and interest-
bearing savings deposits of banks having total assets of more than $1 billion
and which are members of the Federal Deposit Insurance Corporation and (c)
commercial paper of prime quality rated
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Prime 1 or better by Moody's or A-1 or better by S&P or, if not so rated,
issued by companies which have an outstanding debt issue rated Aa or better by
Moody's or AA or better by S&P. The Fund may also at any time temporarily
invest funds awaiting reinvestment or held for reserves for dividends and
other distributions to shareholders in such U.S. dollar-denominated money
market instruments.
BRADY BONDS
The Fund may invest in certain debt obligations customarily referred to as
"Brady Bonds," which are debt obligations created through the exchange of
commercial bank loans to foreign entities for new obligations in connection
with debt restructurings under a plan introduced by former U.S. Secretary of
the Treasury, Nicholas F. Brady (the "Brady Plan").
Brady Bonds have been issued only recently, and, accordingly, do not have a
long payment history. They may be collateralized or uncollateralized and
issued in various currencies (although most are dollar-denominated) and they
are actively traded in the over-the-counter secondary market.
Dollar-denominated, Collateralized Brady Bonds, which may be fixed rate par
bonds or floating rate discount bonds, are generally collateralized in full as
to principal due at maturity by U.S. Treasury zero coupon obligations which
have the same maturity as the Brady Bonds. Interest payments on these Brady
Bonds generally are collateralized by cash or securities in an amount that, in
the case of fixed rate bonds, is equal to at least one year of rolling
interest payments or, in the case of floating rate bonds, initially is equal
to at least one year's rolling interest payments based on the applicable
interest rate at that time and is adjusted at regular intervals thereafter.
Certain Brady Bonds are entitled to "value recovery payments" in certain
circumstances, which in effect constitute supplemental interest payments but
generally are not collateralized. Brady Bonds are often viewed as having three
or four valuation components: (i) the collateralized repayment of principal at
final maturity; (ii) the collateralized interest payments; (iii) the
uncollateralized interest payments; and (iv) any uncollateralized repayment of
principal at maturity (these uncollateralized amounts constitute the "residual
risk"). In the event of a default with respect to Collateralized Brady Bonds
as a result of which the payment obligations of the issuer are accelerated,
the U.S. Treasury zero coupon obligations held as collateral for the payment
of principal will not be distributed to investors, nor will such obligations
be sold and the proceeds distributed. The collateral will be held by the
collateral agent to the scheduled maturity of the defaulted Brady Bonds, which
will continue to be outstanding, at which time the face amount of the
collateral will equal the principal payments which would have then been due on
the Brady Bonds in the normal course. In addition, in light of the residual
risk of Brady Bonds and, among other factors, the history of defaults with
respect to commercial bank loans by public and private entities of countries
issuing Brady Bonds, investments in Brady Bonds are to be viewed as
speculative.
As of April 30, 1996, Brady Plan debt restructurings totaling more than $120
billion have been implemented in Argentina, Bolivia, Brazil, Bulgaria, Costa
Rica, the Dominican Republic, Ecuador, Jordan, Mexico, Nigeria, the
Philippines, Poland, Uruguay and Venezuela with the largest proportion of
Brady Bonds having been issued to date by Argentina, Brazil, Mexico and
Venezuela.
Most Argentine, Brazilian, Dominican Republic and Mexican Brady Bonds and a
significant portion of the Venezuelan Brady Bonds issued to date are
Collateralized Brady Bonds with interest coupon payments collateralized on a
rolling-forward basis by funds or securities held in escrow by an agent for
the bondholders. Of the other issuers of Brady Bonds, Bolivia, Bulgaria,
Jordan, Nigeria, the Philippines, Poland and Uruguay have to date issued
Collateralized Brady Bonds.
STRUCTURED SECURITIES
The Fund may invest up to 25% of its total assets in interests in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of Sovereign Debt Obligations. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, of specified
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instruments (such as commercial bank loans or Brady Bonds) and the issuance by
that entity of one or more classes of securities ("Structured Securities")
backed by, or representing interests in, the underlying instruments. The cash
flow on the underlying instruments may be apportioned among the newly issued
Structured Securities to create securities with different investment
characteristics such as varying maturities, payment priorities and interest
rate provisions, and the extent of the payments made with respect to
Structured Securities is dependent on the extent of the cash flow on the
underlying instruments. Because Structured Securities of the type in which the
Fund anticipates it will invest typically involve no credit enhancement, their
credit risk generally will be equivalent to that of the underlying
instruments.
The Fund is permitted to invest in a class of Structured Securities that is
either subordinated or unsubordinated to the right of payment of another
class. Subordinated Structured Securities typically have higher yields and
present greater risks than unsubordinated Structured Securities.
LOAN PARTICIPATIONS AND ASSIGNMENTS
The Fund may invest in fixed and floating rate loans ("Loans") arranged
through private negotiations between an issuer of Sovereign Debt Obligations
and one or more financial institutions ("Lenders"). The Fund's investments in
Loans are expected in most instances to be in the form of participations in
Loans ("Participations") and assignments of all or a portion of Loans
("Assignments") from third parties. The Fund may invest up to 25% of its total
assets in Participations and Assignments. The government that is the borrower
on the Loan will be considered by the Fund to be the issuer of a Participation
or Assignment for purposes of the Fund's fundamental investment policy that it
will not invest 25% or more of its total assets in securities of issuers
conducting their principal business activities in the same industry (for this
purpose, each foreign government is treated as a separate industry). The
Fund's investment in Participations typically will result in the Fund having a
contractual relationship only with the Lender and not with the borrower. The
Fund will have the right to receive payments of principal, interest and any
fees to which it is entitled only from the Lender selling the Participation
and only upon receipt by the Lender of the payments from the borrower. In
connection with purchasing Participations, the Fund generally will have no
right to enforce compliance by the borrower with the terms of the loan
agreement relating to the Loan, nor any rights of set-off against the
borrower, and the Fund may not directly benefit from any collateral supporting
the Loan in which it has purchased the Participation. As a result, the Fund
may be subject to the credit risk of both the borrower and the Lender that is
selling the Participation. In the event of the insolvency of the Lender
selling a Participation, the Fund may be treated as a general creditor of the
Lender and may not benefit from any set-off between the Lender and the
borrower. Certain Participations may be structured in a manner designed to
avoid purchasers of Participations being subject to the credit risk of the
Lender with respect to the Participation, but even under such a structure, in
the event of the Lender's insolvency, the Lender's servicing of the
Participation may be delayed and the assignability of the Participation
impaired. The Fund will acquire Participations only if the Lender
interpositioned between the Fund and the borrower is a Lender having total
assets of more than $25 billion and whose senior unsecured debt is rated
investment grade or higher (i.e., Baa or higher by Moody's or BBB or higher by
S&P).
When the Fund purchases Assignments from Lenders it will acquire direct
rights against the borrower on the Loan. Because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and be more limited than, those
held by the assigning Lender. The assignability of certain Sovereign Debt
Obligations is restricted by the governing documentation as to the nature of
the assignee such that the only way in which the Fund may acquire an interest
in a Loan is through a Participation and not an Assignment. The Fund may have
difficulty disposing of Assignments and Participations because there is no
liquid market for such interests. The lack of a liquid secondary market may
have an adverse impact on the value of such securities and the Fund's ability
to dispose of particular Assignments or Participations when necessary to meet
the Fund's liquidity needs or in response to a specific economic event such as
a deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations also may make it more
difficult for the Fund to assign a value to these interests for purposes of
valuing the Fund's portfolio and calculating its net asset value.
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ZERO COUPON OBLIGATIONS
The Zero Coupon Obligations in which the Fund may invest include Treasury
bills and the principal components of U.S. Treasury bonds, U.S. Treasury notes
and obligations of U.S. government agencies or instrumentalities. A Zero
Coupon Obligation pays no interest to its holder during its life. An investor
acquires a Zero Coupon Obligation at a price that is generally an amount based
upon its present value, and that, depending upon the time remaining until
maturity, may be significantly less than its face value (sometimes referred to
as a "deep discount" price). Upon maturity of the Zero Coupon Obligation, the
investor receives the face value of the security. Zero Coupon Obligations do
not entitle the holder to any periodic payments of interest prior to maturity.
Accordingly, such obligations usually trade at a deep discount from their face
or par value and are subject to greater fluctuations of market value in
response to changing interest rates than debt obligations of comparable
maturities under which periodic distributions of interest are made. On the
other hand, because there are no periodic interest payments to be reinvested
prior to maturity, Zero Coupon Obligations eliminate reinvestment risk and
lock in a rate of return to maturity. For a discussion of the tax treatment of
Zero Coupon Obligations, see "Taxation--United States Federal Income Taxation
of the Fund--Zero Coupon and Other Discount Obligations" in the SAI.
Currently, the only U.S. Treasury obligation issued without coupons is the
Treasury bill. The U.S. government agencies and instrumentalities that have
issued zero coupon obligations include the Financing Corporation and the
Student Loan Marketing Association. The Zero Coupon Obligations purchased by
the Fund may consist of principal components held in STRIPS form issued
through the U.S. Treasury's STRIPS program, which permits the beneficial
ownership of the component to be recorded directly in the Treasury book-entry
system. In addition, in the last few years a number of banks and brokerage
firms have separated the principal components from the coupon components of
the U.S. Treasury bonds and notes and sold them separately in the form of
receipts or certificates representing undivided interests in these instruments
(which instruments are generally held by a bank in a custodial or trust
account). The staff of the Securities and Exchange Commission has indicated
that, in its view, these receipts or certificates should be considered as
securities issued by the bank or brokerage firm involved and, therefore,
unlike those obligations issued under the U.S. Treasury's STRIPS program,
should not be included in the Fund's categorization of Zero Coupon Obligations
for purposes of the Fund's policy of investing at least 75% of its assets in
Collateralized Brady Bonds and Zero Coupon Obligations. The Fund disagrees
with the staff's interpretation but has undertaken that it will not include
these obligations as Zero Coupon Obligations for purposes of the 75% policy
until final resolution of the issue.
OPTIONS
The Fund may write covered put and call options and purchase put and call
options that are traded on U.S. and foreign securities exchanges and over-the-
counter, including options on market indices. The Fund may also write call
options for cross-hedging purposes. There are no specific limitations on the
Fund's writing and purchasing of options.
The Fund may write a call option on a security that it does not own in order
to hedge against a decline in the value of a security that it owns or has the
right to acquire, a technique referred to as "cross-hedging." The Fund would
write a call option for cross-hedging purposes, instead of writing a covered
call option, when the premium to be received from the cross-hedge transaction
exceeds that to be received from writing a covered call option, while at the
same time achieving the desired hedge. The correlation risk involved in cross-
hedging may be greater than the correlation risk involved with other hedging
strategies.
In purchasing a call option, the Fund would be in a position to realize a
gain if, during the option period, the price of the underlying security
increased by an amount in excess of the premium paid. It would realize a loss
if the price of the underlying security declined or remained the same or did
not increase during the period by at least the amount of the premium. In
purchasing a put option, the Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security declined by an
amount in excess of the premium paid. It would realize a loss if the price of
the underlying security increased or remained the same or
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did not decrease during that period by at least the amount of the premium. If
a put or call option purchased by the Fund were permitted to expire without
being sold or exercised, its premium would be lost by the Fund.
If a put option written by the Fund were exercised the Fund would be
obligated to purchase the underlying security at the exercise price. If a call
option written by the Fund were exercised the Fund would be obligated to sell
the underlying security at the exercise price. The risk involved in writing a
put option is that there could be a decrease in the market value of the
underlying security. If this occurred, the option could be exercised and the
underlying security would then be sold by the option holder to the Fund at a
higher price than its current market value. The risk involved in writing a
call option is that there could be an increase in the market value of the
underlying security. If this occurred, the option could be exercised and the
underlying security would then be sold by the Fund at a lower price than its
current market value. These risks could be reduced by entering into a closing
transaction. The Fund retains the premium received from writing a put or call
option whether or not the option is exercised.
The Fund may purchase or write options on securities of the types in which
it is permitted to invest in privately negotiated transactions. The Fund will
effect such transactions only with investment dealers and other financial
institutions (such as commercial banks or savings and loan institutions)
deemed creditworthy by Alliance, and Alliance has adopted procedures for
monitoring the creditworthiness of such entities. Options purchased or written
by the Fund in negotiated transactions are illiquid and it may not be possible
for the Fund to effect a closing transaction at a time when Alliance believes
it would be advantageous to do so.
An option on a securities index is similar to an option on a security except
that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level
of the chosen index is greater than (in the case of a call) or less than (in
the case of a put) the exercise price of the option.
WARRANTS
The Fund may invest in warrants, which are securities permitting, but not
obligating, their holder to subscribe for other securities. The Fund may
invest in warrants for debt securities or warrants for equity securities that
are acquired as units with debt instruments. Warrants do not carry with them
the right to dividends or voting rights with respect to the securities that
they entitle their holder to purchase, and they do not represent any rights in
the assets of the issuer. As a result, an investment in warrants may be
considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities, and a warrant ceases to have value if it is not
exercised prior to its expiration date. The Fund does not intend to retain in
its portfolio any common stock received upon the exercise of a warrant and
will sell any such common stock as promptly as practicable and in a manner
that it believes will reduce its risk of a loss in connection with the sale.
The Fund does not intend to retain in its portfolio any warrant for equity
securities acquired as a unit with a debt instrument if the warrant begins to
trade separately from the related debt instrument.
SECURITIES NOT READILY MARKETABLE
The Fund may invest up to 50% of its total assets in securities that are not
readily marketable. These securities include, among others, (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market
(e.g., trading in the security is suspended or, in the case of unlisted
securities, market makers do not exist or will not entertain bids or offers),
and (ii) repurchase agreements not terminable within seven days. Securities
eligible for resale under Rule 144A under the Securities Act, that have legal
or contractual restrictions on resale but have a readily available market are
not deemed securities not readily marketable for purposes of this limitation.
Alliance will monitor such securities and in reaching decisions concerning
their marketability will consider, among other things, the following factors:
(i) the frequency of trades and quotations for the security; (ii) the number
of dealers making quotations to purchase or sell the security; (iii) the
number of other potential purchasers of the security; (iv) the number of
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dealers undertaking to make a market in the security; (v) the nature of the
security (including its unregistered nature) and the nature of the marketplace
for the security (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of transfer); and (vi) any applicable
Securities and Exchange Commission interpretation or position with respect to
such type of securities.
Direct placements of debt securities have frequently resulted in higher
yields and restrictive covenants providing greater protection for the
purchaser. An issuer is often willing to create more attractive features in
its securities issued privately because it has averted the expense and delay
involved in a public offering of its securities. Also, adverse conditions in
the public securities markets may at certain times preclude a public offering
of an issuer's securities.
ADDITIONAL INVESTMENT POLICIES
Interest Rate Transactions. The Fund may enter into interest rate swaps and
may purchase or sell (i.e., write) interest rate caps and floors. The Fund
expects to enter into these transactions primarily to preserve a return or
spread on a particular investment or portion of its portfolio. The Fund may
also enter into these transactions to protect against any increase in the
price of securities the Fund anticipates purchasing at a later date. The Fund
does not intend to use these transactions in a speculative manner. Interest
rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of
floating rate payments for fixed rate payments). The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified index exceeds
a predetermined interest rate, to receive payments of interest on a
contractually-based principal amount from the party selling the interest rate
cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on a contractually-based principal amount from
the party selling the interest rate floor.
The Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending on whether it is hedging its
assets or its liabilities, and usually enters into interest rate swaps on a
net basis (i.e., the two payment streams are netted out), with the Fund
receiving or paying, as the case may be, only the net amount of the two
payments. The Fund will not enter into any interest rate swap, cap or floor
transaction unless the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in the highest rating category of at least
one nationally recognized rating organization at the time of entering into the
transaction. Alliance monitors the creditworthiness of counterparties to the
Fund's interest rate swap, cap and floor transactions on an ongoing basis. If
there is a default by the other party to such a transaction, the Fund will
have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals
and agents utilizing standardized swap documentation. Alliance has determined
that, as a result, the swap market has become relatively liquid. The use of
interest rate swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
securities transactions. If Alliance is incorrect in its forecasts of market
values, interest rates and other applicable factors, the investment
performance of the Fund will diminish compared with what it would have been if
these investment techniques had not been utilized. Moreover, even if Alliance
is correct in its forecasts, there is a risk that the swap position may
correlate imperfectly with the price of the asset or liability being hedged.
There is no limit on the amount of interest rate swap transactions that may
be entered into by the Fund. These transactions do not involve the delivery of
securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate swaps is limited to the net amount of
interest payments that the Fund is contractually obligated to make, if any. If
the other party to an interest rate swap defaults, the Fund's risk of loss is
the net amount of interest payments that the Fund contractually is entitled to
receive, if any. The Fund may purchase and sell caps and floors without
limitation, subject to the maintenance, if any, of a segregated account as
described under "Maintenance of Segregated Account" in the SAI.
Forward Commitments. The Fund may enter into forward commitments for the
purchase or sale of securities. Such transactions may include purchases on a
"when-issued" basis or purchases or sales on a
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"delayed delivery" basis. In some cases, a forward commitment may be
conditioned upon the occurrence of a subsequent event, such as approval and
consummation of a debt restructuring (i.e., a "when, as and if issued" trade).
When forward commitment transactions are negotiated, the price, which
generally is expressed in yield terms, is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
Normally, the settlement date occurs within two months after the transaction,
but delayed settlements beyond two months may be negotiated. Securities
purchased or sold under a forward commitment are subject to market
fluctuation, and no interest accrues to the purchaser prior to the settlement
date. At the time the Fund enters into a forward commitment, it records the
transaction and thereafter reflects the value of the security purchased or, if
a sale, the proceeds to be received, in determining its net asset value. Any
unrealized appreciation or depreciation reflected in such valuation of a
"when, as and if issued" security is cancelled in the event that the required
condition does not occur and the trade is cancelled.
The use of forward commitments enables the Fund to protect against
anticipated changes in interest rates and prices. For instance, in periods of
rising interest rates and falling bond prices, the Fund might sell securities
in its portfolio on a forward commitment basis to limit its exposure to
falling bond prices. In periods of falling interest rates and rising bond
prices, the Fund might sell a security in its portfolio and purchase the same
or a similar security on a when-issued or forward commitment basis, thereby
obtaining the benefit of prevailing higher cash yields. However, if Alliance
were to forecast incorrectly the direction of interest rate movements, the
Fund might be required to complete such when-issued or forward transactions at
prices less favorable than prevailing market values. No forward commitments
will be made by the Fund if, as a result, the Fund's aggregate commitments
under such transactions would be more than 30% of the then current value of
the Fund's total assets.
The Fund's right to receive or deliver a security under a forward commitment
may be sold prior to the settlement date, but the Fund enters into forward
commitments only with the intention of actually receiving or delivering the
securities, as the case may be. If the Fund, however, chooses to dispose of
the right to receive or deliver a security subject to a forward commitment
prior to the settlement date of the transaction, it may incur a gain or loss.
In the event the other party to a forward commitment transaction were to
default, the Fund might lose the opportunity to invest money at favorable
rates or to dispose of securities at favorable prices.
Loans of Portfolio Securities. The Fund may make secured loans of its
portfolio securities to entities with which it can enter into repurchase
agreements, provided that cash and/or U.S. Government Securities equal to at
least 100% of the market value of the securities loaned are deposited and
maintained by the borrower with the Fund. See "Repurchase Agreements" below.
The risks in lending portfolio securities, as with other extensions of credit,
consist of possible loss of rights in the collateral should the borrower fail
financially. In determining whether to lend securities to a particular
borrower, Alliance (subject to review by the Board of Directors of the Fund)
considers all relevant facts and circumstances, including the creditworthiness
of the borrower. When securities are on loan, the borrower pays the Fund any
income earned thereon and the Fund may invest any cash collateral in portfolio
securities, thereby earning additional income, or receive an agreed upon
amount of income from a borrower who has delivered equivalent collateral. The
Fund may pay reasonable finders', administrative and custodial fees in
connection with a loan. The Fund does not lend portfolio securities in excess
of 30% of the value of its total assets, nor lend its portfolio securities to
any officer, director, employee or affiliate of the Fund or Alliance. The
Fund's Board of Directors monitors the Fund's lending of portfolio securities.
Repurchase Agreements. The Fund may enter into repurchase agreements
pertaining to the types of securities in which it invests with member banks of
the Federal Reserve System or "primary dealers" (as designated by the Federal
Reserve Bank of New York) in securities in which the Fund may invest. The Fund
may enter into repurchase agreements with respect to up to 35% of its total
assets. The Fund currently enters into repurchase agreements only with its
custodian and such primary dealers. A repurchase agreement arises when a buyer
such as the Fund purchases a security and simultaneously agrees to resell the
security to the vendor
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at an agreed-upon future date, normally one day or a few days later. The
resale price is greater than the purchase price, reflecting an agreed-upon
interest rate which is effective for the period of time the buyer's money is
invested in the security and which is related to the current market rate
rather than the coupon rate on the purchased security. Such agreements permit
the Fund to keep all of its assets at work while retaining "overnight"
flexibility in pursuit of investments of a longer-term nature. The Fund
requires continual maintenance by its custodian for its account in the Federal
Reserve/Treasury Book Entry System of collateral in an amount equal to, or in
excess of, the resale price. In the event a vendor defaulted on its repurchase
obligation, the Fund might suffer a loss to the extent that the proceeds from
the sale of the collateral were less than the repurchase price. In the event
of a vendor's bankruptcy, the Fund might be delayed in, or prevented from,
selling the collateral for the Fund's benefit. The Fund's Board of Directors
has established procedures, which are periodically reviewed by the Board,
pursuant to which Alliance monitors the creditworthiness of the dealers with
which the Fund enters into repurchase agreement transactions.
Reverse Repurchase Agreements and Dollar Rolls. The Fund may also use
reverse repurchase agreements and dollar rolls as part of its investment
strategy. Reverse repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase the same
assets at a later date at a fixed price. Generally, the effect of such a
transaction is that the Fund can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while it will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Fund of the reverse repurchase transaction is less than
the cost of otherwise obtaining the cash.
The Fund may enter into dollar rolls in which the Fund sells securities for
delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type and coupon) securities on a specified future
date. During the roll period, the Fund forgoes principal and interest paid on
the securities. The Fund is compensated by the difference between the current
sales price and the lower forward price for the future purchase (often
referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale.
Reverse repurchase agreements and dollar rolls involve the risk that the
securities the Fund is obligated to repurchase under the agreement may decline
in value below the repurchase price. In the event the buyer of securities
under a reverse repurchase agreement or dollar roll files for bankruptcy or
becomes insolvent, the Fund's use of the proceeds of the agreement or dollar
roll may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the Fund's obligation to repurchase
the securities.
Reverse repurchase agreements and dollar rolls are speculative techniques
and are considered borrowings by the Fund. Under the requirements of the 1940
Act, the Fund is required to maintain an asset coverage of at least 300% of
all borrowings. The Fund does not engage in reverse repurchase agreements and
dollar rolls with respect to greater than 33% of its total assets less
liabilities (other than the amount borrowed).
Standby Commitment Agreements. The Fund may from time to time enter into
standby commitment agreements. Such agreements commit the Fund, for a stated
period of time, to purchase a stated amount of a security that may be issued
and sold to the Fund at the option of the issuer. The price and coupon of the
security are fixed at the time of the commitment. At the time of entering into
the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, which is typically approximately 0.5% of the
aggregate purchase price of the security that the Fund has committed to
purchase. The Fund enters into such agreements only for the purpose of
investing in the security underlying the commitment at a yield and price that
are considered advantageous to the Fund and that are unavailable on a firm
commitment basis. The Fund will not enter into a standby commitment with a
remaining term in excess of 45 days and will limit its investment in such
commitments so that the aggregate purchase price of the securities subject to
the commitments, together with the value of portfolio securities that are not
readily marketable, will not exceed 50% of its assets taken at the time of
acquisition of such commitment of security.
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There can be no assurance that the securities subject to a standby
commitment will be issued and the value of the security, if issued, on the
delivery date may be more or less than its purchase price. Since the issuance
of the security underlying the commitment is at the option of the issuer, the
Fund bears the risk of loss in the event the value of the security declines
and may not benefit from an appreciation in the value of the security during
the commitment period if the issuer decides not to issue and sell the security
to the Fund.
At the time a Fund enters into a forward commitment, it records the
transaction and thereafter reflects the value of the security purchased or, if
a sale, the proceeds to be received, in determining its net asset value. Any
unrealized appreciation or depreciation reflected in such valuation would be
canceled and the commitment fee recorded as income if the required conditions
did not occur and the trade were canceled.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast interest rate movements
correctly. Should interest rates move in an unexpected manner, the Fund may
not achieve the anticipated benefits of these practices or may realize losses
and, thus, be in a worse position than if such strategies had not been used.
In addition, the correlation between movements in the prices of such
instruments and movements in the price of the securities hedged or used for
cover will not be perfect and could produce unanticipated losses.
Future Developments. The Fund may, following written notice to its
shareholders, take advantage of other investment practices that are not at
present contemplated for use by the Fund or that currently are not available
but may be developed, to the extent such investment practices are both
consistent with the Fund's investment objective and legally permissible for
the Fund. Such investment practices, if they are used, may involve risks that
exceed those involved in the activities described above.
BORROWING
The Fund may borrow from a bank or other entity in a privately arranged
transaction to the maximum extent permitted under the 1940 Act, but only in
order to finance the repurchase and/or tenders of its shares or to pay
distributions for purposes of complying with the Code. See "Special Risk
Considerations--Borrowing," "Tender Offers and Share Repurchases; Conversion
to Open-End Status" and "Taxation--United States Federal Income Taxes--
General" in the SAI. The 1940 Act requires the Fund to maintain "asset
coverage" of not less than 300% of its "senior securities representing
indebtedness" as those terms are defined and used in the 1940 Act. In
addition, the Fund may not pay any cash dividend or make any cash distribution
to shareholders if, after the dividend or distribution, there would be less
than 300% asset coverage of a senior security representing indebtedness for
borrowings (excluding for this purpose certain evidences of indebtedness made
to a bank or other entity and privately arranged, and not intended to be
publicly distributed). If, as a result of the foregoing restriction or
otherwise, the Fund were unable to distribute at least 90% of its investment
company taxable income in any year, it would lose its status as a regulated
investment company for such year and become liable at the corporate level for
federal income taxes on its income for such year. See "Taxation--United States
Federal Income Taxes--General" in the SAI.
The Fund may also borrow for temporary purposes in an amount not exceeding
5% of the value of the total assets of the Fund. Such borrowings are not
subject to the asset coverage restrictions set forth in the preceding
paragraph. See "Investment Restrictions" in the SAI.
PORTFOLIO TURNOVER
The Fund may engage in active short-term trading to benefit from yield
disparities among different issues of securities, to seek short-term profits
during periods of fluctuating interest rates or for other reasons. Such
trading will increase the Fund's rate of turnover and the incidence of short-
term capital gain taxable as ordinary income. Alliance anticipates that the
annual turnover in the Fund will not be in excess of 500% (excluding turnover
of securities having a maturity of one year or less). An annual turnover rate
of 500% occurs, for
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example, when all of the securities in the Fund's portfolio are replaced five
times in a period of one year. Such a high rate of portfolio turnover involves
correspondingly greater expenses than a lower rate, which expenses must be
borne by the Fund and its shareholders. High portfolio turnover also may
result in the realization of substantial net short-term capital gains. In
order to continue to qualify as a regulated investment company for federal tax
purposes, less than 30% of the annual gross income of the Fund must be derived
from the sale of securities held by the Fund for less than three months. See
"Taxation--United States Federal Income Taxes--General" in the SAI.
SPECIAL RISK CONSIDERATIONS
Investment in the Fund involves special risk considerations, such as those
described below.
Debt Securities. The net asset value of the Fund's shares will change as the
general levels of interest rates fluctuate. When interest rates decline, the
value of a portfolio of debt securities, such as that of the Fund's, can be
expected to rise. Conversely, when interest rates rise, the value of such a
portfolio can be expected to decline. Debt securities purchased at a discount
tend to be subject to greater price fluctuations in response to interest rate
changes than are ordinary interest-paying debt securities with similar
maturities. Prices of longer-term debt securities tend to be subject to
greater fluctuations in response to interest rate changes than those of
shorter-term debt securities.
Economic and Political Factors. By investing in Sovereign Debt Obligations,
the Fund will be exposed to the direct or indirect consequences of political,
social and economic changes in various countries. Political changes in a
country may affect the willingness of a foreign government to make or provide
for timely payments of its obligations. The country's economic status, as
reflected, among other things, in its inflation rate, the amount of its
external debt and its gross domestic product, will also affect the
government's ability to honor its obligations.
Many countries providing investment opportunities for the Fund have
experienced substantial, and in some periods extremely high, rates of
inflation for many years. Inflation and rapid fluctuations in inflation rates
have had and may continue to have adverse effects on the economies and
securities markets of certain of these countries. In an attempt to control
inflation, wage and price controls have been imposed in certain countries.
Investing in Sovereign Debt Obligations involves economic and political
risks. The Sovereign Debt Obligations in which the Fund invests are in most
cases those of governments of countries that are among the world's largest
debtors to commercial banks, foreign governments, international financial
organizations and other financial institutions. In recent years, some of these
governments have encountered difficulties in servicing their external debt
obligations, which led to defaults on certain obligations and the
restructuring of certain indebtedness. Restructuring arrangements have
included, among other things, reducing and rescheduling interest and principal
payments by negotiating new or amended credit agreements or converting
outstanding principal and unpaid interest to Brady Bonds, and obtaining new
credit to finance interest payments. Certain governments have not been able to
make payments of interest on or principal of Sovereign Debt Obligations as
those payments have come due. Obligations arising from past restructuring
agreements may affect the economic performance and political and social
stability of those issuers.
Central banks and other governmental authorities that control the servicing
of Sovereign Debt Obligations may not be willing or able to permit the payment
of the principal or interest when due in accordance with the terms of the
obligations. As a result, issuers of Sovereign Debt Obligations may default on
their obligations. Defaults on certain Sovereign Debt Obligations have
occurred in the past. Holders of certain Sovereign Debt Obligations may be
requested to participate in the restructuring and rescheduling of these
obligations and to extend further loans to the issuers. The interests of
holders of Sovereign Debt Obligations can be adversely affected in the course
of restructuring arrangements or by certain other factors referred to below.
Moreover, some of the participants in the secondary market for Sovereign Debt
Obligations may also be directly involved in
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negotiating the terms of these arrangements and may therefore have access to
information not available to other market participants.
The ability of a government to make timely payments on its obligations is
likely to be influenced strongly by the country's balance of payments,
including export performance, and its access to international credits and
investments, fluctuations in interest rates and the extent of its foreign
reserves. A country whose exports are concentrated in a few commodities or
whose economy depends on certain strategic imports could be vulnerable to a
decline in the international prices of one or more of those commodities or
imports. Increased protectionism on the part of a country's trading partners
could also adversely affect the country's exports and diminish its trade
account surplus, if any. To the extent that a country receives payment for its
exports in currencies other than dollars, its ability to make debt payments
denominated in dollars could be adversely affected.
To the extent that a country develops a trade deficit, it will need to
depend on continuing loans from foreign governments, multilateral
organizations or private commercial banks, aid payments from foreign
governments and on inflows of foreign investment. The access of a country to
these forms of external funding may not be certain, and a withdrawal of
external funding could adversely affect the capacity of a government to make
payments on its obligations. In addition, the cost of servicing debt
obligations can be affected by a change in international interest rates since
the majority of these obligations carry interest rates that are adjusted
periodically based upon international rates.
Another factor bearing on the ability of a country to repay Sovereign Debt
Obligations is the level of the country's international reserves. Fluctuations
in the level of these reserves, including those as a result of currency
devaluations, can affect the amount of foreign exchange readily available for
external debt payments and, thus, could have a bearing on the capacity of the
country to make payments on its Sovereign Debt Obligations.
Expropriation, confiscatory taxation, seizure or nationalization of assets,
establishment of exchange controls, political, economic or social instability
or other similar developments, such as military coups, have occurred in the
past in countries in which the Fund will invest and could adversely affect
payment due on securities held by the Fund and the value of the Fund's assets
should these conditions or events recur. Other investment risks arising from
differences between U.S. and foreign securities markets include lower volume,
greater price volatility and relative illiquidity of foreign securities
markets, different trading and settlement practices, less governmental
supervision and regulation, the lack of extensive operating experience of
eligible foreign subcustodians and legal limitations on the ability of a fund
to recover assets held in custody by a foreign subcustodian in the event of
the subcustodian's bankruptcy. Countries in which the Fund may invest have
historically experienced, and may continue to experience, high rates of
inflation, high interest rates, exchange rate trade difficulties and extreme
poverty and unemployment.
Investment Controls and Repatriation. Foreign investment in certain
Sovereign Debt Obligations is restricted or controlled to varying degrees.
These restrictions or controls may at times limit or preclude foreign
investment in certain Sovereign Debt Obligations and increase the costs and
expenses of the Fund.
Certain countries in which the Fund will invest require governmental
approval prior to investments by foreign persons, limit the amount of
investment by foreign persons in a particular issuer, limit the investment by
foreign persons only to a specific class of securities of an issuer that may
have less advantageous rights than the classes available for purchase by
domiciliaries of the countries and/or impose additional taxes on foreign
investors.
Certain countries may require governmental approval for the repatriation of
investment income, capital or the proceeds of sales of securities by foreign
investors. In addition, if a deterioration occurs in a country's balance of
payments, the country could impose temporary restrictions on foreign capital
remittances. The Fund could be adversely affected by delays in, or a refusal
to grant, any required governmental approval for repatriation of capital, as
well as by the application to the Fund of any restrictions on investments.
Investing in
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local markets may require the Fund to adopt special procedures, seek local
government approvals or take other actions, each of which may involve
additional costs to the Fund.
Other Characteristics of Investment in Foreign Issuers. Foreign issuers are
subject to accounting, auditing and financial standards and requirements that
differ, in some cases significantly, from those applicable to U.S. issuers. In
particular, financial records of a foreign governmental issuer may not reflect
its financial position or receipts or expenditures in the way they would be
reflected had the financial statements been prepared in accordance with U.S.
generally accepted accounting principles. In addition, for an issuer that
keeps accounting records in local currency, inflation accounting rules in some
of the countries in which the Fund will invest require, for both tax and
accounting purposes, that certain amounts be restated on the issuer's
financial records in order to express items in terms of currency of constant
purchasing power. Consequently, financial data may be materially affected by
restatements for inflation and may not accurately reflect the real condition
of those issuers and securities markets. Substantially less information is
publicly available about certain non-U.S. issuers than is available about U.S.
issuers.
The Fund is permitted to invest in Sovereign Debt Obligations that are not
current in the payment of interest or principal or are in default, so long as
Alliance believes that doing so is consistent with the Fund's investment
objective. The Fund may have limited legal recourse in the event of a default
with respect to certain Sovereign Debt Obligations it holds. For example,
remedies from defaults on certain Sovereign Debt Obligations, unlike those on
private debt, must, in some cases, be pursued in the courts of the defaulting
party itself. Legal recourse therefore may be significantly diminished.
Bankruptcy, moratorium and other similar laws applicable to issuers of
Sovereign Debt Obligations may be substantially different from those
applicable to issuers of private debt obligations. The political context,
expressed as the willingness of an issuer of Sovereign Debt Obligations to
meet the terms of the debt obligation, for example, is of considerable
importance. In addition, no assurance can be given that the holders of
commercial bank debt will not contest payments to the holders of securities
issued by foreign governments in the event of default under commercial bank
loan agreements.
Income from certain investments held by the Fund could be reduced by foreign
income taxes, including withholding taxes. It is impossible to determine the
effective rate of foreign tax in advance. The Fund's net asset value may also
be affected by changes in the rates or methods of taxation applicable to the
Fund or to entities in which the Fund has invested. The Adviser generally will
consider the cost of any taxes in determining whether to acquire any
particular investments, but can provide no assurance that the tax treatment of
investments held by the Fund will not be subject to change.
Extent of Trading Markets. No established secondary markets may exist for
many of the Sovereign Debt Obligations in which the Fund invests. Reduced
secondary market liquidity can have an adverse effect on the market price and
the Fund's ability to dispose of particular instruments when necessary to meet
its liquidity requirements or in response to specific economic events such as
a deterioration in the creditworthiness of the issuer. Reduced secondary
market liquidity for certain Sovereign Debt Obligations may also make it more
difficult for the Fund to obtain accurate market quotations for purposes of
valuing its portfolio. Market quotations are generally available on many
Sovereign Debt Obligations only from a limited number of dealers and may not
necessarily represent firm bids of those dealers or prices for actual sales.
Low Rated and Unrated Instruments. The Fund is permitted to invest
substantially all of its assets in high-yield, high-risk debt securities that
are rated in the lower rating categories (i.e., below investment grade) or
that are unrated but are of comparable quality as determined by Alliance.
There is no minimum rating requirement applicable to the Fund's investment in
lower rated Sovereign Debt Obligations. Currently, Sovereign Debt Obligations
of the type in which the Fund invests substantially all of its assets are
generally considered to have a credit quality below investment grade. For the
fiscal year ended October 31, 1995, the percentages of the Fund's assets
invested in securities rated (or considered by Alliance to be of equivalent
quality to securities rated) in particular rating categories were 29.1% in A
and above, 19.2% in Ba or BB, 19.9% in B, 0% in Caa or CCC and 31.8% in non-
rated. Debt securities rated below investment grade, i.e., those rated Ba1 or
lower by
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Moody's or BB+ or lower by S&P, are considered by those organizations to be
subject to greater risk of loss of principal and interest than higher-rated
securities and are considered to be predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal, which may in any
case decline during sustained periods of deteriorating economic conditions or
rising interest rates. Certain of the Sovereign Debt Obligations in which the
Fund invests may be considered comparable to securities having the lowest
ratings for non-subordinated debt instruments assigned by Moody's or S&P
(i.e., rated C by Moody's or CCC or lower by S&P). These securities are
considered to have extremely poor prospects of ever attaining any real
investment standing, to have a current identifiable vulnerability to default,
to be unlikely to have the capacity to pay interest and repay principal when
due in the event of adverse business, financial or economic conditions, and/or
to be in default or not current in the payment of interest or principal.
Lower-rated securities generally are considered to be subject to greater
market risk than higher-rated securities in times of deteriorating economic
conditions. In addition, lower-rated securities may be more susceptible to
real or perceived adverse economic and competitive industry conditions than
investment grade securities. The market for lower-rated securities may be
thinner and less active than that for higher-quality securities, which can
adversely affect the prices at which these securities can be sold. To the
extent that there is no established secondary market for lower-rated
securities, Alliance may experience difficulty in valuing such securities and,
in turn, the Fund's assets. In addition, adverse publicity and investor
perceptions about lower-rated securities, whether or not based on fundamental
analysis, may tend to decrease the market value and liquidity of such lower-
rated securities. Transaction costs with respect to lower-rated securities may
be higher, and in some cases information may be less available, than is the
case with investment grade securities.
The ratings of debt securities by Moody's and S&P are a generally accepted
barometer of credit risk. They are, however, subject to certain limitations
from an investor's standpoint. The rating of an issuer is heavily weighted by
past developments and does not necessarily reflect probable future conditions.
There is frequently a lag between the time a rating is assigned and the time
it is updated. In addition, there may be varying degrees of difference in
credit risk of securities within each rating category. See the Appendix hereto
for a description of such ratings.
Alliance will try to reduce the risk inherent in the Fund's investment
approach through credit analysis, diversification and attention to current
developments and trends in interest rates and economic conditions. However,
there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-quality securities, Alliance's research and credit
analysis are a correspondingly important aspect of its program for managing
the Fund's securities. In considering investments for the Fund, Alliance will
attempt to identify those high-yielding securities whose financial condition
is adequate to meet future obligations, has improved, or is expected to
improve in the future. Alliance's analysis focuses on relative values based on
such factors as interest or dividend coverage, asset coverage, earnings
prospects, and the experience and managerial strength of the issuer.
In seeking to achieve the Fund's primary objective, there will be times,
such as during periods of rising interest rates, when depreciation and
realization of capital losses on securities in the Fund's portfolio will be
unavoidable. Moreover, medium- and lower-rated securities and non-rated
securities of comparable quality may be subject to wider fluctuations in yield
and market values than higher-rated securities under certain market
conditions. Such fluctuations after a security is acquired do not affect the
cash income received from that security but are reflected in the net asset
value of the Fund.
Securities Not Readily Marketable. The Fund may invest up to 50% of its
total assets in securities that are not readily marketable. Because of the
absence of a trading market for these investments, the Fund may not be able to
realize their value upon sale. The risks associated with these investments
will be accentuated in situations in which the Fund's operations require cash,
such as when the Fund tenders for its shares of Common Stock or pays
distributions, and could result in the Fund borrowing to meet short-term cash
requirements or incurring capital losses on the sale of these investments.
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Non-Diversified Status. The Fund is a "non-diversified" investment company.
However, the Fund intends to conduct its operations so as to qualify to be
taxed as a "regulated investment company" for purposes of the Code, which will
relieve the Fund of any liability for federal income tax to the extent its
earnings are distributed to shareholders. See "Taxation--United States Federal
Income Taxes--General." To so qualify, among other requirements, the Fund will
limit its investments so that, at the close of each quarter of the taxable
year, (i) not more than 25% of the market value of the Fund's total assets
will be invested in the securities of a single issuer, and (ii) with respect
to 50% of the market value of its total assets, not more than 5% of the market
value of its total assets will be invested in the securities of a single
issuer and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. Investments in U.S. Government Securities are
not subject to these limitations. Because the Fund, as a non-diversified
investment company, may invest in a smaller number of individual issuers than
a diversified investment company, an investment in the Fund may, under certain
circumstances, present greater risk to an investor than an investment in a
diversified investment company.
Securities issued or guaranteed by foreign governments are not treated like
U.S. Government Securities for purposes of the diversification tests described
in the preceding paragraph, but instead are subject to these tests in the same
manner as the securities of non-governmental issuers. In this regard,
Sovereign Debt Obligations issued by different issuers located in the same
country are often treated as issued by a single issuer for purposes of these
diversification tests. Certain issuers of Structured Securities and
Participations may be treated as separate issuers for purposes of these tests.
Discount from Net Asset Value. Shares of closed-end investment companies
frequently trade at a discount from net asset value. Since the commencement of
operations of the Fund in November 1992, the Fund's shares have traded at
different times at a discount from and at a premium above their net asset
value. During the fifty-two week period ended June 21, 1996, the Fund's shares
traded at an average discount from net asset value of %. The Fund cannot
predict whether its shares will in the future trade at a premium above or
discount from net asset value. The risk of its shares trading at a discount is
a risk separate from the risk of a decline in net asset value. See "Net Asset
Value and Market Price Information" in this Prospectus.
Borrowing. The Fund may borrow from a bank or other entity in a privately
arranged transaction to the maximum extent permitted under the 1940 Act, but
only in order to finance the repurchase and/or tenders of its shares or to pay
distributions for purposes of complying with the Code. Such borrowings involve
additional risk to the Fund, since the interest expense may be greater than
the income from or appreciation of the securities carried by the borrowings
and since the value of the securities carried may decline below the amount
borrowed.
The 1940 Act requires the Fund to maintain "asset coverage" of not less than
300% of its "senior securities representing indebtedness," as those terms are
defined and used in the 1940 Act. In addition, the Fund may not make any cash
distributions to its shareholders if, after the distribution, there would be
less than 300% asset coverage of a senior security representing indebtedness
for borrowings (excluding for this purpose certain evidences of indebtedness
made by a bank or other entity and privately arranged, and not intended to be
publicly distributed). See "Investments Restrictions" in the SAI. This
limitation on the Fund's ability to make distributions could under certain
circumstances impair the Fund's ability to maintain its qualification for
taxation as a "regulated investment company". See "Taxation--United States
Federal Income Taxes" in the SAI.
The Fund may also borrow for temporary purposes in an amount not exceeding
5% of the value of the total assets of the Fund. Such borrowings are not
subject to the asset coverage restrictions set forth in the preceding
paragraph. See "Investment Restrictions" in the SAI. The Fund may also borrow
through the use of reverse repurchase agreements and dollar rolls. See
"Investment Objective and Policies."
Any investment gains made with the proceeds obtained from borrowings in
excess of interest paid on the borrowings will cause the net income per share
and the net asset value per share of the Fund's shares to be greater than
would otherwise be the case. On the other hand, if the investment performance
of the additional securities purchased fails to cover their cost (including
any interest paid on the money borrowed) to the Fund, then the net income per
share and net asset value per share of the Fund's shares will be less than
would otherwise be the case.
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Borrowing can pose certain risks for the Fund's shareholders, including the
possibility of higher volatility of both the net asset value and market value
of the Fund's shares. There can be no assurance that the Fund will be able to
realize a higher net return on its investment portfolio than the then current
interest rate on any borrowing. Any decline in the value of the Fund's assets
will be borne entirely by the Fund's shareholders in the form of reductions in
the Fund's net asset value, and any requirement that the Fund sell assets at a
loss in order to repay any borrowing or for other reasons would make it more
difficult for the net asset value to recover. Accordingly, the use of
borrowing in a declining market may result in a greater decline in the net
asset value of the Fund's shares than if the Fund had not borrowed, which may
be reflected in a greater decline in the market price of the Fund's shares.
TENDER OFFERS AND SHARE REPURCHASES; CONVERSION TO OPEN-END STATUS
REPURCHASE OF SHARES
Shares of closed-end investment companies frequently trade at a discount
from net asset value but may trade at a premium. Since the Fund's commencement
of operations in November, 1992, the Fund's shares have traded at different
times at a discount and at a premium in relation to net asset value. See "Net
Asset Value and Market Price Information." In recognition of the fact that the
Fund's shares have at times traded at a discount and the possibility that the
Fund's shares may trade at a discount in the future, the Fund's Board of
Directors has determined that it would be in the interest of shareholders for
the Fund to have the ability to take action to attempt to reduce or eliminate
market value discounts from net asset value. To that end, the Board
contemplates that the Fund may from time to time take action either (i) to
repurchase shares of its Common Stock in the open market or (ii) to make an
offer to purchase its shares of Common Stock from all beneficial holders of
its shares at a price per share equal to the net asset value per share of the
Common Stock determined at the close of business on the day the offer
terminates (a "Tender Offer"). The Board has each quarter considered, and
intends to continue each quarter to consider, the making of a Tender Offer or
open market repurchases of the Fund's shares. The Board may at any time,
however, decide that the Fund should not make a Tender Offer or repurchase its
shares in the open market. The Fund's shares have historically traded at or
near their net asset value. For example, during the fifty-two weeks ended June
21, 1996, the Fund's shares traded at an average discount from net asset value
of %. To date, the Board has determined that the Fund not conduct a Tender
Offer or make open-market share repurchases.
In addition, the Fund will commence a Tender Offer during the fourth
quarters of each of 1997 (the "1997 Tender Offer") and 2002 (the "2002 Tender
Offer"). However, the Board has established a policy that, if shares of the
Fund's Common Stock are traded on the principal securities exchange where
listed at or above net asset value or at an average discount from net asset
value of less than 5%, determined on the basis of the discount as of the last
trading day in each week during a period of 12 calendar weeks prior to
September 1, 1997 or September 1, 2002, the Fund will not proceed with either
the 1997 Tender Offer or the 2002 Tender Offer, as the case may be. In the
event the Fund commences the 1997 Tender Offer or the 2002 Tender Offer, if
the Board of Directors determines not to purchase shares of Common Stock
pursuant to either Tender Offer for any of the reasons set forth below, the
Fund will commence one or more additional offers to purchase its shares (a
"Subsequent Offer"). Notwithstanding the possibility of the commencement of
more than one Tender Offer, the Fund intends to consummate only one Tender
Offer during any given calendar year. Subject to the Fund's investment
restriction with respect to borrowings, the Fund may borrow money to finance
repurchases of shares or Tender Offers or any Subsequent Offer. See
"Investment Objective and Policies--Borrowing" and "Investment Restrictions."
Interest on any such borrowings will reduce the Fund's net income.
Even if a Tender Offer or Subsequent Offer has been made, it is the Board's
announced policy, which may be changed by the Board, not to purchase shares
pursuant to a Tender Offer or any Subsequent Offer or effect share repurchases
if (i) such transactions, if consummated, would (a) result in the delisting of
the Fund's Common Stock from the New York Stock Exchange (the New York Stock
Exchange having advised the Fund that it would consider delisting if the
aggregate market value of the Fund's outstanding publicly held Common
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Stock is less than $5,000,000, the number of publicly held shares of Common
Stock falls below 600,000 or the number of round-lot holders falls below
1,200) or (b) 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
shareholders who receive dividends from the Fund); (ii) 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 Common
Stock tendered pursuant to the Tender Offer or any Subsequent Offer; or (iii)
there is any (a) material legal action or proceeding instituted or threatened
that challenges, in the Board's judgment, the Tender Offer or any Subsequent
Offer or otherwise materially adversely affects the Fund, (b) suspension of or
limitation on prices for trading securities generally on the New York Stock
Exchange or any foreign exchange on which portfolio securities of the Fund are
traded, (c) 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, (d)
limitation that 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, (e)
commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States or any foreign
country which is material to the Fund, or (f) other event or condition that,
in the Board's judgment, would have a material adverse effect on the Fund or
its shareholders if shares of Common Stock tendered pursuant to the Tender
Offer or any Subsequent Offer were purchased. The Board of Directors may
modify these conditions in light of experience.
If the Fund has not purchased all shares tendered pursuant to the 1997
Tender Offer or any Subsequent Offer with respect to the 1997 Tender Offer by
March 31, 1998, the Fund's Articles of Incorporation require the Board of
Directors to submit to shareholders by no later than July 31, 1998 a proposal
to convert the Fund to an open-end investment company. Assuming that the Fund
continues as a closed-end investment company and that the Fund commences the
2002 Tender Offer, if the Fund has not purchased all shares tendered pursuant
to the 2002 Tender Offer or any Subsequent Offer with respect to the 2002
Tender Offer by March 31, 2003, the Fund's Articles of Incorporation require
the Board of Directors to submit to shareholders by no later than July 31,
2003 another proposal to convert the Fund to an open-end investment company.
In the event shareholder approval of a proposal to convert the Fund to an
open-end investment company is not obtained, the Fund will continue as a
closed-end investment company.
Tender Offers and any Subsequent Offers will be made and shareholders
notified in accordance with the requirements of the Securities Exchange Act of
1934, as amended, and the 1940 Act, either by publication or mailing or both.
The offering documents will contain such information as is prescribed by such
laws and the rules and regulations promulgated thereunder. A shareholder
wishing to accept a Tender Offer or any Subsequent Offers will be required to
tender all (but not less than all) of the shares owned by such shareholder (or
shares attributed to the shareholder for federal income tax purposes under
section 318 of the Code). Persons tendering shares may be required to pay a
service charge by check payable to the Fund to help defray the costs
associated with such Offers. If a service charge is imposed, it will be
imposed upon each tendering shareholder any of whose tendered shares are
purchased in the offer and will be imposed regardless of the number of shares
purchased. During the period of a Tender Offer or any Subsequent Offer, the
Fund's shareholders will be able to obtain the Fund's current net asset value
by use of a toll-free telephone number.
The Fund will repurchase shares of the Fund's Common Stock in the open
market only when it can do so at prices below the then current net asset value
per share. Although the Board of Directors believes that share repurchases
generally would have a favorable effect on the market price of the Fund's
shares of Common Stock, it should be recognized that the acquisition of shares
by the Fund will decrease its total assets and therefore may increase the
Fund's expense ratio.
General. The fact that the Fund's shares may be the subject of share
repurchases or one or more Tender Offers may enhance their attractiveness to
investors, thereby reducing the spread between market price and net asset
value that might otherwise exist. Sellers may be less inclined to accept a
significant discount if they have
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some prospect of being able to receive net asset value in conjunction with a
possible Tender Offer. There can be no assurance that repurchases of the
Fund's shares of Common Stock or the prospect of Tender Offers or any
Subsequent Offer will result in the shares of Common Stock trading at a price
equal to their net asset value. The market price of the Fund's shares of
Common Stock has varied, and the Fund expects that such price will continue to
vary, from net asset value from time to time. The market price of the Fund's
shares of Common Stock is determined by, among other things, the relative
demand for and supply of such 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.
Shares of Common Stock repurchased by the Fund pursuant to a Tender Offer, a
Subsequent Offer or otherwise, will be retired and will be authorized and
unissued shares.
To consummate a Tender Offer or any Subsequent Offer in order to repurchase
its shares of Common Stock, the Fund may be required to liquidate portfolio
securities, and realize gains or losses, at a time when Alliance would
otherwise consider it disadvantageous to do so. In such event, gains may be
realized on securities held for less than three months. In order to qualify as
a regulated investment company under the Code the Fund must limit such gains
and, accordingly, the amount of gain that the Fund could realize in the
ordinary course of its portfolio management from sales of other securities
held for less than three months would be reduced. This may adversely affect
the Fund's yield. See "Taxation--United States Federal Income Taxation--
General."
The Securities and Exchange Commission has adopted a rule under the 1940 Act
to permit closed-end investment companies under certain circumstances and
subject to certain conditions to repurchase their shares at fixed intervals.
The Fund reserves the right to take advantage of such rule provided that (i)
the Fund's Board of Directors has determined that such action would be in the
best interests of the Fund's shareholders and (ii) the Fund's shareholders
approve such action.
CONVERSION TO OPEN-END STATUS
Conversion of the Fund to an open-end investment company would require an
amendment to the Articles of Incorporation. Prior to October 1, 1997, such an
amendment would require the affirmative vote of the holders of at least 75% of
the outstanding shares of the Fund or a majority of such shares if the
amendment has been approved by two-thirds of the total number of directors
fixed in accordance with the Bylaws. After September 30, 1997 and prior to
January 1, 1999, such an amendment would require the affirmative vote of the
holders of a majority of the Fund's outstanding shares. If the Fund continues
as a closed-end investment company after December 31, 1998, subsequent to that
date and prior to October 1, 2002, an amendment to convert the Fund to an
open-end investment company would require the affirmative vote of the holders
of at least 75% of the outstanding shares of the Fund or a majority of such
shares if the amendment has been approved by two-thirds of the total number of
directors fixed in accordance with the Bylaws. After September 30, 2002 and
prior to January 1, 2004, such an amendment would require the affirmative vote
of the holders of a majority of the Fund's outstanding shares. If the Fund
continues as a closed-end investment company after December 31, 2003,
conversion of the Fund to an open-end investment company would require the
affirmative vote of the holders of at least 75% of the outstanding shares of
the Fund or a majority of such shares if the amendment has been approved by
two-thirds of the total number of directors fixed in accordance with the
Bylaws.
The 1940 Act also requires conversion of the Fund to an open-end investment
company to be voted upon by shareholders and requires approval of the
conversion by a majority of the Fund's outstanding voting securities. See
"Investment Objective and Policies."
Shareholders of an open-end investment company may require the company to
redeem shares at any time (except in certain circumstances as authorized by or
under the 1940 Act) at their next determined net asset value, less such
redemption charges, if any, as might be in effect at the time of a redemption.
All redemptions will be made in cash. If the Fund is converted to an open-end
investment company, it could be required to liquidate portfolio securities to
meet requests for redemption and the shares of the Fund would no longer be
listed on the
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New York Stock Exchange. Conversion to an open-end company would also require
changes in certain of the Fund's investment policies and restrictions, such as
those relating to the borrowing of money and the purchase of securities that
are not readily marketable.
The Board of Directors has determined that the 75% voting requirements
described above, which are greater than the minimum requirement under Maryland
law or the 1940 Act, are in the best interest of shareholders generally.
Reference should be made to the Articles of Incorporation and Bylaws on file
with the Securities and Exchange Commission for the full text of these
provisions to which the foregoing description is subject.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The management of the Fund, including general supervision of the duties
performed by Alliance is the responsibility of its Board of Directors. For
certain information regarding the Directors and officers of the Fund, see
"Management of the Fund--Directors and Officers" in the SAI.
ADVISER AND ADMINISTRATOR
Alliance Capital Management L.P., a New York Stock Exchange listed company
with principal offices at 1345 Avenue of the Americas, New York, New York
10105, has been retained under an investment advisory agreement (the "Advisory
Agreement") to serve as investment adviser and under an administration
agreement (the "Administration Agreement") to serve as administrator to the
Fund. Wayne D. Lyski has been principally responsible for the Fund's portfolio
investment decisions since the Fund's inception. Mr. Lyski is an Executive
Vice President of Alliance Capital Management Corporation, the general partner
of Alliance, with which he has been associated since 1983.
Alliance is a leading international investment manager supervising client
accounts with assets as of March 31, 1996 of more than $163 billion (of which
more than $53 billion represented the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies, foundations and
endowment funds and included, as of March 31, 1996, 34 of the FORTUNE 100
Companies. As of that date, Alliance and its subsidiaries employed
approximately 1,350 employees operating out of domestic offices and the
offices of subsidiaries in Bombay, Istanbul, London, Paris, Sao Paolo, Sydney,
Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The 50 registered
investment companies comprising 107 separate investment portfolios managed by
Alliance currently have more than two million shareholders.
Alliance Capital Management Corporation, the sole general partner of, and
the owner of a 1% general partnership interest in, Alliance, is an indirect,
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable Companies
Incorporated, a holding company controlled by AXA, a French insurance holding
company. As of March 31, 1996, ACMC, Inc. and Equitable Capital Management
Corporation, each a wholly-owned direct or indirect subsidiary of Equitable,
together with Equitable, owned in the aggregate approximately 57.6% of the
issued and outstanding units representing assignments of beneficial ownership
of limited partnership interests in Alliance ("Units"). As of March 31, 1996,
approximately 32.4% and 10.0% of the Units were owned by the public and
employees of Alliance and its subsidiaries, respectively, including employees
of Alliance who serve as Directors of the Fund.
ADVISORY AGREEMENT
The Advisory Agreement between the Fund and Alliance provides that Alliance
will furnish investment advice and recommendations to the Fund and will
provide office space in New York, order placement facilities and persons
satisfactory to the Fund's Board of Directors to act as officers of the Fund.
Such officers, as well as
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certain Directors of the Fund, may be employees of Alliance or directors,
officers or employees of its affiliates. Under the Advisory Agreement, the
Fund pays monthly to Alliance a fee at an annualized rate of 1.00% of the
Fund's average weekly net assets. For purposes of the calculation of the fee
payable to Alliance, average weekly net assets are determined on the basis of
the average net assets of the Fund 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 Friday of such weekly period with the net
assets on Friday of the immediately preceding weekly period. When a Friday is
not a Fund business day, then the calculation will be based on the net assets
of the Fund on the Fund business day immediately preceding such Friday. The
fee is in excess of the management fees paid by most U.S. registered
investment companies investing exclusively in securities of U.S. issuers,
although Alliance believes the fee is generally comparable to the management
fees paid by other closed-end companies that invest in the securities of
foreign issuers, and Alliance believes the fee is justified by the special
care that must be given to the selection and supervision of the particular
types of securities in which the Fund invests.
The Advisory Agreement was approved by the Fund's Board of Directors and its
initial shareholder. The Advisory Agreement by its terms continues in effect
from year to year if such continuance is specifically approved, at least
annually, by a majority vote of the Directors who neither are interested
persons of the Fund nor have any direct or indirect financial interest in the
Advisory Agreement, cast in person at a meeting called for the purpose of
voting on such approval. Most recently, continuance of the Advisory Agreement
through September 30, 1996 was approved by the Board of Directors.
ADMINISTRATION AGREEMENT
Under the Administration Agreement, Alliance furnishes the Fund with
administrative, accounting, internal auditing services and certain other
services required by the Fund. For these services the Fund pays Alliance a
monthly fee at an annualized rate of .15% of the value of the Fund's average
weekly net assets and reimburses certain of Alliance's out-of-pocket expenses.
NET ASSET VALUE
The Fund calculates and makes available for weekly publication the net asset
value of its shares of Common Stock. Net asset value per share of Common Stock
is determined by adding the market value of all securities in the Fund's
portfolio and other assets, subtracting liabilities incurred or accrued, and
dividing the net amount so determined by the total number of the Fund's shares
of Common Stock then outstanding.
For purposes of this computation, portfolio securities that are actively
traded on the over-the-counter market, including listed securities for which
the primary market is believed to be over-the-counter, are valued at the mean
between the most recently quoted bid and asked prices provided by the
principal market makers. Publicly traded Sovereign Debt Obligations are
typically traded internationally on the over-the-counter market. Because of
the nature of the markets for Sovereign Debt Obligations, quotations from
several sources will be obtained so that the Fund's portfolio investments will
not generally be priced by a single source. Any security for which the primary
market is on an exchange is valued at the last sale price on such exchange on
the day of valuation or, if there is no sale on such day, the last bid price
quoted on such day. Securities and assets for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the direction of the Board. However, readily marketable Sovereign Debt
Obligations may be valued on the basis of prices provided by a pricing service
when such prices are believed by Alliance to reflect the fair market value of
such securities. The prices provided by a pricing service take into account
institutional size trading in similar groups of securities and any
developments related to specific securities. U.S. Government Securities and
other debt instruments having 60 days or less remaining until maturity are
stated at amortized cost if the original maturity was 60 days or less, or by
amortizing their fair value as of the 61st day prior to maturity if their
original term to maturity exceeded 60 days (unless in either case the Board
determines that this method does not represent fair value).
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DIVIDENDS AND DISTRIBUTIONS
The Fund distributes all its net investment income. Dividends from such net
investment income are declared and paid monthly to shareholders. All net
realized long- or short-term capital gains, if any, are distributed to
shareholders at least annually. To the extent practicable, the Fund attempts
to maintain a constant level of monthly distributions to shareholders although
there can be no assurance that it will be able to do so. In order to maintain
such monthly distributions, short-term capital gains may from time to time be
included in monthly distributions. From time to time, the Fund also may pay
out less than the entire amount of net investment income and net realized
short-term capital gains earned in any particular period. Any such amount
retained by the Fund would be available to stabilize future distributions. As
a result, the distributions paid by the Fund for any particular month may be
more or less than the amount of net investment income and net realized short-
term capital gains actually earned by the Fund during such period. However,
with respect to any taxable year, the Fund does not intend to pay
distributions in excess of net investment income and net realized capital
gains earned through such year.
DIVIDEND REINVESTMENT PLAN
Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan") all
shareholders whose shares are registered in their own names have all
distributions reinvested automatically in additional shares of the Fund by
First Data Investor Services Group, Inc. (in such capacity, the "Agent"), as
agent under the Plan, unless a shareholder elects to receive cash.
Shareholders whose shares are held in the name of a broker or nominee will
automatically have distributions reinvested by the broker or the nominee in
additional shares under the Plan, unless the shareholder elects to receive
distributions in cash. If the service is not available, such distributions
will be paid in cash. See "Dividend Reinvestment Plan" in the SAI.
The Agent has furnished each shareholder with written information relating
to the Plan. Included in such information are procedures for electing to
receive dividends and distributions in cash (or, in the case of shares held in
the name of a broker or a nominee who does not participate in the Plan, for
electing to participate in the Plan). Shareholders whose shares are held in
the name of a broker or nominee should contact the broker or nominee for
details. All distributions to investors who elect not to participate in the
Plan will be paid by check mailed directly to the record holder by or under
the direction of First Data Investor Services Group, Inc., as the dividend-
paying agent.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the
shares may have elected, non-participants in the Plan receive cash and
participants in the Plan receive the equivalent in shares of the Fund valued
as follows:
(i) If the shares are trading at net asset value or at a premium above
net asset value at the time of valuation, the Fund issues new shares at the
greater of net asset value or 95% of the then current market price.
(ii) If the shares are trading at a discount from net asset value at the
time of valuation, the Agent receives the dividend or distribution in cash
and applies it to the purchase of the Fund's shares in the open market, on
the New York Stock Exchange or elsewhere, for the participants' accounts.
Such purchases are made on or shortly after the payment date for such
dividend or distribution and in no event more than 30 days after such date
except where temporary curtailment or suspension of purchase is necessary
to comply with Federal securities laws. If, before the Agent has completed
its purchases, the market price exceeds the net asset value of a share of
Common Stock, the average purchase price per share paid by the Agent may
exceed the net asset value of the Fund's shares, resulting in the
acquisition of fewer shares than if the dividend or distribution had been
in shares issued by the Fund.
There is no charge to participants for reinvesting dividends and capital
gains distributions. The fees of the Agent for handling the reinvestment of
dividends and capital gains distributions are paid by the Fund. There are
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no brokerage charges with respect to shares issued directly by the Fund as a
result of dividends or capital gains distributions payable either in shares or
in cash. However, each participant bears a pro-rata share of brokerage
commissions incurred with respect to the Agent's open market purchases in
connection with the reinvestment of dividends or capital gains distributions
paid in cash.
The automatic reinvestment of income and capital gains distributions does
not relieve participants of any income tax that may be payable on such income
and capital gains distributions. The federal income tax treatment of
reinvestment is described in the SAI under "Taxation."
All correspondence concerning the Plan should be directed to the Agent at
First Data Investor Services Group, Inc., P.O. Box 1376, Boston, Massachusetts
02104. For a more complete description of the Plan, see "Dividend Reinvestment
Plan" in the SAI.
TAXATION
The Fund intends to continue to qualify and elect to be treated as a
"regulated investment company" under the Code. The Fund intends to make timely
distributions of the Fund's taxable income (including any net capital gain) so
that the Fund will not be subject to federal income or excise taxes. However,
exchange control or other regulations on the repatriation of investment
income, capital or the proceeds of securities sales, if any exist or are
enacted in the future, may limit the Fund's ability to make distributions
sufficient in amount to avoid being subject to one or both of such federal
taxes. It is anticipated that substantially all of the Fund's distributions of
dividend and interest income and any net short-term capital gain will be
taxable as ordinary income to shareholders. Distributions of the Fund's net
capital gain (which will be designated as capital gain dividends by the Fund)
will be taxable to shareholders as long-term capital gain, regardless of the
length of time a shareholder has held his shares. After the end of each
taxable year, the Fund will notify shareholders of the United States federal
income tax status of any distributions made by the Fund to such shareholder
during that year.
Income received by the Fund may also be subject to foreign income taxes,
including withholding taxes. The United States has entered into tax treaties
with many foreign countries which entitle the Fund to a reduced rate of such
taxes or exemption from taxes on such income. It is impossible to determine
the effective rate of foreign tax in advance since the amount of the Fund's
assets to be invested within various countries is not known. If more than 50%
of the value of the Fund's total assets at the close of its taxable year
consists of stocks or securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal Revenue Service to
pass through to its shareholders the amount of foreign taxes paid by the Fund.
However, there can be no assurance that the Fund will be able to do so. The
federal income tax status of each year's distributions by the Fund will be
reported to shareholders and to the Internal Revenue Service. The foregoing is
only a general description of the treatment of foreign taxes under the United
States federal income tax laws. Because of the availability of a foreign tax
credit or deduction will depend on the particular circumstances of each
shareholder, potential investors are advised to consult their own tax
advisers.
DESCRIPTION OF COMMON STOCK
The Fund is authorized to issue 100,000,000 shares of Common Stock, par
value $.01 per share, of which 8,652,707 shares were outstanding as of June
21, 1996. The Fund's shares of Common Stock have no preemptive, conversion,
exchange or redemption rights. Each share of Common Stock has equal voting,
dividend, distribution and liquidation rights. The shares of Common Stock
outstanding are, and the Shares when issued will be, fully paid and
nonassessable. Shareholders are entitled to one vote per share. All voting
rights for the election of Directors are noncumulative, which means that the
holders of more than 50% of the shares can elect 100% of the Directors then
nominated for election if they choose to do so and, in such event, the holders
of the remaining shares of Common Stock will not be able to elect any
Directors. The foregoing description and the description under "Certain Anti-
Takeover Provisions of the Articles of Incorporation and Bylaws" are subject
to the provisions contained in the Fund's Articles of Incorporation and
Bylaws.
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The Fund has no present intention of offering additional shares of Common
Stock, except under the Plan and in connection with the Offer. See "Dividend
Reinvestment Plan." Other offerings of the Fund's shares of Common Stock, if
made, will require approval of the Board of Directors. Any additional offering
of Common Stock will be subject to the requirement of the 1940 Act that shares
may not be sold at a price below the then current net asset value, exclusive
of sales load, except in connection with an offering to existing shareholders
or with the consent of the holders of a majority of the Fund's outstanding
voting securities.
CERTAIN ANTI-TAKEOVER PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS
The Fund has provisions in its Articles of Incorporation and Bylaws
(together, the "Charter Documents") that are intended to limit (i) the ability
of other entities or persons to acquire control of the Fund, (ii) the Fund's
freedom to engage in certain transactions and (iii) the ability of the Fund's
Directors or shareholders to amend the Charter Documents or effect changes in
the Fund's management. These provisions of the Charter Documents may be
regarded as "anti-takeover" provisions. The Board of Directors is divided into
three classes, each having a term of three years. At each annual meeting of
shareholders, the term of one class of Directors expires. Accordingly, only
those Directors in one class may be changed in any one year, and it would
require two years to change a majority of the Board of Directors (although
under Maryland law procedures are available for the removal of Directors even
if they are not then standing for re-election). Such system of electing
Directors is intended to have the effect of maintaining the continuity of
management and, thus, make it more difficult for the Fund's shareholders to
change the majority of Directors. A Director may be removed from office only
by a vote of at least 75% of the outstanding shares of Common Stock of the
Fund entitled to vote for the election of Directors.
Under Maryland law and the Fund's Articles of Incorporation, the affirmative
vote of the holders of a majority of the votes entitled to be cast is required
for the consolidation of the Fund with another corporation, a merger of the
Fund with or into another corporation (except for certain mergers in which the
Fund is the successor), a statutory share exchange in which the Fund is not
the successor, a sale or transfer of all or substantially all of the Fund's
assets, the dissolution of the Fund and any amendment to the Fund's Articles
of Incorporation. The affirmative vote of 75% (which is higher than that
required under Maryland law or the 1940 Act) of the outstanding shares of
Common Stock of the Fund is required to authorize the liquidation or
dissolution of the Fund in the absence of approval of the liquidation or
dissolution by a majority of the Continuing Directors of the Fund (defined for
this purpose as those Directors who were either members of the Board of
Directors on the date of closing of the initial offering of the shares of the
Fund's Common Stock (November 5, 1992) or subsequently became Directors and
whose election or nomination was approved by a majority of the Continuing
Directors then on the Board). In addition, the affirmative vote of 75% (which
is higher than that required under Maryland law or the 1940 Act) of the
outstanding shares of Common Stock of the Fund is required generally to
authorize any of the following transactions involving a corporation, person or
entity that is directly, or indirectly through affiliates, the beneficial
owner of more than 5% of the outstanding shares of the Fund (a "Principal
Shareholder"), or to amend the provisions of the Articles of Incorporation
relating to such transactions:
(i) merger, consolidation or statutory share exchange of the Fund with or
into any Principal Shareholder;
(ii) issuance of any securities of the Fund to any Principal Shareholder
for cash except upon reinvestment of dividends pursuant to a dividend
reinvestment plan of the Fund;
(iii) sale, lease or exchange of all or any substantial part of the
assets of the Fund to any Principal Shareholder (except assets having an
aggregate fair market value of less than $1,000,000); or
(iv) sale, lease or exchange to the Fund, in exchange for securities of
the Fund, of any assets of any Principal Shareholder (except assets having
an aggregate fair market value of less than $1,000,000).
However, such vote would not be required when, under certain conditions, the
Continuing Directors approve the transactions described in (i) through (iv)
above, although in certain cases involving merger, consolidation or
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statutory share exchange or sale of all or substantially all of the Fund's
assets, the affirmative vote of a majority of the outstanding shares of Common
Stock of the Fund would nevertheless be required. Except as described above
under "Tender Offers and Shares Repurchases; Conversion to Open-End Status--
Conversion to Open-End Status," the affirmative vote of 75% (which is higher
than that required under Maryland law or the 1940 Act) of the outstanding
shares of Common Stock of the Fund is required to convert the Fund to an open-
end investment company and to amend the Fund's Articles of Incorporation to
effect any such conversion. For the full text of these provisions, reference
is made to the Articles of Incorporation and Bylaws of the Fund, on file with
the Securities and Exchange Commission. See "Available Information."
The provisions of the Charter Documents described above could have the
effect of depriving the owners of shares of Common Stock of opportunities to
sell their shares at a premium over prevailing market prices by discouraging a
third party from seeking to obtain control of the Fund in a tender offer or
similar transaction. See "Repurchase of Shares." The overall effect of these
provisions is to render more difficult the accomplishment of a merger or the
assumption of control by a Principal Shareholder. The Board of Directors of
the Fund has considered the foregoing anti-takeover provisions and concluded
that they are in the best interests of the Fund and its shareholders.
DISTRIBUTION ARRANGEMENTS
The Dealer Manager is Smith Barney Inc., 388 Greenwich Street, New York, New
York 10013. Under the terms and subject to the conditions contained in a
Dealer Manager Agreement dated the date hereof, the Dealer Manager will
provide financial advisory services and marketing assistance in connection
with the Offer and will solicit the exercise of Rights by Record Date
shareholders. The Fund has agreed to pay the Dealer Manager a fee equal to
1.25% of the aggregate Subscription Price per Share for Shares issued upon
exercise of the Rights and the Over-Subscription Privilege for financial
advisory services and marketing assistance, including advice with respect to
the advisability, timing, size and Subscription Price of the Offer and the
coordination of soliciting efforts of any soliciting dealers, the Subscription
Agent and the Information Agent. The Fund has agreed to pay broker-dealers,
including the Dealer Manager, fees for their soliciting efforts (the
"Soliciting Fees") of 2.50% of the Subscription Price per Share for each Share
issued upon exercise of the Rights and the Over-Subscription Privilege. In
addition, the Fund has agreed to reimburse the Dealer Manager up to $100,000
for its reasonable expenses incurred in connection with the Offer. Soliciting
Fees will be paid to the broker-dealer designated on the applicable portion of
the Subscription Certificates or, if no broker-dealer is so designated, to the
Dealer Manager.
The Fund and Alliance have each agreed to indemnify the Dealer Manager or
contribute to losses arising out of certain liabilities, including liabilities
under the Securities Act. The Dealer Manager Agreement also provides that, in
rendering the services contemplated by the Dealer Manager Agreement, the
Dealer Manager will not be subject to any liability to the Fund except in
instances involving the Dealer Manager's gross negligence or willful
misconduct, or for any act or omission on the part of any broker-dealer (other
than the Dealer Manager or any of its affiliates) or any other person. The
staff of the Securities and Exchange Commission has advised the Fund and the
Dealer Manager that the staff is considering whether a dealer manager is an
underwriter for purposes of the Securities Act and the 1940 Act.
The Fund has agreed not to offer or sell, or enter into any agreement to
sell, any equity or equity related securities of the Fund or securities
convertible into such securities for a period of 180 days after the date of
the Dealer Manager Agreement without the prior consent of the Dealer Manager
except for the Shares and Common Stock issued in reinvestment of dividends or
distributions.
CUSTODIAN
The Bank of New York, 48 Wall Street, New York, New York 10286, serves as
custodian for the Fund.
46
<PAGE>
TRANSFER AGENT, DIVIDEND-PAYING AGENT AND REGISTRAR
First Data Investor Services Group, Inc., 53 State Street, Boston,
Massachusetts 02109, acts as the Fund's transfer agent, dividend-paying agent
and registrar.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the Fund
by Seward & Kissel, New York, New York. Certain legal matters will be passed
upon for the Dealer Manager by Simpson Thacher & Bartlett (a partnership which
includes professional corporations), New York, New York. Seward & Kissel and
Simpson Thacher & Bartlett will rely upon the opinion of Venable, Baetjer and
Howard, LLP, Baltimore, Maryland, for matters relating to Maryland law.
EXPERTS
The audited financial statements included in this Prospectus have been so
included in reliance on the report by Ernst & Young LLP, independent auditors,
given on the authority of such firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Fund is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the 1940 Act, and in accordance
therewith is required to file reports, proxy statements and other information
with the Securities and Exchange Commission. Any such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Securities and Exchange Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Securities and Exchange Commission's New York Regional Office, Seven World
Trade Center, 13th Floor, New York, New York 10048 and Chicago Regional
Office, Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can be obtained from the public
reference section of the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports, proxy
statements and other information concerning the Fund can also be inspected and
copied at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
Additional information regarding the Fund and the Shares is contained in the
Registration Statement on Form N-2, including amendments, exhibits and
schedules thereto, relating to the Shares filed by the Fund with the
Securities and Exchange Commission, Washington, D.C. This Prospectus and the
SAI do not contain all of the information set forth in the Registration
Statement, including any amendments, exhibits and schedules thereto. For
further information with respect to the Fund and the Shares, reference is made
to the Registration Statement. Statements contained in this Prospectus and the
SAI as to the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement may be inspected without
charge at the Securities and Exchange Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from
the Securities and Exchange Commission upon the payment of certain fees
prescribed by the Securities and Exchange Commission.
A copy of the Fund's annual report for the fiscal year ended October 31,
1995 was mailed to shareholders in December 1995.
47
<PAGE>
TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Investment Practices...............................................
Investment Restrictions....................................................
Management of the Fund.....................................................
Brokerage and Portfolio Transactions.......................................
Dividend Reinvestment Plan.................................................
Taxation...................................................................
Certain Owners of Record...................................................
Financial Statements.......................................................
</TABLE>
48
<PAGE>
APPENDIX
BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payment
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
ABSENCE OF RATING--When no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the quality of
the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that
are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
A-1
<PAGE>
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
NOTE--Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
STANDARD & POOR'S RATINGS SERVICES
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C--Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation and
CCC the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions.
C1--The rating C1 is reserved for income bonds on which no interest is being
paid.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-)--The Ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR--Not rated.
A-2
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND THE SAI AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND,
ALLIANCE OR THE DEALER MANAGER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE FUND SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE. HOWEVER, IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS
REQUIRED BY LAW TO BE DELIVERED, THIS PROSPECTUS WILL BE AMENDED OR
SUPPLEMENTED ACCORDINGLY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES
OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR AN
OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expense Information........................................................ 3
Prospectus Summary......................................................... 4
Financial Highlights....................................................... 11
The Offer.................................................................. 13
The Fund................................................................... 21
Use of Proceeds............................................................ 22
Net Asset Value and Market Price Information............................... 23
Investment Objective and Policies.......................................... 23
Special Risk Considerations................................................ 33
Tenders Offers and Share Repurchases; Conversion to Open-End Status........ 38
Management of the Fund..................................................... 41
Net Asset Value............................................................ 42
Dividends and Distributions................................................ 43
Dividend Reinvestment Plan................................................. 43
Taxation................................................................... 44
Description of Common Stock................................................ 44
Distribution Arrangements.................................................. 46
Custodian.................................................................. 46
Transfer Agent, Dividend-Paying Agent and Registrar........................ 47
Legal Matters.............................................................. 47
Experts.................................................................... 47
Available Information...................................................... 47
Table of Contents of Statement of Additional Information................... 48
Appendix--Bond Ratings..................................................... A-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
2,884,235 SHARES OF
COMMON STOCK
ISSUABLE UPON EXERCISE
OF RIGHTS TO SUBSCRIBE
FOR SUCH SHARES OF
COMMON STOCK
--------
PROSPECTUS
JUNE , 1996
--------
SMITH BARNEY INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS
TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN
ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
Subject to Completion dated June 21, 1996
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
________________________
STATEMENT OF ADDITIONAL INFORMATION
Alliance World Dollar Government Fund, Inc. (the "Fund")
is a non-diversified, closed-end management investment
company. The Fund's investment objective is to seek high
current income by investing exclusively in fixed income
securities denominated in U.S. dollars. In seeking to
achieve this objective, the Fund invests substantially all
of its assets in (i) U.S. dollar-denominated debt
obligations 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 ("Sovereign Debt
Obligations") and (ii) zero coupon obligations issued or
guaranteed by the U.S. government, its agencies or
instrumentalities ("Zero Coupon Obligations"). Under normal
circumstances, the Fund invests at least 75% of its total
assets in (i) Sovereign Debt Obligations of a type
customarily referred to as "Brady Bonds" that are issued as
part of debt restructurings and that are collateralized in
full as to principal due at maturity by Zero Coupon
Obligations having the same maturity ("Collateralized Brady
Bonds") and (ii) Zero Coupon Obligations. There can be no
assurance that the Fund's investment objective will be
achieved.
This Statement of Additional Information ("SAI") is not
a prospectus, but should be read in conjunction with the
Prospectus for the Fund dated June , 1996 (the
"Prospectus"). This SAI does not include all information
that a prospective investor should consider before
purchasing shares of the Fund and investors should obtain
and read the Prospectus prior to purchasing shares. A copy
of the Prospectus may be obtained without charge by calling
1-800-227-4618. This SAI incorporates by reference the
entire Prospectus. Defined terms used herein shall have the
same meaning as provided in the Prospectus.
________________________
1
<PAGE>
TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION
Page
Certain Investment Practices ............................. 3
Investment Restrictions .................................. 4
Management of the Fund ................................... 7
Brokerage and Portfolio Transactions ..................... 13
Dividend Reinvestment Plan ............................... 14
Taxation ................................................. 15
Certain Owners of Record ................................. 22
Financial Statements ..................................... 23
2
<PAGE>
CERTAIN INVESTMENT PRACTICES
The following information supplements the section "Investment
Objective and Policies" in the Prospectus and should be read only
in connection with that section of the Prospectus.
STRUCTURED SECURITIES
Certain issuers of Structured Securities may be deemed to be
"investment companies" as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"). As a result, the Fund's
investment in these Structured Securities may be limited by the
restrictions contained in the 1940 Act described in the next
paragraph under "Investment in Other Investment Companies."
INVESTMENT IN OTHER INVESTMENT COMPANIES
In accordance with the 1940 Act, the Fund may invest up to
10% of its total assets in securities of other investment
companies. In addition, under the 1940 Act the Fund may not own
more than 3% of the total outstanding voting stock of any
investment company and not more than 5% of the value of the
Fund's total assets may be invested in the securities of any
investment company. If the Fund acquires shares in investment
companies, shareholders would bear both their proportionate share
of expenses in the Fund (including management and advisory fees)
and, indirectly, the expenses of such investment companies
(including management and advisory fees).
OPTIONS
A put option gives the purchaser of such option, upon payment
of a premium, the right to deliver a specified amount of a
security to the writer of the option on or before a fixed date at
a predetermined price. A call option gives the purchaser of the
option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by
the Fund is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or
for additional cash consideration held in a segregated account by
its custodian) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if the Fund
holds a call on the same security in the same principal amount as
the call written and the exercise price of the call held (a) is
equal to or less than the exercise price of the call or (b) is
greater than the exercise price of the call written and the
difference is maintained by the Fund in cash and liquid high-
grade debt securities in a segregated account with its custodian.
A put option written by the Fund is "covered" if the Fund
3
<PAGE>
maintains cash not available for investment or liquid high-grade
debt securities with a value equal to the exercise price in a
segregated account with its custodian, or else holds a put on the
same security in the same principal amount as the put written and
the exercise price of the put held is equal to or greater than
the exercise price of the put written. The premium paid by the
purchaser of an option reflects, among other things, the
relationship of the exercise price to the market price and
volatility of the underlying security, the remaining term of the
option, supply and demand and interest rates.
MAINTENANCE OF SEGREGATED ACCOUNT
The Fund may determine to maintain a segregated account with
its custodian consisting of cash, U.S. Government Securities or
high-grade debt obligations in connection with certain
transactions that otherwise may result in the issuance of a
"senior security" within the meaning of the 1940 Act. See
"Investment Objective and Policies--Borrowing" in the Prospectus.
These transactions include uncovered options, interest rate swaps
(other than those entered into on a net basis), reverse
repurchase agreements, dollar rolls, standby commitments to
purchase securities, forward commitments to purchase or sell
securities and sales of interest rate caps and floors.
Maintenance of such a segregated account may have the effect of
limiting the Fund's ability to engage in such transactions.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions,
which may not be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities as defined
in "Investment Objective and Policies--General" in the
Prospectus. The percentage limitations set forth below apply
only at the time an investment is made or other relevant action
is taken by the Fund.
The Fund will not:
1. Invest 25% or more of its total assets (valued at
the time of investment) in securities of issuers conducting
their principal business activities in the same industry,
except that this restriction does not apply to U.S.
Government Securities;
2. Make loans except through (i) the purchase of debt
obligations in accordance with its investment objective and
policies; (ii) the lending of portfolio securities; or
(iii) the use of repurchase agreements;
4
<PAGE>
3. Borrow money or issue senior securities, except
that the Fund may borrow from a bank or other entity in a
privately arranged transaction for (i) the repurchase and/or
tenders for its shares or to pay dividends for purposes of
complying with the Internal Revenue Code of 1986, as amended,
if after such borrowing there is asset coverage of at least
300% as defined in the 1940 Act and (ii) temporary purposes
in an amount not exceeding 5% of the value of the total
assets of the Fund;
4. Pledge, hypothecate, mortgage or otherwise encumber
its assets, except to secure permitted borrowings;
5. Invest in companies for the purpose of exercising
control;
6. Make short sales of securities or maintain a short
position, unless at all times when a short position is open
it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any
further consideration, securities of the same issue as, and
equal in amount to, the securities sold short ("short sales
against the box"), and unless not more than 10% of the Fund's
net assets (taken at market value) is held as collateral for
such sales at any one time (it being the Fund's present
intention to make such sales only for the purpose of
deferring realization of gain or loss for federal income tax
purposes); or
7. (i) Purchase or sell real estate, except that it
may purchase and sell securities of companies which deal in
real estate or interests therein and securities that are
secured by real estate, provided such securities are
Sovereign Debt Obligations; (ii) invest in interests in oil,
gas, or other mineral exploration or development programs;
(iii) purchase securities on margin, except for such short-
term credits as may be necessary for the clearance of
transactions; and (iv) act as an underwriter of securities,
except that the Fund may acquire restricted securities under
circumstances in which, if such securities were sold, the
Fund might be deemed to be an underwriter for purposes of the
Securities Act of 1933.
In addition, the Fund has adopted a policy which may be
changed by the action of the Fund's Board of Directors without
shareholder approval that it will not purchase or sell
commodities or commodity contracts.
5
<PAGE>
MANAGEMENT OF THE FUND
The Directors and officers of the Fund and their principal
occupations during the past five years are set forth below. The
Directors and officers also serve as directors, trustees or
officers of other registered investment companies sponsored by
Alliance Capital Management L.P. ("Alliance").
Age, Principal Occupations
During Past Five Years
Name and Address Office and Other Affiliations
________________ ______ ______________________
John D. Carifa* Director and 51, President, Chief Operating
1345 Avenue of the Americas Chairman Officer and a Director of Alliance
New York, NY 10105 Capital Management Corporation
("ACMC").**
Ruth Block Director 65, Formerly an Executive Vice
P.O. Box 4653 President and Chief Insurance
Stamford, CT 06903 Officer of The Equitable Life
Assurance Society of the United
States. She is a Director of
Ecolab Incorporated (specialty
chemicals) and Amoco Corporation
(oil and gas).
David H. Dievler Director 66, Independent consultant. He
P.O. Box 167 was formerly a Senior Vice
Spring Lake, NJ 07762 President of ACMC until December
1994.
John H. Dobkin Director 54, President of Historic Hudson
105 West 55th Street Valley (historic preservation)
New York, NY 10019 since 1991. He was formerly
Director of the National Academy
of Design. From 1987 to 1992 he
was a director of ACMC.
William H. Foulk, Jr. Director 63, An investment adviser and
2 Hekma Road independent consultant. He was
Greenwich, CT 06831 formerly Senior Manager of Barrett
Associates, Inc., a registered
investment adviser, since 1986.
Dr. James M. Hester Director 72, President of The Harry Frank
45 East 89th Street Guggenheim Foundation. He was
New York, NY 10128 formerly President of New York
University and The New York
Botanical Garden and Rector of The
United Nations University. He is
6
<PAGE>
also a Director of Union Carbide
Corporation.
Clifford L. Michel Director 56, Partner in the law firm of
St. Bernard's Road Cahill Gordon & Reindel. He is
Gladstone, NJ 07934 Chief Executive Officer of Wenonah
Development Company (investments)
and a Director of Placer Dome,
Inc. (mining).
_______________________________________________________________
* An "interested person," as defined in the 1940 Act, of the Fund.
** For the purpose of this SAI, ACMC refers to Alliance Capital Management
Corporation, the sole general partner of Alliance, and to the predecessor
general partner of Alliance of the same name.
7
<PAGE>
Age, Principal Occupations
During Past Five Years
Name and Address Office and Other Affiliations
________________ ______ ______________________
Robert C. White Director 75, Formerly Assistant
30835 River Crossing Treasurer of Ford Motor Company
Bingham Farms, MI 48025 and, until September 30, 1994,
Vice President and Chief Financial
Officer of the Howard Hughes
Medical Institute.
Wayne D. Lyski President 54, Executive Vice President of
1345 Avenue of the Americas ACMC, with which he has been
New York, NY 10105 associated since prior to 1991.
Kathleen A. Corbet Senior Vice 36, Senior Vice President of ACMC
1345 Avenue of the Americas President since July 1993. Previously, she
New York, NY 10105 held various responsibilities as
head of Equitable Capital
Management Corporation's Fixed
Income Management Department,
Private Placement, Secondary
Trading and Fund Management since
prior to 1991.
Paul J. DeNoon Vice President 34, Vice President of ACMC, with
1345 Avenue of the Americas which he has been associated
New York, NY 10105 since 1992. Previously, he was a
Vice President of Manufacturers
Hanover Trust Company since prior
to 1991.
Vicki L. Fuller Vice President 39, Senior Vice President of ACMC
1345 Avenue of the Americas since July 1993. Previously, she
New York, NY 10105 was a Managing Director of High
Yield of Equitable Capital
Management Corporation since prior
to 1991.
Mark D. Gersten Treasurer and 45, Senior Vice President of
500 Plaza Drive Chief Financial Alliance Fund Services, Inc.
Secaucus, NJ 07094 Officer ("AFS"), with which he has been
associated since prior to 1991.
Edmund P. Bergan, Jr. Secretary 46, Senior Vice President and the
1345 Avenue of the Americas General Counsel of Alliance Fund
New York, NY 10105 Distributors, Inc. and AFS and a
Vice President and Assistant
General Counsel of ACMC, with
8
<PAGE>
which he has been associated since
prior to 1991.
Joseph J. Mantineo Controller 37, Vice President of AFS, with
500 Plaza Drive which he has been associated since
Secaucus, NJ 07094 prior to 1991.
The Board of Directors is divided into three classes, each
class having a term of three years. Each year the term of one
class expires. See "Description of Common Stock--Certain Anti-
Takeover Provisions of the Articles of Incorporation and Bylaws"
in the Prospectus.
The Fund does not pay any fees to, or reimburse expenses of,
its Directors who are considered "interested persons" of the
Fund. The aggregate compensation paid by the Fund to each of the
Directors during its fiscal year ended October 31, 1995, the
aggregate compensation paid to each of the Directors during
calendar year 1995 by all of the funds to which Alliance provides
investment advisory services (collectively, the "Alliance Fund
Complex") and the total number of registered investment companies
in the Alliance Fund Complex with respect to which each of the
Directors serves as a director or trustee, are set forth below.
Neither the Fund nor any other fund in the Alliance Fund Complex
provides compensation in the form of pension or retirement
benefits to any of its directors or trustees. Each of the
Directors is a director or trustee of one or more other
registered investment companies in the Alliance Fund Complex.
Total Number of Funds
Total in the Alliance Fund
Compensation Complex, Including
Aggregate from the Alliance the Fund, as to which
Name of Director Compensation Fund Complex, the Director is a
of the Fund from the Fund Including the Fund Director
________________ _____________ __________________ _____________________
John D. Carifa $-0- $ -0- 49
Ruth Block $3,467 $159,000 36
David H. Dievler $2,717 $179,200 42
John H. Dobkin $3,729 $117,200 29
William H. Foulk, Jr. $3,729 $143,500 30
Dr. James M. Hester $3,467 $156,000 37
Clifford L. Michel $3,217 $131,500 36
Robert C. White $3,467 $133,200 36
As of June 17, 1996, the Directors and officers of the Fund
as a group owned less than 1% of the outstanding shares of Common
Stock of the Fund.
9
<PAGE>
ADVISER AND ADMINISTRATOR; ADVISORY ARRANGEMENTS
Alliance Capital Management L.P., a New York Stock Exchange
listed company with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to serve
as investment adviser and under an administration agreement to
serve as administrator to the Fund. Alliance Capital Management
Corporation, the sole general partner of, and the owner of a 1%
general partnership interest in, Alliance, is an indirect wholly-
owned subsidiary of The Equitable Life Assurance Society of the
United States ("Equitable"), one of the largest life insurance
companies in the United States and a wholly-owned subsidiary of
The Equitable Companies Incorporated ("ECI"), a holding company
controlled by AXA, a French insurance holding company. As of
March 31, 1996, ACMC, Inc. and Equitable Capital Management
Corporation, each a wholly-owned direct or indirect subsidiary of
Equitable, together with Equitable, owned in the aggregate
approximately 57.6% of the issued and outstanding units
representing assignments of beneficial ownership of limited
partnership interests in Alliance ("Units"). As of March 31,
1996, approximately 32.4% and 10.0% of the Units were owned by
the public and employees of Alliance and its subsidiaries,
respectively, including employees of Alliance who serve as
Directors of the Fund.
AXA and its subsidiaries own approximately 63.9% of the
issued and outstanding shares of capital stock of ECI. AXA is
the holding company for an international group of insurance and
related financial services companies. AXA's insurance operations
include activities in life insurance, property and casualty
insurance and reinsurance. The insurance operations are diverse
geographically, with activities in France, the United States,
Australia, the United Kingdom, Canada and other countries,
principally in Europe and the Asia Pacific area. AXA is also
engaged in asset management, investment banking, securities
trading, brokerage, real estate and other financial services
activities in the United States, Europe and the Asia Pacific
area. Based on information provided by AXA, as of March 31,
1996, 42.1% of the issued ordinary shares (representing 53.4% of
the voting power) of AXA were owned by Midi Participations, a
French holding company ("Midi"). The shares of Midi were, in
turn, owned 61.4% (representing 62.5% of the voting power) by
Finaxa, a French holding company, and 38.6% (representing 37.5%
of the voting power) by subsidiaries of Assicurazioni Generali
S.p.A., an Italian corporation (one of which, Belgica Insurance
Holding S.A., a Belgian corporation, owned 30.8%, representing
33.1% of the voting power). As of March 31, 1996, 61.1% of the
voting shares (representing 73.4% of the voting power) of Finaxa
were owned by five French mutual insurance companies (the
"Mutuelles AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle,
10
<PAGE>
owned 34.7% of the voting shares representing 40.4% of the voting
power), and 25.5% of the voting shares (representing 16% of the
voting power) of Finaxa were owned by Banque Paribas, a French
bank. Including the ordinary shares owned by Midi, as of
March 31, 1996, the Mutuelles AXA directly or indirectly owned
51% of the issued ordinary shares (representing 64.7% of the
voting power) of AXA. Acting as a group, the Mutuelles AXA
control AXA, Midi and Finaxa.
The Advisory Agreement between the Fund and Alliance provides
that Alliance will furnish investment advice and recommendations
to the Fund and will provide office space in New York, order
placement facilities and persons satisfactory to the Fund's Board
of Directors to act as officers of the Fund. Such officers, as
well as certain Directors of the Fund, may be employees of
Alliance or directors, officers or employees of its affiliates.
Under the Advisory Agreement, the Fund pays monthly to Alliance a
fee at an annualized rate of 1.00% of the Fund's average weekly
net assets. For purposes of the calculation of the fee payable
to Alliance, average weekly net assets are determined on the
basis of the average net assets of the Fund 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 Friday of such weekly period with the net assets on
Friday of the immediately preceding weekly period. When a Friday
is not a Fund business day, then the calculation will be based on
the net assets of the Fund on the Fund business day immediately
preceding such Friday. The fee is in excess of the management
fees paid by most U.S. registered investment companies investing
exclusively in securities of U.S. issuers, although Alliance
believes the fee is generally comparable to the management fees
paid by other closed-end companies that invest in the securities
of foreign issuers, and Alliance believes the fee is justified by
the special care that must be given to the selection and
supervision of the particular types of securities in which the
Fund invests. For the Fund's fiscal years ended in 1995, 1994,
and 1993, the Fund paid $915,252, $1,165,088, $1,227,705,
respectively, to Alliance pursuant to the Advisory Agreement.
The Fund has entered into a Shareholder Inquiry Agency
Agreement (the "Inquiry Agreement") with AFS, an indirect wholly-
owned subsidiary of Alliance, pursuant to which AFS has agreed to
act as shareholder inquiry agent to the Fund for the purpose of
responding to telephone inquiries concerning the Fund and matters
relating thereto from shareholders of the Fund and others. Under
the Inquiry Agreement, the Fund reimburses AFS for its costs of
responding to such inquiries. During 1995, the Fund reimbursed
AFS $3,995 pursuant to the Inquiry Agreement.
Alliance has entered into a written agreement (the "Economic
Consulting Agreement") under which it pays out of its own
11
<PAGE>
resources a monthly fee at an annualized rate of .10% of the
Fund's average weekly net assets in consideration of the
provision by Lehman Brothers, Inc. of research regarding global
economic conditions and economic conditions in the specific
countries in which the Fund invests as well as statistical
services. In rendering such services, Lehman Brothers, Inc. does
not give advice or make recommendations regarding the purchase or
sale by the Fund of specific portfolio securities. For the
Fund's fiscal years ended in 1995, 1994, and 1993, Alliance paid
$91,525, $116,507, and $122,771, respectively, pursuant to the
Economic Consulting Agreement.
Certain other clients of Alliance or of its affiliates may
have investment objectives and policies similar to those of the
Fund. Alliance and any of its affiliates may, from time to time,
make recommendations which result in the purchase or sale of a
particular security by its other clients simultaneously with the
Fund. If transactions on behalf of more than one client during
the same period increase the demand for securities being
purchased or the supply of securities being sold, there may be an
adverse effect on price or quantity. It is the policy of
Alliance and any of its affiliates to allocate advisory
recommendations and the placing of orders in a manner that is
deemed equitable by Alliance to the accounts involved, including
the Fund. When two or more clients of Alliance and any of its
affiliates (including the Fund) are purchasing or selling the
same security on a given day from the same broker-dealer, such
transactions may be averaged as to price.
CUSTODIAN
The Bank of New York (the "Bank"), 48 Wall Street, New York,
New York 10286, serves as custodian for the Fund. In this
capacity, the Bank maintains custody of the securities and cash
of the Fund in compliance with the 1940 Act.
INDEPENDENT AUDITORS
Ernst & Young LLP, 787 Seventh Avenue, New York, New York
10019, serves as independent auditors of the Fund. In this
capacity, Ernst & Young LLP audits the accounts of the Fund.
BROKERAGE AND PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Directors
of the Fund, Alliance is responsible for the investment decisions
and the placing of the orders for portfolio transactions for the
Fund. The Fund's portfolio transactions occur primarily with
issuers, underwriters and major dealers acting as principals.
Such transactions are normally on a net basis which do not
involve payment of brokerage commissions. The cost of securities
12
<PAGE>
purchased from an underwriter usually includes a commission paid
by the issuer to the underwriter; transactions with dealers
normally reflect the spread between bid and asked prices.
Premiums are paid with respect to options purchased by the Fund.
The Fund has no obligation to enter into transactions in
portfolio securities with any dealer, issuer, underwriter or
other entity. In placing orders, it is the policy of the Fund to
obtain the best execution for its transactions. Where best
execution may be obtained from more than one dealer, Alliance
may, in its discretion, purchase and sell securities through
dealers who provide research, statistical and other information
to Alliance. These services are used by Alliance for all of its
investment advisory accounts and, accordingly, not all of the
services are used by Alliance in connection with the Fund. The
supplemental information received from a dealer is in addition to
the services required to be performed by Alliance under the
Advisory Agreement, and the expenses of the Alliance will not
necessarily be reduced as a result of the receipt of such
information. Portfolio securities will not be purchased from or
sold to Donaldson, Lufkin & Jenrette Securities Corporation, an
affiliate of Alliance, or any other subsidiary or affiliate of
Equitable.
DIVIDEND REINVESTMENT PLAN
Certain brokers or nominees may require a shareholder to
elect to participate in the Dividend Reinvestment Plan (the
"Plan") to the extent such shareholder desires to participate.
First Data Investors Services Group, Inc. (in this capacity, the
"Agent") maintains all shareholder accounts in the Plan and
furnishes written confirmations of all transactions in the
account, including information needed by shareholders for
personal and tax records. Shares in the account of each Plan
participant are held by the Agent in the name of the participant
and each shareholder's proxy includes those shares purchased
pursuant to the Plan. Share certificates are not issued in the
name of individual Plan participants.
Experience under the Plan may indicate that changes are
desirable. Accordingly, the Fund reserves the right to amend or
terminate the Plan as applied to any income or capital gains
distribution paid subsequent to written notice of the change sent
to the Plan participant at least 90 days before the date of such
income or capital gain distribution. The Plan may also be
amended or terminated by the Agent, with the Fund's prior
consent, on at least 90 days' written notice to Plan
participants. All correspondence concerning the Plan should be
directed to First Data Investor Services Group, Inc., P.O. Box
1376, Boston, MA 02104 or by phone at (800) 331-1710.
13
<PAGE>
TAXATION
The following summary addresses the principal United States
and foreign income tax considerations regarding the purchase,
ownership and disposition of shares in the Fund. The Fund and
its shareholders may also be subject to other federal, state,
local and foreign taxes.
IN VIEW OF THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH
SHAREHOLDER IS ADVISED TO CONSULT THE SHAREHOLDER'S OWN TAX
ADVISER WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF BEING A
SHAREHOLDER OF THE FUND, INCLUDING THE EFFECT AND APPLICABILITY
OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES THEREIN.
The statements regarding taxation set out below are based on
those laws that are in force on the date of this Prospectus and
are subject to any subsequent changes therein.
UNITED STATES FEDERAL INCOME TAXES
The following discussion of United States federal income
taxes is based upon the advice of Seward & Kissel, counsel for
the Fund.
GENERAL. The Fund intends to continue to qualify and elect
to be treated as a "regulated investment company" under sections
851 through 855 of the Internal Revenue Code of 1986, as amended
(the "Code"). To so qualify, the Fund must, among other things,
(i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock or
securities or foreign currency, or certain other income
(including, but not limited to, gains from options, futures and
forward contracts) derived with respect to its business of
investing in stock, securities or currency; (ii) derive less than
30% of its gross income in each taxable year from the sale or
other disposition within three months of their acquisition by the
Fund of stocks, securities, options, futures or forward contracts
and foreign currencies (or options, futures or forward contracts
on foreign currencies) that are not directly related to the
Fund's principal business of investing in stock or securities (or
options and futures with respect to stocks or securities); and
(iii) diversify its holdings so that, at the end of each quarter
of its taxable year, the following two conditions are met: (a) at
least 50% of the value of the Fund's assets is represented by
cash, U.S. Government securities, securities of other regulated
investment companies and other securities with respect to which
the Fund's investment is limited, in respect of any one issuer,
to an amount not greater than 5% of the Fund's assets and 10% of
the outstanding voting securities of such issuer, and (b) not
14
<PAGE>
more than 25% of the value of the Fund's assets is invested in
securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment
companies). These requirements will limit the Fund's ability to
purchase or sell forward contracts, to enter into interest rate
swaps and to purchase or sell interest rate caps or floors.
If the Fund qualifies as a regulated investment company for
any taxable year and makes timely distributions to its
shareholders of 90% or more of its net investment income for that
year (calculated without regard to its net capital gain, i.e.,
the excess of its net long-term capital gain over its net short-
term capital loss), it will not be subject to federal income tax
on the portion of its taxable income for the year (including any
net capital gain) that it distributes to shareholders.
The Fund will also avoid the 4% federal excise tax that would
otherwise apply to certain undistributed income for a given
calendar year if it makes timely distributions to the
shareholders equal to the sum of (i) 98% of its ordinary income
for that year; (ii) 98% of its capital gain net income and
foreign currency gains for the twelve-month period ending on
October 31 (or November 30 if elected by the Fund) of that year;
and (iii) any ordinary income or capital gain net income from the
preceding calendar year that was not distributed during that
year. For this purpose, income or gain retained by the Fund that
is subject to corporate income tax will be considered to have
been distributed by the Fund by year-end. For federal income and
excise tax purposes, dividends declared and payable to
shareholders of record as of a date in October, November or
December of a given year but actually paid during the immediately
following January will be treated as if paid by the Fund on
December 31 of that calendar year, and will be taxable to these
shareholders for the year declared, and not for the year in which
the shareholders actually receive the dividend.
DISTRIBUTIONS. Distributions payable by the Fund either in
cash or in additional shares to its shareholders will be subject
to United States federal income taxes. Shareholders electing to
receive such distributions in the form of additional shares will
be treated as receiving a distribution in an amount equal to the
fair market value, determined as of the payment date, of the
shares received. The shareholder's cost basis in the shares
received will equal the amount recognized as a taxable
distribution. Distributions to shareholders of the Fund's
dividend and interest income and of any net short-term capital
gain in any year will be taxable as ordinary income to such
shareholders to the extent of the Fund's taxable income (without
regard to any net capital gain) for that year.
15
<PAGE>
It is anticipated that substantially all of the Fund's
distributions of dividend and interest income and any net short-
term capital gain will be taxable as ordinary income to
shareholders. Distributions which are so taxable will constitute
dividends for federal income tax purposes but will not be
eligible for the dividends-received deduction for corporations.
To the extent that such distributions to a shareholder in any
year are not taxable as ordinary income, they will be treated as
a nontaxable return of capital and will reduce the shareholder's
basis in his shares. The amount of such distributions, if any,
in excess of the shareholder's basis in his shares, will be
treated as a gain from the sale of shares, as discussed below.
Distributions of the Fund's net capital gain (which will be
designated as capital gain dividends by the Fund) will be taxable
to shareholders as long-term capital gain, regardless of the
length of time a shareholder has held his shares.
After the end of the taxable year, the Fund will notify
shareholders of the United States federal income tax status of
any distributions made by the Fund to such shareholders during
that year.
SALES, REDEMPTIONS AND OFFERS TO PURCHASE SHARES. A
shareholder may recognize taxable gain or loss if the shareholder
sells or redeems shares of the Fund or, pursuant to a Tender
Offer or a Subsequent Offer, tenders all of his shares. Any gain
or loss arising from such a sale, redemption or tender generally
will be capital gain or loss except in the case of a dealer or
certain financial institutions and will be long-term capital gain
or loss if the shareholder has held such shares for more than one
year at the time of the sale, redemption or tender; otherwise it
will be short-term capital gain or loss. However, any capital
loss arising from the sale, redemption or tender of shares held
for six months or less by a shareholder will be treated as a
long-term capital loss to the extent of the amount of capital
gain dividends received by the shareholder. In determining the
holding period of such shares for this purpose, any period during
which a shareholder's risk of loss is offset by means of options,
short sales or similar transactions is not counted.
If a shareholder who tenders shares pursuant to a Tender
Offer or a Subsequent Offer fails to comply with the terms of the
Offer and tenders less than all the shares owned by and
attributed to such shareholder, and if the distribution to the
shareholder does not otherwise qualify as an exchange, the
proceeds received may be taxable as described above under
"Distributions." Also, there is a risk that non-tendering
shareholders may be considered to have received a deemed
distribution which may also be taxable as described above.
16
<PAGE>
Any loss realized by a shareholder on a sale or exchange of
shares of the Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30
days before and ending 30 days after the shares are sold or
exchanged. For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan will constitute a replacement if made
within the period. If disallowed, the loss will be reflected in
an upward adjustment to the basis of the shares acquired.
FOREIGN TAX CREDITS. If more than 50% of the value of the
Fund's total assets at the close of its taxable year consists of
stocks or securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal
Revenue Service to pass through to its shareholders the amount of
foreign taxes paid by the Fund. However, there can be no
assurance that the Fund will be able to do so. Pursuant to this
election a shareholder will be required to (i) include in gross
income (in addition to taxable dividends actually received) his
pro rata share of foreign taxes paid by the Fund, (ii) treat his
pro rata share of such foreign taxes as having been paid by him,
and (iii) either deduct such pro rata share of foreign taxes in
computing his taxable income or treat such foreign taxes as a
credit against United States federal income taxes. Shareholders
who are not liable for federal income taxes, such as retirement
plans qualified under section 401 of the Code, will not be
affected by any such pass through of taxes by the Fund. No
deduction for foreign taxes may be claimed by an individual
shareholder who does not itemize deductions. In addition,
certain individual shareholders may be subject to rules which
limit or reduce their availability to fully deduct their pro rata
share of the foreign taxes paid by the Fund. Each shareholder
will be notified within 60 days after the close of the Fund's
taxable year as to whether the foreign taxes paid by the Fund
will pass through for that year and, if so, such notification
will designate (i) the shareholder's portion of the foreign taxes
paid to each such country and (ii) the portion of dividends that
represents income derived from sources within each such country.
Generally, a credit for foreign taxes may not exceed the
shareholder's United States tax attributable to the shareholder's
total foreign source taxable income. Generally, the source of
the Fund's income flows through to its shareholders. The overall
limitation on a foreign tax credit is also applied separately to
specific categories of foreign source income, including foreign
source "passive income," including dividends, interest and
capital gains. Further, the foreign tax credit is allowed to
offset only 90% of any alternative minimum tax to which a
shareholder may be subject. As a result of these rules, certain
shareholders may be unable to claim a credit for the full amount
of their proportionate share of the foreign taxes paid by the
Fund. If a Shareholder could not credit his full share of the
17
<PAGE>
foreign tax paid, double taxation of such income could be
mitigated only by deducting the foreign tax paid, which may be
subject to limitation as described above.
The federal income tax status of each year's distributions by
the Fund will be reported to shareholders and to the Internal
Revenue Service. The foregoing is only a general description of
the treatment of foreign taxes under the United States federal
income tax laws. Because the availability of a foreign tax
credit or deduction will depend on the particular circumstances
of each shareholder, potential investors are advised to consult
their own tax advisers.
BACKUP WITHHOLDING. The Fund may be required to withhold
United States federal income tax at the rate of 31% of all
taxable distributions payable to shareholders who fail to provide
the Fund with their correct taxpayer identification numbers or to
make required certifications, or who have been notified by the
Internal Revenue Service that they are subject to backup
withholding. Corporate shareholders and certain other
shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
amounts so withheld may be credited against a shareholder's
United States federal income tax liability or refunded.
UNITED STATES FEDERAL INCOME TAXATION OF THE FUND
The following discussion relates to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.
PASSIVE FOREIGN INVESTMENT COMPANIES. Certain of the Fund's
investments in Structured Securities may constitute, for federal
income tax purposes, investments in shares of foreign
corporations. If the Fund owns shares in a foreign corporation
that constitutes a "passive foreign investment company" (a
"PFIC") for federal income tax purposes and the Fund does not
elect to treat the foreign corporation as a "qualified electing
fund" within the meaning of the Code, the Fund may be subject to
United States federal income taxation on a portion of any "excess
distribution" it receives from the PFIC or any gain it derives
from the disposition of such shares, even if such income is
distributed as a taxable dividend by the Fund to its United
States shareholders. The Fund may also be subject to additional
interest charges in respect of deferred taxes arising from such
distributions or gains. Any tax paid by the Fund as a result of
its ownership of shares in a PFIC will not give rise to any
deduction or credit to the Fund or to any shareholder. A PFIC
18
<PAGE>
means any foreign corporation if, for the taxable year involved,
either (i) it derives at least 75 percent of its gross income
from "passive income" (including, but not limited to, interest,
dividends, royalties, rents and annuities), or (ii) at least 50
percent of the value (or adjusted tax basis, if elected) of the
assets held by the corporation produce "passive income." The
Treasury has issued proposed regulations which would provide a
"mark-to-market" election solely with respect to gain inherent in
PFIC stock held by a regulated investment company, such as the
Fund, which does not elect to treat the PFIC as a "qualified
electing fund." If the proposed regulations are adopted in final
form and the election provided therein were to be made by the
Fund, the Fund would recognize as gain as of the last business
day of its taxable year the excess of the fair market value of
each share of stock in the PFIC over the Fund's adjusted tax
basis in that share. This gain, which would be treated as
derived from securities held by the Fund for at least three
months, generally would not be subject to the deferred tax and
interest charge amounts to which it might otherwise be subject,
as discussed above, in the event of an "excess distribution" or
gain with regard to shares of a PFIC. If the Fund purchases
shares in a PFIC and the Fund does elect to treat the foreign
corporation as a "qualified electing fund" under the Code, the
Fund will be required to include in its income each year a
portion of the ordinary income and net capital gains of the
foreign corporation, even if this income is not distributed to
the Fund. Any such income would be subject to the 90 percent and
calendar year distribution requirements described above.
ZERO COUPON AND OTHER DISCOUNT OBLIGATIONS. Under current
federal tax law, the Fund will include in income as interest each
year, in addition to stated interest received on obligations held
by the Fund, amounts attributable to the Fund from holding
(i) securities (including certain Brady Bonds and all Zero Coupon
Obligations) which were initially issued at a discount from their
face value (collectively, "Discount Obligations") and
(ii) securities (including many Brady Bonds) purchased by the
Fund at a price less than their stated face amount or, in the
case of Discount Obligations, at a price less than their issue
price plus the portion of "original issue discount" previously
accrued thereon, i.e., purchased at a "market discount." Current
federal tax law requires that a holder (such as the Fund) of a
Discount Obligation accrue as income each year a portion of the
discount at which the obligation was purchased by the Fund even
though the Fund does not receive interest payments in cash on the
security during the year which reflect the accrued discount. The
Fund will elect to likewise accrue and include in income each
year a portion of the market discount with respect to a Discount
Obligation or other obligation even though the Fund does not
receive interest payments in cash on the securities which reflect
that accrued discount.
19
<PAGE>
As a result of the applicable rules, in order to make the
distributions necessary for the Fund not to be subject to federal
income or excise taxes, the Fund may be required to pay out as an
income distribution each year an amount significantly greater
than the total amount of cash which the Fund has actually
received as interest during the year. Such distributions will be
made from the cash assets of the Fund, from borrowings or by
liquidation of portfolio securities, if necessary. If a
distribution of cash necessitates the liquidation of portfolio
securities, Alliance will select which securities to sell. The
Fund may realize a gain or loss from such sales. In the event
the Fund realizes net capital gains from such sales, its
shareholders may receive a larger capital gain distribution, if
any, than they would have in the absence of such sales.
TAX STRADDLES. Any forward contract or other position
entered into or held by the Fund in conjunction with any other
position held by the Fund may constitute a "straddle" for federal
income tax purposes. The Treasury has recently issued
regulations which treat interest rate swaps, caps and floors
entered into or purchased by the Fund as positions which may also
constitute part of a straddle for federal income tax purposes.
In general, straddles are subject to certain rules that may
affect the character and timing of the Fund's gains and losses
with respect to straddle positions.
TAXATION OF FOREIGN SHAREHOLDERS
The foregoing discussion relates only to United States
federal income tax law as it affects shareholders who are United
States citizens or residents or United States corporations. The
effects of federal income tax law on shareholders who are non-
resident alien individuals or foreign corporations may be
substantially different. Foreign investors should therefore
consult their own counsel for further information as to the
United States federal income tax consequences of receipt of
income from the Fund.
OTHER TAXES
As noted above, the Fund may be subject to other state, local
and foreign taxes. The Fund intends to conduct its business
activities so that it will qualify to do business in the
Commonwealth of Pennsylvania and, accordingly, expects to be
subject to the Pennsylvania foreign franchise and corporate net
income tax in respect of its business activities in Pennsylvania
for its initial fiscal year and subsequent years. Accordingly,
it is expected that shares of the Fund will be exempt from
Pennsylvania personal property taxes. The Fund anticipates that
it will continue such business activities but reserves the right
20
<PAGE>
to suspend them at any time, resulting in the termination of the
exemption.
CERTAIN OWNERS OF RECORD
Set forth below is certain information as to all persons
known by the Fund to have owned of record 5% or more of the
outstanding shares of Common Stock of the Fund as of the close of
business on June 4, 1996:
Percent of
Outstanding
Name and Address Number of Shares Common Stock
The Depository Trust Company 7,835,657 90.56%
55 Water Street
New York, NY 10041
21
00250230.AJ8
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PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $VALUE
- - ------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS99.6%
COLLATERALIZED BRADY BONDS*73.6%
ARGENTINA11.2%
Republic of Argentina Euro Par Bonds
5.25%, 3/31/23(a)
(cost $11,760,866) $23,450 $12,794,906
BRAZIL17.3%
Republic of Brazil Par Bonds
4.25%, 4/15/24(a)
(cost $18,174,128) 37,500 19,746,094
BULGARIA8.7%
Republic of Bulgaria Discount Bonds FRN
6.25%, 7/28/24
(cost $9,406,086) 20,000 10,012,500
ECUADOR9.4%
Republic of Ecuador Discount Bonds FRN
6.0625%, 2/28/25
(cost $9,568,295) 19,000 10,651,875
MEXICO6.9%
United Mexican States Euro Pa
r Bonds
6.25%, 12/31/19
Series A 9,500 6,270,000
Series B 2,500 1,650,000
Total Mexican Securities
(cost $7,245,237) 7,920,000
NIGERIA6.7%
Central Bank of Nigeria Par Bonds
6.25%, 11/15/20(a)
(cost $7,175,837) 14,500 7,594,375
POLAND4.4%
Republic of Poland Par Bonds
2.75%, 10/27/24(a)
(cost $4,319,745) 10,000 4,990,600
VENEZUELA9.0%
Republic of Venezuela Par Bonds
6.750%, 3/31/20
Series W-A 11,000 6,455,625
Series W-B 6,500 3,814,687
Total Venezuelan Securities
(cost $9,303,812) 10,270,312
Total Collateralized Brady Bonds
(cost $76,954,006) 83,980,662
NON-COLLATERALIZED BRADY BONDS14.9%
BULGARIA1.
8%
FLIRB FRN
2.00%, 7/28/12
(cost $2,426,640) 7,000 2,091,250
PANAMA5.9%
Republic of Panama
IRB
3.50%, 6/30/14(a)(b)(c) 10,000 5,150,000
PDI Bonds FRN
6.50%, 6/30/16(b) 3,000 1,631,250
Total Panama Securities
(cost $5,547,500) 6,781,250
POLAND2.3%
Republic of Poland PDI Bonds FRN
3.25%, 10/27/14
(cost $2,391,817) 3,500 2,678,603
3
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $VALUE
- - -------------------------------------------------------------------------
VENEZUELA4.9%
Republic of Venezuela DCB FRN
6.5
625%, 12/18/07
(cost $5,239,817) $ 8,500 $ 5,567,500
Total Non-Collateralized Brady Bonds
(cost $15,605,774) 17,118,603
LOAN PARTICIPATIONS & ASSIGNMENTS8.9%
ALGERIA1.3%
Algeria Refinancing Trust
Loan Assignment Series B
7.00%, 3/04/97
(cost $2,797,249) 3,000 1,470,000
MOROCCO7.6%
Kingdon of Morocco
Loan Participation FRN
6.59375%, 1/01/09
(cost $5,804,826) 12,000 8,640,000
Total Loan Participations & Assignments
(cost $8,602,075) 10,110,000
Sovereign Debt-Related-2.2%
Morgan Guaranty Trust Co. Spread Note(d)
U.S. Treasury Bond 5.875%, 11/25 vs.
Poland PDI Bonds 3.75%, 10/27/14
10.00%, 7/25/96
(cost $1,600,000) 1,600 2,547,309
Total Sovereign Debt Obligations
(cost $102,761,855) 113,756,574
TREASURY S
ECURITY36.3%
U.S. Treasury Strip Zero coupon, 5/15/99
(cost $41,807,738) 50,000 41,459,850
TOTAL INVESTMENTS135.9%
(cost $144,569,593) 155,216,424
Other assets less liabilities(35.9%) (41,004,223)
NET ASSETS-100% $114,212,201
* Sovereign debt obligations issued as part of debt restructurings that are
collateralized in full as to principal due at maturity by U.S. Treasury zero
coupon obligations which have the same maturity as the Brady Bond.
(A) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at April 30, 1996.
(B) When and if issued.
(C) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold normally to qualified institutional
buyers. At April 30, 1996, this security amounted to $5,150,000, or 4.5% of net
assets.
(D) The redemption val
ue of this security is indexed to the spread between the
referenced treasury yield and the referenced emerging market debt yield.
Glossary of Terms:
FLIRB Front Loaded Interest Reduction Bonds.
FRN Floating Rate Note. Coupon will fluctuate based upon an interest
rate index. Stated interest rate in effect April 30, 1996.
DCB Debt Conversion Bond.
IRB Interest Rate Option Bond.
PDI Past Due Interest.
See notes to financial statements.
4
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996 (UNAUDITED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $144,569,593) $155,216,424
Cash 5,150,974
Interest receivable 2,221,376
Receivable for investment securities sold 10
1,688
Deferred organization expenses and other assets 60,288
Total assets 162,750,750
LIABILITIES
Payable for investment securities purchased 47,259,500
Unrealized depreciation on interest rate swap contract 1,059,600
Advisory fee payable 94,458
Administrative fee payable 14,169
Accrued expenses and other liabilities 110,822
Total liabilities 48,538,549
NET ASSETS $114,212,201
COMPOSITION OF NET ASSETS
Capital stock, at par $ 86,527
Additional paid-in capital 119,218,745
Undistributed net investment income 795,398
Accumulated net realized lo
ss on investments (15,475,700)
Net unrealized appreciation of investments and other assets 9,587,231
$114,212,201
NET ASSET VALUE PER SHARE
(based on 8,652,707 shares outstanding) $13.20
See notes to financial statements.
5
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 6,886,388
EXPENSES
Advisory fee $559,805
Administrative fee 83,971
Transfer agency 51,786
Custodian 47,864
Audit and legal 46,583
Printing
11,505
Directors' fees 10,048
Amortization of organization expenses 8,918
Registration 7,984
Miscellaneous 13,622
Total expenses 842,086
Net investment income 6,044,302
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 5,056,933
Net change in unrealized appreciation of investments
and other assets 6,367,841
Net gain on investments 11,424,774
NET INCREASE IN NET ASSETS FROM OPERATIONS $17,469,076
See notes to financial statements.
6
STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE WORLD DOLL
AR GOVERNMENT FUND, INC.
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
APRIL 30,1996 OCTOBER 31,
(UNAUDITED) 1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 6,044,302 $ 12,920,751
Net realized gain (loss) on investment
transactions 5,056,933 (10,415,111)
Net change in unrealized appreciation of
investments and other assets 6,367,841 16,574,731
Net increase in net assets from operations 17,469,076 19,080,371
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (6,013,633) (12,156,022)
COMMON STOCK TRANSACTIONS
Reinvestme
nt of dividends resulting in
issuance of Common Stock -0- 2,304,564
Total increase 11,455,443 9,228,913
NET ASSETS
Beginning of year 102,756,758 93,527,845
End of period (including undistributed net
investment income of $795,398 and $764,729
at April 30, 1996 and October 31, 1995,
respectively) $114,212,201 $102,756,758
See notes to financial statements.
7
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 (UNAUDITED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance World Dollar Government Fund, Inc. (the 'Fund') was incorporated under
the laws of the State of Maryland on August 20, 1992 and is registered under
the Investment Company Act of 1940, as a non-diversified, closed-end management
inves
tment company. The following is a summary of significant accounting
policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange are valued at the
last sale price on such exchange on the day of valuation or, if there was no
sale on such day, the last bid price quoted on such day. Listed securities not
traded and securities traded in the over-the-counter market, including listed
debt securities whose primary market is believed to be over-the-counter, are
valued at the mean between the most recently quoted bid and asked price
provided by the principal market makers. Publicly traded Sovereign Debt
Obligations are typically traded internationally on the over-the-counter
market. Because of the nature of the markets for Sovereign Debt Obligations,
quotations from several sources will be obtained so that the Fund's portfolio
investments will not generally be priced by a single source. Readily marketable
Sovereign Debt Obligations may be valued on the
basis of prices provided by a
pricing service when such prices are believed by the Adviser to reflect the
fair value of such securities.
Securities for which market quotations are not readily available and restricted
securities which are subject to limitations as to their resale are valued in
good faith, at fair value, using methods determined by the Board of Directors.
Securities which mature in 60 days or less are valued at amortized cost, which
approximates fair value, unless this method does not represent fair value.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $90,000 have been deferred and are being
amortized on a straight-line basis through November, 1997.
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
req
uired.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are accounted for on
the date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund accretes discounts as
adjustments to interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
NOTE B: ADVISORY AND ADMINISTRATIVE FEES
Under the terms of an Investment Advisory Agreement, the Fund pays Alliance
Capital Management L.P. (the 'Adviser') a monthly fee equal to the annualized
rate of 1% of the Fund's average weekly net assets.
Under the terms of an Administrative Agreement, the Fund pays Alliance Capital
Management L.P., (the 'Administrator') a monthly fee equal to the annualized
rate of .15 of 1% of the Fund's average weekly net assets.
The Administrator provides administrative functions to the F
und as well as
other clerical services. The Administrator also prepares financial and
regulatory reports for the Fund.
8
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $205,968,730 and $197,757,814, respectively, for the six months
ended April 30, 1996.
At April 30, 1996, the cost of investments for federal income tax purposes was
$146,219,635. Accordingly, gross unrealized appreciation of investments was
$12,574,069 and gross unrealized depreciation of investments was $3,577,280
resulting in net unrealized appreciation of $8,996,789 (excluding swap
contracts). At October 31, 1995, the Fund had a capital loss carryforward of
$18,376,086 which expires in the year 2003.
NOTE D: INTEREST RATE SWAP AGREEMENT
The Fund enters into swaps on sovereign debt obligations
to protect itself from
interest rate fluctuations on the underlying floating rate 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 o
f 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 unrealized
appreciation or depreciation on swap contracts.
At April 30, 1996, the Fund had an outstanding interest rate swap contract with
the following terms:
<TABLE>
<CAPTION
RATE TYPE
---------------------------------
SWAP NOTIONAL TERMINATION PAYMENTS MADE PAYMENTS RECEIVED UNREALIZED
COUNTERPARTY AMOUNT DATE BY THE FUND BY THE FUND DEPRECIATION
- - ------------ -------------- ----------- ------------- ----------------- ------------
<S>
<C> <C> <C> <C> <C>
Morgan US$ 12,000,000 1/01/09 LIBOR+ 6.8526% $1,059,600
Guaranty
</TABLE>
NOTE E: CAPITAL STOCK
There are 100,000,000 shares of $0.01 par value Common Stock authorized.
Of the 8,652,707 shares outstanding at April 30, 1996, the Adviser owned 7,200
shares. During the six months ended April 30, 1996 and the year ended October
31, 1995, the Fund issued -0- and 212,897 shares, respectively, in connection
with the Fund's dividend reinvestment plan.
+ LIBOR (London Interbank Offered Rate).
9
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
NOTE F: CONCENTRATION OF RISK
Investing in securities of foreign governments involves special risks which
include revaluation of currencies and future adverse political and economic
developments. Moreover, s
ecurities of many foreign governments and their
markets may be less liquid and their prices more volatile than those of the
United States government. The Fund invests in 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.
10
FINANCIAL HIGHLIGHTS ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED OCTOBER 31, NOV. 2,1992*
APRIL
30,1996 ------------------------ TO
(UNAUDITED) 1995 1994 OCT. 31,1993
------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $11.88 $11.08 $22.09 $13.82(a)
INCOME FROM INVESTMENT OPERATIONS
Net investment income .70 1.51(b) 1.32 1.54
Net realized and unrealized gain (loss)
on investments 1.32 .71 (5.66) 8.19
Net increase (decrease) in net asset
value from operations 2.02 2.22 (4.34) 9.73
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.70) (1.42) (1.39) (1.46)
Distributions from net realized gains -0- -0-
(4.96) -0-
Distributions in excess of net realized
gains -0- -0- (.09) -0-
Tax return of capital distribution -0- -0- (.23) -0-
Total distributions (.70) (1.42) (6.67) (1.46)
Net asset value, end of period $13.20 $11.88 $11.08 $22.09
Market value, end of period $12.875 $11.75 $13.00 $20.375
TOTAL RETURN
Total investment return based on: (c)
Market value 15.64% 2.78% (7.52)% 59.14%
Net asset value 17.26% 21.92% (27.29)% 72.53%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $114,212 $102,757 $93,528 $164,622
Ratio of expenses to average net assets 1.52%(d) 1.55% 1.43% 1.44%(d)
Ratio of net investm
ent income to average
net assets 10.88%(d) 14.12% 9.08% 9.79%(d)
Portfolio turnover rate 134% 441% 395% 417%
</TABLE>
* Commencement of operations.
(A) Net of offering costs of $.13.
(B) Based on average shares outstanding.
(C) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day of
the period reported. Dividends and distributions, if any, are assumed, for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's Dividend Reinvestment Plan. Generally, total investment return based on
net asset value will be higher than total investment return based on market
value in periods where there is an increase in the discount or a decrease in
the premium of the market value to the net asset value from the beginning to
the end of such periods. Conversely, total investment return
based on net asset
value will be lower than total investment return based on market value in
periods where there is a decrease in the discount or an increase in the premium
of the market value to the net asset value from the beginning to the end of
such periods. Total investment return calculated for a period of less than one
year is not annualized.
(D) Annualized.
11
<PAGE>
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S.$VALUE
- ----------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-95.5%
COLLATERALIZED BRADY BONDS*-71.2%
ARGENTINA-8.1%
Republic of Argentina Euro Par Bonds
5.00%, 3/31/23(a)
(cost $8,053,702) $17,450 $8,348,734
BRAZIL-18.7%
Republic of Brazil Par Bonds Series ZL
4.25%, 4/15/24(a)
(cost $18,240,086) 39,500 19,231,563
BULGARIA-9.9%
Republic of Bulgaria Discount Bonds FRN
6.75%, 7/28/24(b)
(cost $9,396,541) 20,000 10,125,000
ECUADOR-9.2%
Republic of Ecuador Discount Bonds FRN
6.8125%, 2/28/25(b)
(cost $9,556,497) 19,000 9,458,390
MEXICO-5.4%
United Mexican States
Euro Par Bonds Series A
6.25%, 12/31/19
(cost $5,593,875) 9,500 5,593,125
NIGERIA-5.7%
CCentral Bank of Nigeria Par Bonds
6.25%, 11/15/20(a)
(cost $5,385,541) 12,500 5,859,375
PHILLIPINES-4.5%
Central Bank of the Phillipines Par Bonds
5.75%, 12/01/17(a)
(cost $4,645,968) 6,250 4,587,891
POLAND-4.3%
Republic of Poland Par Bonds
2.75%, 10/27/24(a)
(cost $4,292,199) $10,000 $4,425,000
VENEZUELA-5.4%
Republic of Venezuela Par Bonds
6.75%, 3/31/20
Series W-A 4,250 2,196,719
Series W-B 6,500 3,359,687
Total Venezuelan Securities
(cost $5,484,291) 5,556,406
Total Collateralized Brady Bonds
(cost $70,648,700) 73,185,484
NON-COLLATERALIZED BRADY BONDS-6.3%
ECUADOR-0.1%
Republic of Ecuador PDI Bonds FRN
6.8125%, 2/27/15(b)(c)(d)
(cost $59,448) 228 75,171
POLAND-6.2%
Republic of Poland PDI Bonds
3.75%, 10/27/14(a)
(cost $5,977,536) 10,000 6,437,500
Total Non-Collateralized Brady Bonds
(cost $6,036,984) 6,512,671
LOAN PARTICIPATIONS & ASSIGNMENTS-14.4%
ALGERIA-1.1%
Algeria Refinancing Trust Loan Assignment
Series B 7.1875%, 3/04/97
(cost $2,688,947) 3,000 1,110,000
3
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S.$VALUE
- ----------------------------------------------------------------------
MOROCCO-7.0%
Kingdom of Morocco Loan Participation FRN
6.6875%, 1/01/09(b)
(cost $5,740,207) $12,000 $7,155,000
RUSSIA-6.3%
Vneshekonombank Loan Assignment(e)
(cost $6,361,975) 20,000 6,487,500
Total Loan Participations & Assignments
(cost $14,791,129) 14,752,500
OTHER SOVEREIGN DEBT-RELATED-3.6%
Bayerische Landesbank Spread Note
U.S. Treasury Bond 7.825%, 2/15/25 vs.
Brazil Par Bonds 4.00%, 4/15/24
9.125%, 3/28/96(f) 2,000 1,729,800
Morgan Guaranty Trust Co.
Spread Note
U.S. Treasury Bond 6.25%, 8/15/23
vs. Argentina Par Bonds 5.00%,
3/31/23 9.00%, 1/19/96(f) 671 407,132
Indexed Notes(g)
Indexed to Ivory Coast Restructured
Loan Assignment 9.00%, 12/19/95 $ 1,393 $1,391,473
Indexed to Ivory Coast Unrestructured
Loan Assignment 9.00%, 12/19/95 180 172,859
Total Other Sovereign Debt-Related
(cost $4,243,453) 3,701,264
Total Sovereign Debt Obligations
(cost $95,720,266) 98,151,919
TREASURY SECURITY-36.5%
U.S. Treasury Bond Zero coupon, 2/15/03
(cost $36,577,913) 57,500 37,452,050
TIME DEPOSIT-2.8%
Bank of New York
5.6875%, 11/01/95
(cost $2,863,000) 2,863 2,863,000
TOTAL INVESTMENTS-134.8%
(cost $135,161,179) 138,466,969
Other assets less liabilities-(34.8%) (35,710,211)
NET ASSETS-100% $102,756,758
* Sovereign debt obligations issued as part of debt restructurings that are
collateralized in full as to principal due at maturity by U.S. Treasury zero
coupon obligations which have the same maturity as the Brady Bond.
(a) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at October 31, 1995.
(b) Coupon will fluctuate based upon an interest rate index. Stated interest
rate in effect at October 31, 1995.
(c) Coupon consists of 3.00% cash payment and 3.8125% paid-in-kind.
(d) Restricted security.
(e) Non-income producing security.
(f) The redemption value of these securities is indexed to the spread between
the referenced treasury yield and the referenced emerging market debt yield.
(g) The redemption value of these securities is linked to the change in the
bid price of the referenced emerging market debt.
Glossary of Terms:
FRN - Floating rate note.
PDI - Past due interest.
See notes to financial statements.
4
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $135,161,179) $138,466,969
Interest receivable 2,204,044
Deferred organization expenses and other assets 40,546
Total assets 140,711,559
LIABILITIES
Payable for investment securities purchased 37,661,258
Unrealized depreciation on interest rate swap contract 86,400
Advisory fee payable 86,213
Administrative fee payable 12,932
Accrued expenses and other liabilities 107,998
Total liabilities 37,954,801
NET ASSETS (equivalent to $11.88 per share, based on 8,652,707
shares outstanding) $102,756,758
COMPOSITION OF NET ASSETS
Capital stock, at par $ 86,527
Additional paid-in capital 119,218,745
Undistributed net investment income 764,729
Accumulated net realized loss on investments (20,532,633)
Net unrealized appreciation of investments and other assets 3,219,390
$102,756,758
NET ASSET VALUE PER SHARE $11.88
See notes to financial statements.
5
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Interest $14,335,477
EXPENSES
Advisory fee $915,252
Administrative fee 137,289
Audit and legal 91,841
Custodian 78,689
Transfer agency 73,539
Printing 32,036
Directors' fees 25,718
Registration 17,974
Amortization of organization expenses 17,885
Miscellaneous 24,503
Total expenses 1,414,726
Net investment income 12,920,751
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions (10,415,111)
Net change in unrealized depreciation of
investments and other assets 16,574,731
Net gain on investments 6,159,620
NET INCREASE IN NET ASSETS FROM OPERATIONS $19,080,371
See notes to financial statements.
6
STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1995 1994
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 12,920,751 $10,733,241
Net realized loss on investment transactions (10,415,111) (9,633,653)
Net change in unrealized appreciation
(depreciation) of investments and other assets 16,574,731 (37,262,374)
Net increase (decrease) in net assets from
operations 19,080,371 (36,162,786)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Dividends from net investment income (12,156,022) (11,284,327)
Distributions from net realized gains -0- (36,979,502)
Distributions in excess of net realized gains -0- (752,869)
Tax return of capital distribution -0- (1,930,057)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in issuance
of Common Stock 2,304,564 16,015,296
Total increase (decrease) 9,228,913 (71,094,245)
NET ASSETS
Beginning of year 93,527,845 164,622,090
End of year(including undistributed net investment
income of $764,729 at October 31, 1995) $102,756,758 $93,527,845
See notes to financial statements.
7
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995 ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance World Dollar Government Fund, Inc. (the 'Fund') was incorporated under
the laws of the State of Maryland on August 20, 1992 and is registered under
the Investment Company Act of 1940, as a non-diversified, closed-end management
investment company. The following is a summary of significant accounting
policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange are valued at the
last sale price on such exchange on the day of valuation or, if there was no
sale on such day, the last bid price quoted on such day. Listed securities not
traded and securities traded in the over-the-counter market, including listed
debt securities whose primary market is believed to be over-the-counter, are
valued at the mean between the most recently quoted bid and asked price
provided by the principal market makers. Publicly traded Sovereign Debt
Obligations are typically traded internationally on the over-the-counter
market. Because of the nature of the markets for Sovereign Debt Obligations,
quotations from several sources will be obtained so that the Fund's portfolio
investments will not generally be priced by a single source. Readily marketable
Sovereign Debt Obligations may be valued on the basis of prices provided by a
pricing service when such prices are believed by the Adviser to reflect the
fair value of such securities.
Securities for which market quotations are not readily available and restricted
securities which are subject to limitations as to their resale are valued in
good faith, at fair value, using methods determined by the Board of Directors.
Securities which mature in 60 days or less are valued at amortized cost, which
approximates fair value, unless this method does not represent fair value.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $90,000 have been deferred and are being
amortized on a straight-line basis through November, 1997.
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are accounted for on
the date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund accretes discounts as
adjustments to interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
NOTE B: ADVISORY AND ADMINISTRATIVE FEES
Under the terms of an Investment Advisory Agreement, the Fund pays Alliance
Capital Management L.P. (the 'Adviser') a monthly fee equal to the annualized
rate of 1% of the Fund's average weekly net assets.
Under the terms of an Admistrative Agreement, the Fund pays Alliance Capital
Management L.P., (the 'Administrator') a monthly fee equal to the annualized
rate of .15 of 1% of the Fund's average weekly net assets.
The Administrator provides administrative functions to the Fund as well as
other clerical services. The Administrator also prepares financial and
regulatory reports for the Fund.
8
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $537,138,805 and $541,686,835, respectively, for the year ended
October 31, 1995.
At October 31, 1995, the cost of investments for federal income tax purposes
was $136,833,857. Accordingly, gross unrealized appreciation of investments was
$4,378,183 and gross unrealized depreciation of investments was $2,745,071
resulting in net unrealized appreciation of $1,633,112 (excluding swap
contracts). At October 31, 1995, the Fund had a capital loss carryforward of
$18,376,086 which expires in the year 2003.
NOTE D: INTEREST RATE SWAP AGREEMENT
The Fund enters into interest rate swaps on sovereign debt obligations to
protect itself from interest rate fluctuations on the underlying floating rate
debt instruments. 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 unrealized
appreciation or depreciation on interest rate swap contracts.
At October 31, 1995, the Fund had an outstanding interest rate swap contract
with the following terms:
RATE TYPE
---------------------
PAYMENTS PAYMENTS
SWAP NOTIONAL TERMINATION MADE BY RECEIVED BY UNREALIZED
COUNTERPARTY AMOUNT DATE THE FUND THE FUND DEPRECIATION
- ------------ ------------- ----------- -------- ----------- ------------
Morgan US$12,000,000 1/01/09 Floating+ 6.8526% $86,400
Guaranty
NOTE E: CAPITAL STOCK
There are 100,000,000 shares of $0.01 par value Common Stock authorized.
Of the 8,652,707 shares outstanding at October 31, 1995, the Adviser owned
7,200 shares. During the years ended October 31, 1995 and 1994, the Fund issued
212,897 and 985,961 shares, respectively, in connection with the Fund's
dividend reinvestment plan.
+ Floating is composed of LIBOR (London Interbank Offered Rate) plus a fixed
amount of .8125%.
9
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
NOTE F: CONCENTRATION OF RISK
Investing in securities of foreign governments involves special risks which
include revaluation of currencies and future adverse political and economic
developments. Moreover, securities of many foreign governments and their
markets may be less liquid and their prices more volatile than those of the
United States government. The Fund invests in 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.
NOTE G: QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NET INCREASE
NET REALIZED (DECREASE)
AND UNREALIZED IN NET ASSETS
NET INVESTMENT GAIN (LOSS) ON RESULTING FROM MARKET PRICE
INCOME INVESTMENTS OPERATIONS ON NYSE
---------------- ------------------- ------------------- -----------------
TOTAL PER TOTAL PER TOTAL PER
QUARTER ENDED (000) SHARE (000) SHARE (000) SHARE HIGH LOW
- ---------------- ------- ----- --------- -------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
October 31, 1995 $ 3,075 $ .36 $ 5,381 $ .63 $ 8,456 $ .99 $11.875 $10.750
July 31, 1995 3,204 .37 7,517 .87 10,721 1.24 $11.875 $11.000
April 30, 1995 3,766 .44 2,102 .24 5,868 .68 $11.375 $ 9.000
January 31, 1995 2,876 .34 (8,841) (1.03) (5,965) (.69) $13.000 $ 9.875
$12,921 $1.51 $ 6,159 $ .71 $ 19,080 $ 2.22
October 31, 1994 $ 1,660 $ .20 $ 242 $ .04 $ 1,902 $ .24 $13.875 $13.000
July 31, 1994 3,600 .43 (4,126) (.49) (526) (.06) $15.250 $13.000
April 30, 1994 2,583 .31 (47,700) (5.78) (45,117) (5.47) $18.250 $14.000
January 31, 1994 2,890 .38 4,688 .57 7,578 .95 $22.500 $17.500
$10,733 $1.32 $(46,896) $(5.66) $(36,163) $(4.34)
</TABLE>
10
FINANCIAL HIGHLIGHTS ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED NOV.2,1992*
OCTOBER 31, OCTOBER 31, TO
1995 1994 OCT.31,1993
----------- ---------- ------------
Net asset value, beginning of period $11.08 $22.09 $13.82(a)
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.51(b) 1.32 1.54
Net realized and unrealized gain (loss)
on investments .71 (5.66) 8.19
Net increase (decrease) in net asset
value from operations 2.22 (4.34) 9.73
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (1.42) (1.39) (1.46)
Distributions from net realized gains -0- (4.96) -0-
Distributions in excess of net realized gains -0- (.09) -0-
Tax return of capital distribution -0- (.23) -0-
Total distributions (1.42) (6.67) (1.46)
Net asset value, end of period $11.88 $11.08 $22.09
Market value, end of period $11.75 $13.00 $20.375
TOTAL RETURN
Total investment return based on:
Market value 2.78%(c) (7.52)% 59.14%
Net asset value 21.92% (27.29)% 72.53%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $102,757 $93,528 $164,622
Ratio of expenses to average net assets 1.55% 1.43% 1.44%(d)
Ratio of net investment income to
average net assets 14.12% 9.08% 9.79%(d)
Portfolio turnover rate 441% 395% 417%
* Commencement of operations.
(a) Net of offering costs of $.13.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day of
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 total investment return based on market
value in periods where there is an increase in the discount or a decrease in
the premium of the market value to the net asset value from the beginning to
the end of such periods. Conversely, total investment return based on net asset
value will be lower than total investment return based on market value in
periods where there is a decrease in the discount or an increase in the premium
of the market value to the net asset value from the beginning to the end of
such periods. Total investment return calculated for a period of less than one
year is not annualized.
(d) Annualized.
11
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance World Dollar Government Fund, Inc., including the portfolio of
investments, as of October 31, 1995, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance World Dollar Government Fund, Inc. at October 31, 1995, the results of
its operations 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 the
indicated periods, in conformity with generally accepted accounting principles.
Ernst & Young LLP
New York, New York
December 15, 1995
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS
Included in Part A:
Financial Highlights for the six months ended April 30,
1996, for the year ended October 31, 1995, for the
year ended October 31, 1994 and for the period from
November 2, 1992 (commencement of operations) to
October 31, 1993.
Included in Part B:
Portfolio of Investments, April 30, 1996.
Statement of Assets and Liabilities, April 30, 1996.
Statement of Operations for the six months ended
April 30, 1996.
Statement of Changes in Net Assets for the six months
ended April 30, 1996.
Notes to Financial Statements, April 30, 1996.
Portfolio of Investments, October 31, 1995.
Statement of Assets and Liabilities, October 31, 1995.
Statement of Operations for the year ended October 31,
1995.
Statement of Changes in Net Assets for the year ended
October 31, 1995.
Notes to Financial Statements, October 31, 1995.
Report of Independent Auditors dated December 15, 1995.
2. EXHIBITS
A Articles of Incorporation(1)
B By-Laws(1)
C Not Applicable
D(1) Specimen certificate for Common Stock, par value $.01
per share(2)
D(2) Form of Subscription Certificate
D(3) Form of Notice of Guaranteed Delivery
D(4) Form of DTC Participant Over-Subscription Exercise
Form/Nominee Holder Over-Subscription Exercise Form
D(5) Form of Beneficial Owner Listing Certification
D(6) Form of Subscription Rights Agency Agreement
D(7) Form of Nominee Holder Over-Subscription Certificate
E Dividend Reinvestment Plan
F Inapplicable
G Advisory Agreement(4)
H(1) Form of Dealer Manager Agreement
H(2) Form of Soliciting Dealer Agreement
I Inapplicable
J Custody Agreement
C-1
<PAGE>
K(1) Transfer Agency and Registrar Services Agreement
K(2) Administration Agreement(4)
K(3) Shareholder Inquiry Agency Agreement(4)
L(1) Opinion and Consent of Seward & Kissel
L(2) Opinion and Consent of Venable, Baetjer and Howard, LLP
M Inapplicable
N Consent of Independent Auditors
O Inapplicable
P Investment Representation Letter(3)
Q Inapplicable
R Financial Data Schedule
Other Exhibits: Powers of Attorney of Messrs. Carifa,
Dievler, Dobkin, Foulk, Hester, Michel and White and
Ms. Block(4)
1. Incorporated by reference from Registrant's Registration
Statement on Form N-2 (File Nos. 33-51048 and 811-07108) as
filed with the Securities and Exchange Commission on
August 20, 1992.
2. Incorporated by reference from Pre-Effective Amendment No. 1
to Registrant's Registration Statement on Form N-2 (File
Nos. 33-51048 and 811-07108) as filed with the Securities
and Exchange Commission on September 28, 1992.
3. Incorporated by reference from Pre-Effective Amendment No. 2
to Registrant's Registration Statement on form N-2 (File
Nos. 33-51048 and 811-07108) as filed with the Securities
and Exchange Commission on October 29, 1992.
4. Incorporated by reference from Registrant's Registration
Statement on Form N-2 (File Nos. 333-04015 and 811-07108) as
filed with the Securities and Exchange Commission on May 17,
1996.
ITEM 25. MARKETING ARRANGEMENTS
See Forms of Dealer Manager Agreement and Soliciting Dealer
Agreement filed herewith as Exhibits H(1) and H(2).
C-2
<PAGE>
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration fees ..................................... $ 12,000
National Association of Securities Dealers, Inc. fees . $ 4,000
Printing .............................................. $160,000
Fees and expenses of qualifications under state
securities laws (including fees of counsel) ......... $ 15,000
Legal fees and expenses ............................... $160,000
Auditing fees and expenses ............................ $ 15,000
New York Stock Exchange listing fees .................. $ 9,000
Subscription Agent fees and expenses .................. $ 40,000
Information Agent fees and expenses ................... $ 30,000
Reimbursement of Dealer Manager expenses .............. $100,000
Miscellaneous.......................................... $ 5,000
_______
$550,000
========
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
Not applicable
ITEM 28. NUMBER OF HOLDERS OF SECURITIES (AS OF June 14, 1996)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
- -------------- ------------------------
Common Stock ($.01 par value per share) 931
ITEM 29. INDEMNIFICATION
Item 3 of Part II of Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-2 (File Nos. 33-
51048 and 811-07108) as filed with the Securities and Exchange
Commission on October 29, 1992, except with regard to the
disclosure relating to Section 5 of the Fund's previous
Administration Agreement and Section 6 of the Underwriting
Agreement referred to therein, is incorporated by reference
herein. Reference is made to Section 9 of the form of Dealer
Manager Agreement filed as Exhibit H(1) hereto and Section 6 of
the Administration Agreement filed as Exhibit K(2) hereto.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF ALLIANCE
The description of Alliance Capital Management L.P.
under the caption "Management of the Fund--Adviser and
Administrator" in the Prospectus and Statement of Additional
Information is incorporated by reference herein.
C-3
<PAGE>
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the general
partner of Alliance, set forth in Alliance Capital Management
L.P.'s Form ADV filed with the Securities and Exchange Commission
on April 21, 1988 (File No. 801-32361) and as amended through the
date hereof is incorporated herein by reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940
and the Rules thereunder are maintained as follows: journals,
ledgers, securities records and other original records are
maintained principally at the offices of Alliance Capital
Management L.P., 500 Plaza Drive, Secaucus, New Jersey 07094, and
at the offices of First Data Investor Services Group, Inc., the
Registrant's Dividend-Paying Agent, Transfer Agent and Registrar,
53 State Street, Boston, Massachusetts 02109. All other records
so required to be maintained are maintained at the offices of
Alliance Capital Management L.P., 1345 Avenue of the Americas,
New York, New York 10105. Additional records are maintained at
the offices of The Bank of New York, the Registrant's Custodian,
48 Wall Street, New York, New York 10286.
ITEM 32. MANAGEMENT SERVICES
Not applicable
ITEM 33. UNDERTAKINGS
1. Registrant undertakes to suspend offering of the
shares covered hereby until it amends its Prospectus contained
herein if (1) subsequent to the effective date of this
Registration Statement, its net asset value per share declines
more than 10 percent from its net asset value per share as of the
effective date of this Registration Statement or (2) its net
asset value increases to an amount greater than its net proceeds
as stated in the Prospectus contained herein.
2. Not applicable
3. Not applicable
4. (a) Registrant undertakes to file, during any
period in which offers or sales are being made, a post-effective
amendment to this Registration Statement:
(1) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
C-4
<PAGE>
(2) to reflect in the prospectus any facts or
events after the effective date of this Registration Statement
(or the most recent post-effective amendment hereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement; and
(3) to include any material information with
respect to the plan of distribution not previously disclosed in
this Registration Statement or any material change to such
information in this Registration Statement.
(b) Registrant undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each
subsequent post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of those securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) Registrant undertakes to remove from
registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the
termination of the offering.
5. Not applicable
6. Registrant undertakes to send the Statement of
Additional Information by first class mail or other means
designed to ensure equally prompt delivery, within two business
days of receipt of a written or oral request for the Statement of
Additional Information.
7. (1) For purposes of determining any liability under
the Securities Act of 1933, the information omitted from the form
of prospectus filed as part of a registration statement in
reliance upon Rule 430A and contained in the form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment
that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933, as amended, and the Investment Company Act of 1940,
as amended, the registrant has duly caused this amendment to
its registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New
York and the State of New York, on the 19th day of June,
1996.
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
By: /s/John D. Carifa
________________________
John D. Carifa, Chairman
Pursuant to the requirements of the Securities Act of
1933, as amended, this amendment to its registration statement
has been signed below by the following persons in the capacities
and on the date indicated.
SIGNATURE TITLE DATE
(1) Principal Executive:
/s/ John D. Carifa Chairman June 19, 1996
________________________
John D. Carifa
(2) Principal Financial and
Accounting Officer:
/s/ Mark D. Gersten Treasurer and June 19, 1996
________________________ Chief Financial
Mark D. Gersten Officer
C-6
<PAGE>
(3) All of the Directors:
John D. Carifa*
Ruth Block*
David H. Dievler*
John H. Dobkin*
William H. Foulk, Jr.*
Dr. James M. Hester*
Clifford L. Michel*
Robert C. White*
*By: /s/Edmund B. Bergan, Jr. June 19, 1996
_________________________
Edmund B. Bergan, Jr.
Attorney-in-Fact
C-7
<PAGE>
EXHIBIT INDEX
EXHIBIT
_______
D(2) Form of Subscription Certificate
D(3) Form of Notice of Guaranteed Delivery
D(4) Form of DTC Participant Over-Subscription Exercise
Form/Nominee Holder Over-Subscription Exercise Form
D(5) Form of Beneficial Owner Listing Certification
D(6) Form of Subscription Rights Agency Agreement
D(7) Form of Nominee Holder Over-Subscription Certificate
E Dividend Reinvestment Plan
H(1) Form of Dealer Manager Agreement
H(2) Form of Soliciting Dealer Agreement
J Custody Agreement
K(1) Transfer Agency and Registrar Services Agreement
L(1) Opinion and Consent of Seward & Kissel
L(2) Opinion and Consent of Venable, Baetjer and Howard, LLP
N Consent of Independent Auditors
C-8
00250230.AJ8
<PAGE>
<PAGE>
EXHIBIT 99.D2
1 OF 2
THE OFFER EXPIRES AT 5:00 P.M., EASTERN TIME, ON JULY 19, 1996*
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
SUBSCRIPTION RIGHTS FOR COMMON STOCK
SUBSCRIPTION CERTIFICATE NO.
NUMBER OF RIGHTS:
THESE SUBSCRIPTION RIGHTS ARE NON-TRANSFERABLE
Dear Shareholder:
You are entitled to exercise the Rights issued to you as of June 21, 1996,
the Record Date for the Fund's rights offering, to subscribe for the number of
Shares of Common Stock of Alliance World Dollar Government Fund, Inc. shown on
this Subscription Certificate pursuant to the Primary Subscription upon the
terms and conditions specified in the Fund's Prospectus dated June , 1996
(the "Prospectus"). The terms and conditions of the rights offering (the
"Offer") set forth in the Prospectus are incorporated herein by reference.
Capitalized terms not defined herein have the meanings attributed to them in
the Prospectus. As holder of these rights you are entitled to purchase one
Share of the Fund for each three Rights you exercise. In accordance with the
Over-Subscription Privilege, as a Record Date shareholder, you are also
entitled to subscribe for additional Shares if Shares remaining after exercise
of Rights pursuant to the Primary Subscription are available and you have
fully exercised all Rights issued to you. If sufficient Shares remain after
completion of the Primary Subscription, all over-subscriptions will be honored
in full. If sufficient Shares are not available after completion of the
Primary Subscription to honor all over-subscriptions, the Fund may, at the
discretion of the Board of Directors, issue shares of Common Stock up to an
additional 721,058 Shares in order to cover such over-subscription requests.
Regardless of whether the fund issues additional Shares, to the extent Shares
are not available to honor all over-subscription requests, the available
Shares will be allocated among those who over-subscribe based on the number of
Rights originally issued to them by the Fund, so that the number of Shares
issued to shareholders who subscribe pursuant to the Over-Subscription
Privilege will generally be in proportion to the number of Shares owned by
them on the Record Date. The Fund will not offer or sell any Shares which are
not subscribed for pursuant to the Primary Subscription or the Over-
Subscription Privilege.
SUBSCRIPTION PRICE
The Subscription Price will be 95% of the lower of (i) the average of the
last reported sales price on the NYSE on the expiration date of the Offer (the
"Pricing Date") and the four preceding business days, and (ii) the net asset
value per share as of the close of business on the Pricing Date.
METHOD OF EXERCISE OF RIGHTS
IN ORDER TO EXERCISE YOUR RIGHTS, YOU MUST EITHER (I) COMPLETE AND SIGN THIS
SUBSCRIPTION CERTIFICATE ON THE BACK AND RETURN IT TOGETHER WITH PAYMENT AT
THE ESTIMATED SUBSCRIPTION PRICE FOR THE SHARES, OR (II) PRESENT A PROPERLY
COMPLETED NOTICE OF GUARANTEED DELIVERY, IN EITHER CASE TO THE SUBSCRIPTION
AGENT, FIRST DATA INVESTOR SERVICES GROUP, INC. BEFORE 5:00 P.M., EASTERN
TIME, ON JULY 19, 1996, UNLESS EXTENDED BY THE FUND, (THE "EXPIRATION DATE").
BY FIRST CLASS BY EXPRESS MAIL OR OVERNIGHT BY HAND:
MAIL: COURIER: The Subscription
The Subscription Agent for Alliance Agent for Alliance
The Subscription Agent for Alliance
World Dollar Government Fund, Inc.
World Dollar Government Fund, Inc.
World Dollar
Corporate Reorganization Corporate Reorganization Government Fund,
P.O. Box 9061 Two Heritage Drive Inc. c/o BancBoston
Boston, Massachusetts 02205-8686 Trust Company
North Quincy, Massachusetts 02171
of New York
55 Broadway--3rd
Floor New York, New
York 10006
DELIVERY TO AN ADDRESS OTHER THAN ONE OF THE ADDRESSES LISTED ABOVE WILL NOT
CONSTITUTE VALID DELIVERY.
FULL PAYMENT OF THE ESTIMATED SUBSCRIPTION PRICE PER SHARE FOR ALL SHARES
SUBSCRIBED FOR PURSUANT TO BOTH THE PRIMARY SUBSCRIPTION AND OVER-SUBSCRIPTION
PRIVILEGE MUST ACCOMPANY THIS SUBSCRIPTION CERTIFICATE AND MUST BE MADE
PAYABLE IN UNITED STATES DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A BANK
LOCATED IN THE UNITED STATES PAYABLE TO ALLIANCE WORLD DOLLAR GOVERNMENT FUND,
INC. ALTERNATIVELY, IF A NOTICE OF GUARANTEED DELIVERY IS USED, A PROPERLY
COMPLETED AND EXECUTED SUBSCRIPTION CERTIFICATE, AND FULL PAYMENT, AS
DESCRIBED IN SUCH NOTICE, MUST BE RECEIVED BY THE SUBSCRIPTION AGENT NO LATER
THAN THE CLOSE OF BUSINESS ON THE THIRD BUSINESS DAY AFTER THE EXPIRATION
DATE. FOR ADDITIONAL INFORMATION, SEE THE PROSPECTUS.
- -------------------
Any questions regarding this Subscription Certificate and the Offer may be
directed to the Information Agent, Shareholder Communications Corporation,
toll-free at (800) 733-8481, extension 347.
<PAGE>
EXHIBIT 99.D2
2 OF 2
Stock certificates for the shares acquired pursuant to the Primary
Subscription will be mailed promptly after the Confirmation Date. Certificates
representing shares acquired pursuant to the Over-Subscription Privilege will
be mailed as soon as practicable after full payment has been received and
cleared and all allocations have been effected. Any excess payment to be
refunded by the Fund to a shareholder will be mailed by the Subscription Agent
to such shareholder as promptly as possible.
The issuance and sale of the shares of Common Stock offered hereby is subject
to the withdrawal or cancellation of the Offer by the Fund at any time prior
to 5:00 p.m. Eastern time on the Confirmation Date. In the event the Shares
are not issued and sold by the Fund, amounts paid for Shares will be returned
to subscribing shareholders. No interest will be paid to shareholders with
respect to such amounts.
PLEASE PRINT ALL INFORMATION CLEARLY AND LEGIBLY
SECTION 1: DETAILS OF SUBSCRIPTION
IF YOU WISH TO SUBSCRIBE FOR YOUR FULL ENTITLEMENT:
A: I apply for ALL of my entitlement of new shares pursuant to the Primary
Subscription. ________ X $ + = $ ____________
(no. of new shares)
B: I apply for new shares pursuant to the Over-Subscription
Privilege* _________ X $ + = $ _____________
(no. of additional shares)
AMOUNT ENCLOSED $ _____________
* You can only over-subscribe if you have fully exercised your Primary
Subscription Rights.
- -------------------------------------------------------------------------------
IF YOU DO NOT WISH TO APPLY FOR YOUR FULL ENTITLEMENT:
C:I apply for ________ X $ = $_______________________________________
(no. of new shares)(AMOUNT ENCLOSED)
SECTION 2: TO SUBSCRIBE
I acknowledge that I have received the Prospectus for this Offer and I
hereby irrevocably subscribe for the number of new shares indicated above on
the terms and conditions set out in the Prospectus. I understand and agree
that I will be obligated to pay any additional amount to the Fund if the
Subscription Price as determined on the Pricing Date is in excess of the
$ Estimated Subscription Price per share.
I hereby agree that if I fail to pay in full for the shares for which I
have subscribed, the Fund may exercise any of the remedies provided for in
the Prospectus.
Signature of subscriber(s) __________________________________________________
______________________________________________________________
______________________________________________________________
Telephone number (including area code) ( ) _____________________________
- -------------------------------------------------------------------------------
If you wish to have your shares and refund check (if any) delivered to an
address other than that listed on this Subscription Certificate you must
have your signature guaranteed by a member of the New York Stock Exchange or
a bank or trust company. Please provide the delivery address below and note
if it is a permanent change.
_____________________________________________________________________________
_____________________________________________________________________________
SECTION 3: DESIGNATION OF BROKER-DEALER
The following broker-dealer is hereby designated as having been
instrumental in the exercise of the Rights hereby exercised:
FIRM: _______________________________________________________________________
REPRESENTATIVE NAME: ________________________________________________________
REPRESENTATIVE NUMBER: ______________________________________________________
+ NOTE: $ per share is an estimated price only. The Subscription Price
will be determined on July 19, 1996, the Pricing Date, which is the same as
the Expiration Date (unless extended), and could be higher or lower depending
on the changes in the net asset value and share price of the Common Stock.
Account #: Control #:
Number of Primary Subscription Rights:
Number of Shares Entitled in Primary
Subscription:
<PAGE>
EXHIBIT 99.D3
1 OF 2
NOTICE OF GUARANTEED DELIVERY FOR SHARES OF
COMMON STOCK OF ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
SUBSCRIBED FOR PURSUANT TO THE PRIMARY SUBSCRIPTION
AND THE OVER-SUBSCRIPTION PRIVILEGE
Alliance World Dollar Government Fund, Inc. Rights Offering
As set forth in the Fund's Prospectus dated June , 1996 (the "Prospectus")
under "The Offer--Payment for Shares," this form or one substantially
equivalent hereto may be used as a means of effecting subscription and payment
for all shares of Alliance World Dollar Government Fund, Inc. Common Stock
subscribed for by exercise of Rights pursuant to the Primary Subscription and
the Over-Subscription Privilege. Such form may be delivered by hand or sent by
facsimile transmission, overnight courier or mail to the Subscription Agent
and must be received prior to 5:00 p.m. Eastern time on July 19, 1996 (the
"Expiration Date")*. The terms and conditions of the Offer set forth in the
Prospectus are incorporated by reference herein. Capitalized terms not defined
herein have the meanings attributed to them in the Prospectus.
The Subscription Agent is:
FIRST DATA INVESTOR SERVICES GROUP, INC.
<TABLE>
<S> <C> <C>
BY FACSIMILE: BY EXPRESS MAIL OR OVERNIGHT COURIER: BY HAND:
(TELECOPIES) The Subscription Agent for The Subscription Agent for
(617) 774-4519 Alliance World Dollar Alliance World Dollar
Confirm by telephone to: Government Fund, Inc. Government Fund, Inc.
(617) 774-4511 Corporate Reorganization c/o BancBoston Trust Company
Two Heritage Drive of New York
North Quincy, MA 02172 55 Broadway - 3rd Floor
New York, NY 10006
BY FIRST CLASS MAIL:
The Subscription Agent for
Alliance World Dollar
Government Fund, Inc.
Corporate Reorganization
P.O. Box 9061
Boston, MA 02205-8686
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA
A TELECOPY OR FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT
CONSTITUTE A VALID DELIVERY.
The New York Stock Exchange member firm or bank or trust company which
completes this form must communicate the guarantee and the number of shares
subscribed for under both the Primary Subscription and the Over-Subscription
Privilege to the Subscription Agent and must deliver this Notice of Guaranteed
Delivery guaranteeing delivery of (i) payment in full for all subscribed
shares and (ii) a properly completed and executed Subscription Certificate to
the Subscription Agent prior to 5:00 p.m., Eastern time, on the Expiration
Date.* The Subscription Certificate and full payment must then be delivered by
the close of business on the third business day after the Expiration Date* to
the Subscription Agent. Failure to do so will result in a forfeiture of the
Rights.
(continued on other side)
- --------
* Unless extended by the Fund.
<PAGE>
Exhibit 99-D3
2 OF 2
GUARANTEE
The undersigned, a member firm of the New York Stock Exchange or a bank or
trust company, guarantees delivery of payment to the Subscription Agent by the
close of business (5:00 p.m., Eastern time) on the third business day (July
24, 1996) after the Expiration Date (July 19,1996, unless extended) of (i) a
properly completed and executed Subscription Certificate and (ii) payment of
the full Subscription Price for shares subscribed for on Primary Subscription
and pursuant to the Over-Subscription Privilege, if applicable, as
subscription for such shares is indicated herein or in the Subscription
Certificate.
<TABLE>
<S> <C> <C> <C>
1. Primary
Subscription Number of Primary Shares
requested for which you Payment to be made
Number of Rights to are guaranteed delivery of in connection with
be exercised Rights and Payment Primary Shares
Rights Shares $ __________________
(Rights / by 3)
2. Over-Subscription Number of Over- Payment to be made
Subscription Shares in connection with
requested for which you Over-Subscription
are guaranteeing payment Shares
Shares $ __________________
3. Totals Total Number of
Rights to be
Delivered
Rights $ __________________
Total Payment
</TABLE>
Method of Delivery of Rights A.Through The Depository Trust Company ("DTC")*
(circle one) B.Direct to the Subscription Agent
Please note that if you are guaranteeing for Over-Subscription Shares and
are a DTC participant, you must also execute and forward to First Data
Investor Services Group, Inc. a Nominee Holder Over-Subscription
Certification.
_____________________________________ _____________________________________
Name of Firm Authorized Signature
_____________________________________ _____________________________________
Address Title
_____________________________________ _____________________________________
Zip Code Name (Please Type or Print)
_____________________________________
Name of Registered Holder (If
Applicable)
_____________________________________
_____________________________________ Date
Telephone Number
* IF THE RIGHTS ARE TO BE DELIVERED THROUGH DTC, CALL THE SUBSCRIPTION AGENT
AT 1-800-331-1710 TO OBTAIN A PROTECT IDENTIFICATION NUMBER, WHICH NEEDS TO
BE COMMUNICATED BY YOU TO DTC.
2
<PAGE>
EXHIBIT 99.D4
1 OF 2
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
RIGHTS OFFERING
DTC PARTICIPANT OVER-SUBSCRIPTION EXERCISE FORM
NOMINEE HOLDER OVER-SUBSCRIPTION EXERCISE FORM
THIS FORM IS TO BE USED ONLY BY NOMINEE HOLDERS OR BY THE DEPOSITORY TRUST
COMPANY ("DTC") PARTICIPANTS TO EXERCISE THE OVER-SUBSCRIPTION PRIVILEGE IN
RESPECT OF RIGHTS WITH RESPECT TO WHICH THE PRIMARY SUBSCRIPTION PRIVILEGE WAS
EXERCISED IN FULL AND DELIVERED THROUGH THE FACILITIES OF A COMMON DEPOSITORY
OR DTC. ALL OTHER EXERCISES OF OVER-SUBSCRIPTION PRIVILEGES MUST BE EFFECTED
BY THE DELIVERY OF THE SUBSCRIPTION CERTIFICATE.
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE FUND'S
PROSPECTUS DATED JUNE , 1996 (THE "PROSPECTUS") AND ARE INCORPORATED HEREIN
BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM THE
INFORMATION AGENT.
PLEASE COMPLETE ALL APPLICABLE INFORMATION
VOID UNLESS RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL OR
WITH A PROPERLY COMPLETED NOTICE OF GUARANTEED DELIVERY BEFORE 5:00 P.M.,
EASTERN TIME, ON JULY 19, 1996 (THE "EXPIRATION DATE"), UNLESS EXTENDED BY THE
FUND.
<TABLE>
<S> <C> <C>
BY FACSIMILE: BY EXPRESS MAIL OR OVERNIGHT COURIER: BY HAND:
(TELECOPIES) The Subscription Agent for The Subscription Agent for
(617) 774-4519 Alliance World Dollar Alliance World Dollar
Confirm by telephone to: Government Fund, Inc. Government Fund, Inc.
(617) 774-4511 Corporate Reorganization c/o BancBoston Trust Company
Two Heritage Drive of New York
North Quincy, MA 02171 55 Broadway - 3rd Floor
New York, NY 10006
BY FIRST CLASS MAIL:
The Subscription Agent for
Alliance World Dollar
Government Fund, Inc.
Corporate Reorganization
P.O. Box 9061
Boston, MA 02205-8686
</TABLE>
1. The undersigned hereby certifies to the Subscription Agent that it is a
participant in [Name of Depository] (the "Depository") and that it has either
(i) exercised the Primary Subscription in respect of the Rights and delivered
such exercised Rights to the Subscription Agent by means of transfer to the
Depository Account of the Fund or (ii) delivered to the Subscription Agent a
Notice of Guaranteed Delivery in respect of the exercise of the Primary
Subscription Privilege and will deliver the Rights called for in such Notice
of Guaranteed Delivery to the Subscription Agent by means of transfer to such
Depository Account of the Fund.
2. The undersigned hereby exercises the Over-Subscription Privilege to
purchase, to the extent available, shares of Common Stock and certifies
to the Subscription Agent that such Over-Subscription Privilege is being
exercised for the account or accounts of persons (which may include the
undersigned) on whose behalf all Primary Subscription Rights have been
exercised.
3. The undersigned understands that payment of the Estimated Subscription
Price of $ per share for each Share of Common Stock subscribed for
pursuant to the Over-Subscription Privilege must be received by the
Subscription Agent before 5:00 p.m., Eastern time, on the Expiration Date,
unless a Notice of Guaranteed Delivery is used, in which case, payment in full
must be received by the Subscription Agent not later than the close of
business on the third business day after the Expiration Date and represents
that such payment, in the aggregate amount of $ , either
(continued on other side)
1
<PAGE>
EXHIBIT 99.D4
2 OF 2
(check appropriate box):
[_] has been or is being delivered to the Subscription Agent pursuant to the
Notice of Guaranteed Delivery referred to above
or
[_] is being delivered to the Subscription Agent herewith
or
[_] has been delivered separately to the Subscription Agent;
_____________________________________ _____________________________________
Primary Subscription Confirmation Name of Nominee Holder
Number
_____________________________________
_____________________________________ Address
Depository Participant Number
_____________________________________
Contact Name: _______________________ City State Zip Code
By: _________________________________
Phone Number: _______________________
Name: _______________________________
Title: ______________________________
Dated: _________ , 1996
PLEASE ATTACH A BENEFICIAL OWNER LISTING CONTAINING THE RECORD DATE POSITION
OF RIGHTS OWNED, THE NUMBER OF PRIMARY SHARES SUBSCRIBED AND THE NUMBER OF
OVER-SUBSCRIPTION SHARES, IF APPLICABLE, REQUESTED BY EACH SUCH OWNER.
PLEASE NOTE: THIS FORM WILL NOT BE ACCEPTED AS VALID UNLESS THE FOLLOWING
INFORMATION IS PROVIDED FOR THE ALLOCATION OF OVER-SUBSCRIPTION SHARES.
The positions below pertain to those persons on whose behalf the Over-
Subscription is being exercised:
_____________________________________ Total number of record date shares
_____________________________________ Total number of primary rights
exercised
2
<PAGE>
EXHIBIT 99.D5
1 OF 1
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC. RIGHTS OFFERING
BENEFICIAL OWNER LISTING CERTIFICATION
The undersigned, a bank, broker or other nominee holder of Rights ("Rights")
to purchase shares of Common Stock, $.01 par value ("Common Stock"), of
Alliance World Dollar Government Fund, Inc. (the "Fund") pursuant to the
Rights Offering (the "Offer") described and provided for in the Fund's
Prospectus dated June , 1996 (the "Prospectus"), hereby certifies to the
Fund and to First Data Investor Services Group, Inc., as Subscription Agent
for such Offer, that for each numbered line filled in below, the undersigned
has exercised, on behalf of the beneficial owner thereof (which may be the
undersigned), the number of Rights specified on such line pursuant to the
Primary Subscription (as defined in the Prospectus) and such beneficial owner
wishes to subscribe for the purchase of additional shares of Common Stock
pursuant to the Over-Subscription Privilege (as defined in the Prospectus), in
the amount set forth in the third column of such line.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF RECORD DATE NUMBER OF RIGHTS EXERCISED REQUESTED PURSUANT TO THE
SHARES OWNED PURSUANT TO PRIMARY SUBSCRIPTION OVER-SUBSCRIPTION PRIVILEGE
<S> <C> <C>
1)__________________ _____________________ ______________________
2)__________________ _____________________ ______________________
3)__________________ _____________________ ______________________
4)__________________ _____________________ ______________________
5)__________________ _____________________ ______________________
6)__________________ _____________________ ______________________
7)__________________ _____________________ ______________________
8)__________________ _____________________ ______________________
9)__________________ _____________________ ______________________
10)__________________ _____________________ ______________________
</TABLE>
______________________________________________
Name of Nominee Holder
By: __________________________________________
Name: ______________________________________
Title: _____________________________________
Dated: _________ , 1996
Provide the following information, if applicable:
______________________________________________ Name of Broker: _______________
Depository Trust Corporation ("DTC") Participant Number
Address: ______________________
______________________________________________
DTC Primary Subscription Confirmation Number(s)
<PAGE>
SUBSCRIPTION RIGHTS AGENCY AGREEMENT
THIS AGREEMENT, dated as of this the day of June,
1996, is between ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC. (the
"Fund"), a Maryland corporation having its principal place of
business at 1345 Avenue of the Americas, New York, New York
10105, and First Data Investor Services Group, Inc. ("FDISG"), a
Massachusetts corporation with principal offices at One Exchange
Place, 53 State Street, Boston, Massachusetts 02109.
W I T N E S S E T H
WHEREAS, the Fund proposes to make a subscription offer by
issuing certificates or other evidences of subscription rights,
in the form designated by the Fund ("Subscription Rights"), to
shareholders of record ("Shareholders") of its beneficial
interest as of a record date specified by the Fund (the "Record
Date"), pursuant to which each Shareholder will have certain
rights (the "Rights") to subscribe to shares of the Fund's shares
of beneficial interest, par value $.01 ("Shares"), as described
in and upon such terms as are set forth in the final prospectus
(the "Prospectus") for the Form N-2 Registration Statement that
was filed by the Fund with the Securities and Exchange Commission
on May 17, 1996, as amended from time to time (the "Registration
Statement");
WHEREAS, the Fund desires to engage FDISG to provide certain
services on its behalf and FDISG desires to provide such
services, in connection with the distribution of the Subscription
Rights and the issuance and exercise of the Rights to subscribe
therein set forth, all upon the terms and conditions set forth
herein;
NOW THEREFORE, in consideration of the mutual covenants and
promises hereinafter set forth, the Fund and FDISG agrees as
follows:
Article 1 Appointment of FDISG
1.1 Pursuant to resolution of its Board of Directors, the
Fund hereby appoints and authorizes FDISG to act on its
behalf in accordance with the provisions hereof, and
FDISG hereby accepts such appointment and agrees to so
act.
1.2 FDISG hereby agrees to provide on behalf of the Fund
those services relating to the Fund's subscription
rights offering set forth herein as more fully described
in the written schedule of Subscription Rights Offering
Services annexed hereto as Schedule A.
<PAGE>
1.3 FDISG is hereby authorized and directed to accept
instructions with respect to the performance of its
duties hereunder from any officer or assistant officer
of the Fund and to apply to any such officer of the Fund
for advice or instructions in connection with its duties
hereunder and the Fund shall provide such instructions.
1.4 To the extent required by Section 31 of the 1940 Act,
FDISG agrees that all records prepared or maintained by
FDISG relating to the services to be performed by FDISG
hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance
with such section, and will be surrendered promptly to
the Fund on and in accordance with the Fund's request.
Article 2 Compensation
2.1 The Fund will compensate FDISG for the performance of
its obligations hereunder in accordance with the fees
set forth in the written Fee Schedule annexed hereto as
Schedule B and incorporated herein.
Article 3 FDISG System
3.1 FDISG shall retain title to and ownership of any and all
data bases, computer programs, screen formats, report
formats, interactive design techniques, derivative
works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents,
copyrights, trade secrets, and other related legal
rights utilized by FDISG in connection with the services
provided by FDISG to the Fund herein (the "FDISG
System").
3.2 FDISG hereby grants to the Fund a limited license to the
FDISG System for the sole and limited purpose of having
FDISG provided the services contemplated hereunder and
nothing contained in this Agreement shall be construed
or interpreted otherwise and such license shall
immediately terminate with the termination of this
Agreement.
Article 4 Representations and Warranties of FDISG
4.1 FDISG represents and warrants to the Fund that:
(a) It is a corporation duly organized and existing and
in good standing under the laws of the Commonwealth
of Massachusetts;
2
<PAGE>
(b) It is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into
and perform this Agreement;
(c) All requisite corporate proceedings have been taken
to authorized it to enter into this Agreement;
(d) It is duly registered with its appropriate
regulatory agency as a transfer agent and such
registration will remain in effect for the duration
of this Agreement; and
(e) It has and will continue to have access to the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement.
Article 5 Representations and Warranties of the Fund
5.1 The Fund represents and warrants to FDISG that:
(a) It is duly organized and existing and in good
standing under the laws of the jurisdiction in
which it is organized;
(b) It is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into
this Agreement; and
(c) All corporate proceedings required by said Articles
of Incorporation, By-Laws and applicable laws have
been taken to authorize it to enter into this
Agreement.
Article 6 Indemnification
6.1 FDISG shall not be responsible for and the Fund shall
indemnify and hold FDISG harmless from and against any
and all claims, costs, expenses (including reasonable
attorneys' fees), losses, damages, charges, payments and
liabilities of any sort or kind which may be asserted
against FDISG or for which FDISG may be held to be
liable ("Claim") arising out of or attributable to any
of the following:
(a) Any actions of FDISG required to be taken pursuant
to this Agreement unless such Claim resulted from a
negligent act or omission to act or bad faith by
FDISG in the performance of its duties hereunder;
3
<PAGE>
(b) FDISG's reasonable reliance on, or reasonable use
of, information, data, records and documents
(including but not limited to magnetic tapes,
computer printouts, hard copies and microfilm
copies) received by FDISG from the Fund, or any
authorized third party acting on behalf of the
Fund;
(c) the reliance on, or the implementation of, any
instructions or requests of the Fund;
(d) The offer or sale of Shares in violation of any
requirement under the securities laws or
regulations of any state that such Shares be
registered in such state or in violation of any
stop order or other determination or ruling by any
state with respect to the offer or sale of such
Shares in such state; and
(e) The Fund's refusal or failure to comply with the
terms of this Agreement, or any Claim which arises
out of the Fund's negligence or misconduct or the
breach of any representation or warranty of the
Fund made herein.
6.2 In any case in which the Fund may be asked to indemnify
or hold FDISG harmless, FDISG will notify the Fund
promptly after identifying any situation which it
believes presents or appears likely to present a claim
for indemnification against the Fund and shall keep the
Fund advised with respect to all developments concerning
such situation, although the failure to do so shall not
prevent recovery by FDISG. The Fund shall have the
option to defend FDISG against any Claim which may be
the subject of this indemnification, and, in the event
that the Fund so elects, such defense shall be conducted
by counsel chosen by the Fund and satisfactory to FDISG,
and thereupon the Fund shall take over complete defense
of the Claim and FDISG shall sustain no further legal or
other expenses in respect of such Claim. FDISG will not
confess any Claim or make any compromise in any case in
which the Fund will be asked to provide indemnification,
except with the Fund's prior written consent. The
obligations of the parties hereto under this Section 6
shall survive the termination of this Agreement.
Article 7 Standard of Care
7.1 FDISG shall at all times act in good faith and agrees to
use its best efforts within commercially reasonable
limits to ensure the accuracy of all services performed
4
<PAGE>
under this Agreement, but assumes no responsibility for
loss or damage to the Fund unless said errors are caused
by FDISG's own negligence, bad faith or willful
misconduct or that of its employees.
7.2 Notwithstanding the foregoing Section 6(a) or anything
else contained in this Agreement to the contrary,
FDISG's entire liability to the Fund for any loss or
damage, direct or indirect, for any cause whatsoever
(including but not limited to those arising out of this
Agreement), and regardless of the form of action, shall
be limited to the Fund's actual direct out-of-pocket
expenses which are reasonably incurred by the Fund, but
shall not under any circumstances exceed $500,000.
Article 8 Consequential Damages
8.1 In no event and under no circumstances shall either
party to this Agreement be liable to the other party for
consequential or indirect loss of profits, reputation or
business or any other special damages under any
provision of this Agreement or for any act or failure to
act hereunder.
Article 9 Term and Termination
9.1 This Agreement shall be effective on the date first
written above and shall continue in effect until the
completion of the Fund's Rights Offering described in
this Agreement.
Article 10 Confidentiality
10.1 The parties agree that the Proprietary Information
(defined below) and the contents of this Agreement
(collectively "Confidential Information") are
confidential information of the parties and their
respective licensors. The Fund and FDISG shall exercise
at least the same degree of care, but not less than
reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would
exercise to protect its own confidential information of
a similar nature. The Fund and FDISG may use the
Confidential Information only to exercise their rights
under this Agreement. The Fund and FDISG shall not
duplicate, sell or disclose to others the Confidential
Information of the other, in whole or in part, without
the prior written permission of the other party. The
Fund and FDISG may, however, disclose Confidential
Information to its employees who have a need to know the
Confidential Information to perform work for the other,
5
<PAGE>
provided that each shall use reasonable efforts to
ensure that the Confidential Information is not
duplicated or disclosed by its employees in breach of
this Agreement. The Fund and FDISG may also disclose
the Confidential Information to independent contractors,
auditors and professional advisors, provided they first
agree in writing to be bound by the confidentiality
obligations substantially similar to this Section 10.1.
Notwithstanding the previous sentence, in no event shall
either the Fund or FDISG disclose the Confidential
Information to any competitor of the other without
specific, prior written consent.
10.2 Proprietary Information means:
(a) any data or information that is competitively
sensitive material, and not generally known to the
public, including, but not limited to, information
about product plans, marketing strategies, finance,
operations, customer relationships, customer
profiles, sales estimates, business plans and
internal performance results relating to the past,
present or future business activities of the Fund
or FDISG, their respective subsidiaries and
affiliated companies and the customers, clients and
suppliers of any of them;
(b) any scientific or technical information, design,
process, procedure, formula or improvement that is
commercially valuable and secret in the sense that
its confidentiality affords the Fund or FDISG a
competitive advantage over its competitors; and
(c) all confidential or proprietary concepts,
documentation, reports, data, specifications,
computer software, source code, object code, flow
charts, databases, inventions, know-how, show-how
and trade secrets, whether or not patentable or
copyrightable.
10.3 Confidential Information includes, without limitation,
all documents, inventions, substances, engineering and
laboratory notebooks, drawings, diagrams,
specifications, bills of material, equipment, prototypes
and models and any other tangible manifestation of the
foregoing of either party which now exists or comes into
the control or possession of the other.
6
<PAGE>
Article 11 Force Majeure
11.1 In the event either party is unable to perform its
obligations under the terms of this Agreement because of
acts of God, strikes, labor difficulties, mechanical
breakdowns, equipment or transmission failure or damage
reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be
liable for damages to the other for any damages
resulting from such failure to perform or otherwise from
such causes.
Article 12 Amendments
12.1 This Agreement may only be amended or modified by a
written instrument executed by both parties.
Article 13 Subcontracting
13.1 The Fund agrees that FDISG may, in its discretion,
subcontract for certain of the services described under
this Agreement or the Schedules hereto; provided,
however, that the appointment of any such agent shall
not relieve FDISG of its responsibilities hereunder.
Article 14 Arbitration
14.1 Any claim or controversy arising out of or relating to
this Agreement, or breach hereof, shall be settled by
arbitration administered by the American Arbitration
Association in Boston, Massachusetts in accordance with
its applicable rules, except that the Federal Rules of
Evidence and the Federal Rules of Civil Procedure with
respect to the discovery process shall apply.
14.2 The parties hereby agree that judgment upon the award
rendered by the arbitrator may be entered in any court
having jurisdiction.
14.3 The parties acknowledge and agree that the performance
of the obligations under this Agreement necessitates the
use of instrumentalities of interstate commerce and,
notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal
Arbitration Act shall govern and control with respect to
the provisions of this Section 14.
7
<PAGE>
Article 15 Notice
15.1 Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or
FDISG shall be sufficiently given if addressed to that
party and received by it at its office set forth below
or at such other place as it may from time to time
designate in writing.
To the Fund:
Alliance World Dollar Government Fund, Inc.
Alliance Capital Management
1345 Avenue of the Americas
New York, New York 10105
Attention: Domenick Pugliese, Vice President
and Assistant General Counsel
To FDISG:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to General Counsel (same address)
Article 16 Successors
16.1 This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and
assigns, provided, however, that this Agreement shall
not be assigned to any person other than a person
controlling, controlled by or under common control with
the assignor without the written consent of the other
party, which consent shall not be unreasonably withheld.
Article 17 Governing Law
17.1 This Agreement shall be governed exclusively by the laws
of the Commonwealth of Massachusetts without reference
to the choice of law provisions thereof. Each party
hereto hereby (i) consents to the personal jurisdiction
of the Commonwealth of Massachusetts courts over the
parties hereto, hereby waiving any defense of lack of
personal jurisdiction; and (ii) appoints the person to
whom notices hereunder are to be sent as agent for
service of process.
8
<PAGE>
Article 18 Counterparts
18.1 This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an
original; but such counterparts shall, together,
constitute only one instrument.
Article 19 Captions
19.1 The captions of this Agreement are included for
convenience of reference only and in no way define or
limit any of the provisions hereof or otherwise affect
their construction or effect.
Article 20 Use of FDISG/Fund Name
20.1 The Fund shall not use the name of FDISG in any
Prospectus, Statement of Additional Information,
Shareholders' report, sales literature or other material
relating to the Fund in a manner not approved prior
thereto in writing; provided, however, that FDISG need
only receive notice of all reasonable uses of its name
which merely refer in accurate terms to its appointment
hereunder or which are required by any government agency
or applicable law or rule.
20.2 FDISG shall not use the name of the Fund or material
relating to the Fund on any documents or forms for other
than internal use n a manner not approved prior thereto
in writing; provided, however, that the Fund need only
receive notice of all reasonable uses of its name which
merely refer in accurate terms to the appointment of
FDISG or which are required by any government agency or
applicable law or rule.
Article 21 Relationship of Parties
21.1 The parties agree that they are independent contractors
and not partners of co-venturers and nothing contained
herein shall be interpreted or construed otherwise.
Article 22 Entire Agreement; Severability
22.1 This Agreement and the Schedules attached hereto
constitute the entire agreement of the parties hereto
relating to the matters covered hereby and supersede any
previous agreements. If any provision is held to be
illegal, unenforceable or invalid for any reason, the
remaining provisions shall not be affected or impaired
thereby.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers, as of
the day and year first above written.
ALLIANCE WORLD DOLLAR FIRST DATA INVESTOR SERVICES
GOVERNMENT FUND, IC. GROUP, INC.
By:__________________________ By:_________________________
Name:________________________ Name________________________
Title:_______________________ Title:______________________
10
<PAGE>
SCHEDULE A
SUBSCRIPTION RIGHTS OFFERING SERVICES
1. (a) Each Subscription Right shall evidence the Rights of the
Rightsholder to purchase beneficial interest upon the terms
and conditions set forth in the Prospectus.
(b) Upon the written advice of the Fund signed by its
Chairman, President, Secretary or Assistant Secretary, as to
the Record Date to be prepared by FDISG in its capacity as
Transfer Agent for the Fund prepare and record Subscription
Rights in the names of the Shareholders, setting forth the
number of Rights to subscribe to the Fund's beneficial
interest calculated on the basis of one Right for each share
of beneficial interest recorded on the Fund's books in the
name of each such Shareholder as of the Record Date.
(c) Each Subscription Certificate shall be dated as of the
Record Date and shall be executed manually or by facsimile
signature of a duly authorized Officer of the Fund. Upon the
written advice, signed as aforesaid, as to the effective date
of the Registration Statement, FDISG shall as promptly as
practicable countersign and deliver the Subscription
Certificates, together with a copy of the Prospectus and
offer letter, to all Record Date Shareholders. No
Subscription Certificate shall be valid for any purpose
unless so executed. Should any Officer whose signature has
been placed upon a Subscription Certificate cease to hold
such office at any time thereafter, such event shall have no
effect on the validity of such Subscription Certificate.
2. (a) Each Subscription Right shall not be transferable and
shall, its having been exercised by the holder thereof in the
manner set forth in the Prospectus, become irrevocable upon a
completed subscription certificate having been delivered to
FDISG. FDISG shall, in its capacity as Transfer Agent for
the Fund, maintain a register of Subscription Rights and the
holders of record thereof (each of whom shall be deemed a
"Shareholder" hereunder for the purposes of determining the
rights of holders of Subscription Rights). Each Subscription
Right shall, subject to the provisions thereof, entitle the
Shareholder in whose name it is recorded to the following:
(i) The right (the "Basic Subscription Right") to
purchase one share of Common Stock for every three
Subscription Rights (each Shareholder to receive
one Subscription Right for each share held on the
record date); and
<PAGE>
(ii) The right (the "Oversubscription Right") to
purchase from the Fund additional shares of
beneficial interest, subject to the availability of
such shares and to allotment of such shares as may
be available among Rightsholders who exercise
Oversubscription Rights on the basis specified in
the Prospectus; provided, however, that a
Rightsholder who has not exercised his Basic
Subscription Rights with respect to the full number
of Rights that such Rightsholder owns as of the
Expiration Date, if any, shall not be entitled to
any Oversubscription Rights.
(b) A Rightsholder may exercise his Basic Subscription
Rights and Oversubscription Rights by delivery to FDISG at
its corporate office specified in the Prospectus of (i) the
Subscription Right with respect thereto, duly executed by
such Rightsholder in accordance with and as provided by the
terms and conditions of the Subscription Right, together with
(ii) the Estimated Subscription Price for each share of
beneficial interest subscribed for by exercise of such
Rights, in United States dollars by money order or check
drawn on a bank located in the continental United States and
in each case payable to the order of the Fund.
(c) Rights may be exercised at any time after the date of
issuance of the Subscription Certificates with respect
thereto but no later than 5:00 p.m. Eastern Standard Time
("EST") on such date as the Fund shall designate to FDISG
(the "Expiration Date"). For the purpose of determining the
time of the exercise of any Rights, delivery of any material
to FDISG shall be deemed to occur when such materials are
received at the corporate office of FDISG specified in the
Prospectus.
(d) Notwithstanding the provisions of Sections 2(b) and 2(c)
regarding Delivery of any executed Subscription Right to
FDISG prior to 5:00 p.m. EST on the Expiration Date, if prior
to such time FDISG receives notice of guaranteed delivery by
mail or otherwise from a bank, trust company or a New York
Stock Exchange member guaranteeing delivery of (i) full
payment for shares purchased and subscribed for the virtue of
a Rightsholder's Rights, and (ii) a properly combined and
executed Subscription Certificate, then such exercise of
Basic Subscription Rights and Oversubscription Rights shall
be regarded as timely subject, however, to receipt of the
duly executed Exercise Form by FDISG by the close of business
on the fifth calendar day after the Expiration Date.
2
<PAGE>
(e) Within thirteen calendar days following the Pricing Date
(the "Confirmation Date"), FDISG shall send a confirmation to
each exercising Rightsholder (or, for shares of beneficial
interest on the Record Date held by Cede & Co. or any other
depository or nominee, to Cede & Co. or such other depository
or nominee), showing (i) the number of shares acquired
pursuant to the Basic Subscription Rights, (ii) the number of
shares, if any, acquired pursuant to the Oversubscription
Rights, (iii) the per share and total purchase price for the
shares, (iv) any additional amount payable by such
Rightsholder to the Fund or any excess to be refunded by the
Fund to such Rightsholder, in each case based on the
Subscription Price as determined on the Pricing Date. In the
case of shareholders exercising their Oversubscription
Rights, any excess payments which would otherwise be refunded
will be applied toward payment for Shares acquired pursuant
to exercise of the Oversubscription Rights. Any additional
payment required from a Rightsholder must be received by
FDISG within fifteen business days after the Confirmation
Date. Any excess payment to be refunded by the Fund to
Rightsholder shall be mailed by FDISG to the Rightsholder
within fifteen business days after the Confirmation Date, as
provided in Section 5 below.
3. If, after allocation of Shares of beneficial interest to
persons exercising Basic Subscription Rights, there remain
unexercised Rights, then FDISG shall allot the shares
issuable upon exercise of such unexercised Rights (the
"Remaining Shares") to persons exercising Oversubscription
Rights, in the amounts of such oversubscription. If the
number of shares for which Oversubscription Rights have been
exercised is greater than the Remaining Shares, FDISG shall
allot the Remaining Shares to the persons exercising
Oversubscription Rights pro rata based solely on the number
of Rights held on the Record date.
4. All proceeds from the exercise of Rights shall be held by
FDISG in an account in the name of the Fund. Such proceeds
shall be wired to the Fund's custodian from time to time, as
instructed by the Fund. FDISG shall advise the Fund
immediately upon the completion of the allocation set forth
above as to the total number of shares subscribed and
distributable.
5. (a) FDISG shall mail to the Rightsholders after full payment
for the Shares subscribed for has cleared, and in no event
greater than fifteen business day after the Confirmation
Date; (i) certificates representing those shares purchased
pursuant to exercise of Basic Subscription Rights, if
applicable and shoe shares purchased pursuant to the exercise
of Oversubscription Rights, if applicable; and (ii) in the
3
<PAGE>
case of each Rightsholder who subscribed and paid for shares
at an assumed purchase price greater than the actual per
share purchase price, a refund in the amount of the
difference between the assumed purchase price and the actual
purchase price;
(b) FDISG shall deliver the proceeds of the exercise of
Rights to the Fund as promptly as practicable, but in no
event later than fifteen business days after the Confirmation
Date.
6. (a) FDISG shall account promptly to the Fund with respect to
Rights exercised and concurrently account for all monies
received and returned by FDISG with respect to the purchase
of shares of Common Stock upon the exercise of Rights.
(b) FDISG will advise the Fund and Smith Barney, Inc. (the
"Dealer Manager") from day to day during the period of, and
promptly after the termination of, the Offer as to all the
names and addresses of Rightsholder exercising Rights, the
total number of Rights exercised by each Rightsholders during
the immediately preceding day (indicating the total number of
Rights verified to be in proper form for exercise, rejected
for exercise and being processed) and the number of Rights
exercised on Subscription Certificates indicating the Dealer
Manager or such soliciting broker as the broker-dealer with
respect to such exercise and such other information as the
Fund or the Dealer Manager may reasonably request.
(c) FDISG shall notify the Fund and the Dealer Manager no
later than 5:00 p.m. EST, on the first business day following
the Expiration Date, of the number of Rights exercised, the
total number of Rights verified to be in proper form for
exercise, rejected for exercise and being processed, and the
number of Rights exercised on Subscription Certificates
indicating the Dealer Manager or such soliciting broker as
the broker-dealer with respect to such exercise and such
other information as the Fund or the Dealer Manager may
reasonably request.
(d) Upon request of the Fund after the Confirmation Date,
FDISG shall notify the Fund, and at the Fund's request the
Dealer Manager, of any Right with respect of which the full
amount due upon the exercise thereof has not been received
and the soliciting broker, if any, specified as the broker-
dealer with respect to such right.
7. In the event FDISG does not receive, within fifteen business
days after the Confirmation Date, any amount due from a
Shareholder as specified in Section 2(e), then it shall take
such action with respect to such Shareholder's Subscription
4
<PAGE>
Rights as may be instructed in writing by the Fund,
including, without limitation, (i) applying any payment
actually received by it toward the purchase of the greatest
whole number of shares of Common Stock which could be
acquired with such payment, (ii) allocating the shares
subject to such Subscription Rights to one or more other
Shareholders, and (iii) selling all or a portion of the
shares of Common Stock deliverable upon exercise of such
Subscription Rights on the open market, and applying the
proceeds thereof to the amount owed.
8. No Subscription Right shall entitle a Shareholder to vote or
receive dividends or be deemed the holder of shares of
beneficial interest for any purpose, nor shall anything
contained in any Subscription Right be construed to confer
upon any Rightsholder any of the rights of a Shareholder of
the Fund or any right to vote, give or withhold consent to
any action by the Fund (whether upon any recapitalization,
issue of stock, reclassification of stock, consolidation,
merger, conveyance of otherwise), receive notice of meetings
or other action affecting Shareholders or receive dividends
or otherwise, until the Rights evidenced thereby shall have
been exercised and the Shares of beneficial interest
purchasable upon the exercise thereof shall have become
deliverable as provided in this Agreement and in the
Prospectus.
9. If there shall be delivered to FDISG (i) evidence to FDISG's
and the Fund's satisfaction of the destruction, loss or theft
of any Subscription Rights and (ii) such security or
indemnity as may be required by FDISG or the Fund to hold
each of them harmless, then, in the absence of notice to
FDISG that the Rights evidenced by such Subscription Rights
have been acquired by a bona fide purchaser, FDISG may issue
a new Subscription Certificate for a like number of Rights in
substitution for the Subscription Certificate so lost,
stolen, mutilated or destroyed.
10. (a) The Fund covenants that all shares of beneficial
interest issued on exercise of Rights will be validly issued,
fully paid, nonassessable and free of preemptive rights.
(b) The Fund shall furnish to FDISG, upon request, evidence
satisfactory to FDISG to the effect that a registration
statement under the Securities Act of 1933, as amended (the
"Act"), is then in effect with respect to its shares of
Common Stock issuable upon exercise of the Rights set forth
in the Subscription Rights. Upon written advice to FDISG
that the Securities and Exchange Commission shall have issued
or threatened to have issued any order preventing or
suspending the use of the Prospectus, or if for any reason it
5
<PAGE>
shall be necessary to amend or supplement the Prospectus in
order to comply with the Act, FDISG shall cease acting
hereunder until receipt of written instructions from the Fund
and such assurances as it may reasonable request that it may
comply with such instructions without violation of the Act.
11. Whenever in the performance of its duties under this
Agreement FDISG shall deem it necessary or desirable that any
fact or matter be proved or established, prior to taking or
suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof is herein specifically
prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the
Board or President or a Vice President or the Secretary or
Assistant Secretary or the Treasurer of the Fund delivered to
FDISG, and such certificate shall be fully authorized to
FDISG for any action taken or suffered in good faith by it
under the provisions of this Agreement in reliance upon such
certificate.
(b) FDISG is hereby authorized and directed to accept
instructions with respect to the performance of its duties
hereunder from any officer or assistant officer of the Fund
and to apply to any such officer of the Fund for advice or
instructions in connection with its duties, and shall be
indemnified and not be liable for any action taken or
suffered by it in good faith in accordance with instructions
of any officer or assistant officer of the Fund.
12. FDISG may, without the consent or concurrence of the
Shareholders in whose names Subscription Rights are
registered, by supplemental agreement or otherwise, concur
with the Fund in making any changes or corrections in a
Subscription Right that it shall have been advised by Counsel
(who may be counsel for the Fund) is appropriate to cure any
ambiguity or to correct any defective or inconsistent
provision or clerical omission or mistake or manifest error
therein or herein contained, and which shall not be
inconsistent with the provisions of the Subscription Right or
the Prospectus except insofar as any such change may confer
additional rights upon the Shareholders.
6
00250230.AL2
<PAGE>
SCHEDULE B
FEES
* Administrative Fees $13,000
* Per subscription certificate $10.00
processed (registered holders)
* Per defective subscription $12.00
certificate processed
(if applicable)
* Per notice of guarantee delivery $20.00
processed
* Per account for proration processing $3.00
* Per refund check (or collection letter $3.00
processed)
* Per broker split certificate issued $2.00
(if applicable)
* Per withdrawal of subscription $10.00
certificate (if applicable)
* Per dealer solicitation form received $9.00
and processed
* New York window fee upon expiration $1,200
* Per offer extension (if applicable) $1,000
All out of pocket expenses such as postage, stationery, etc. will
be billed as incurred.
00250230.AL2
<PAGE>
<PAGE>
EXHIBIT 99.D7
1 OF 2
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
RIGHTS OFFERING
NOMINEE HOLDER OVER-SUBSCRIPTION CERTIFICATION
PLEASE COMPLETE ALL APPLICABLE INFORMATION
<TABLE>
<S> <C> <C>
By Express Mail or
By First Class By Hand: Overnight Courier:
Mail:
The Subscription Agent for The Subscription Agent for The Subscription Agent for
Alliance World Dollar Alliance World Dollar Alliance World Dollar
Government Fund, Inc. Government Fund, Inc. Government Fund, Inc.
Corporate Reorganization Corporate Reorganization c/o BancBoston Trust Company
P.O. Box 9061 Two Heritage Drive of New York
Boston, MA 02205-8686 North Quincy, MA 02171 55 Broadway - 3rd Floor
New York, NY 10006
</TABLE>
THIS FORM IS TO BE USED ONLY BY NOMINEE HOLDERS TO EXERCISE THE OVER-
SUBSCRIPTION PRIVILEGE IN RESPECT OF RIGHTS WITH RESPECT TO WHICH THE PRIMARY
SUBSCRIPTION PRIVILEGE WAS EXERCISED IN FULL AND DELIVERED THROUGH THE
FACILITIES OF A COMMON DEPOSITORY. ALL OTHER EXERCISES OF OVER-SUBSCRIPTION
PRIVILEGES MUST BE EFFECTED BY THE DELIVERY OF THE SUBSCRIPTION CERTIFICATES.
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE FUND'S
PROSPECTUS DATED JUNE , 1996 (THE "PROSPECTUS") AND ARE INCORPORATED HEREIN BY
REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM THE
INFORMATION AGENT AND THE SUBSCRIPTION AGENT.
VOID UNLESS RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL OR WITH A
PROPERLY COMPLETED NOTICE OF GUARANTEED DELIVERY BEFORE 5:00 P.M., EASTERN
TIME, ON JULY 19, 1996 (THE "EXPIRATION DATE"), UNLESS EXTENDED BY THE FUND.
1. The undersigned hereby certifies to the Subscription Agent that it is a
participant in ___________________ [Name of Depository] (the "Depository") and
that it has either (i) exercised the Primary Subscription in respect of the
Rights and delivered such exercised Rights to the Subscription Agent by means
of transfer to the Depository Account of the Fund or (ii) delivered to the
Subscription Agent a Notice of Guaranteed Delivery in respect of the exercise
of the Primary Subscription Privilege and will deliver the Rights called for in
such Notice of Guaranteed Delivery to the Subscription Agent by means of
transfer to such Depository Account of the Fund.
2. The undersigned hereby exercises the Over-Subscription Privilege to
purchase, to the extent available, _______ shares of Common Stock and certifies
to the Subscription Agent that such Over-Subscription Privilege is being
exercised for the account or accounts of persons (which may include the
undersigned) on whose behalf all Primary Subscription Rights have been
exercised.*
3. The undersigned understands that payment of the Estimated Subscription
Price of $ per share for each Share of Common Stock subscribed for pursuant
to the Over-Subscription Privilege must be received by the Subscription Agent
before 5:00 p.m., Eastern time, on the Expiration Date, unless a Notice
of Guaranteed Delivery is used, in which case, payment in full must be received
by the Subscription Agent not later than the close of business on the third
business day after the Expiration Date and represents
<PAGE>
EXHIBIT 99.D7
2 OF 2
that such payment, in the aggregate amount of $ _______ , either
(check appropriate box):
[_] has been or is being delivered to the Subscription Agent pursuant to the
Notice of Guaranteed Delivery referred to above
or
[_] is being delivered to the Subscription Agent herewith
or
[_] has been delivered separately to the Subscription Agent; and, in the case
of funds not delivered pursuant to a Notice of Guaranteed Delivery, is or
was delivered in the manner set forth below (check appropriate box and
complete information relating thereto):
[_] uncertified check
[_] certified check
[_] bank draft
_____________________________________ _____________________________________
Primary Subscription Confirmation Name of Nominee Holder
Number
_____________________________________ _____________________________________
Depository Participant Number Address
Contact Name: _______________________ _____________________________________
City State Zip Code
Phone Number: _______________________ By: _________________________________
Name: _______________________________
Title: ______________________________
Dated: , 1996
* PLEASE ATTACH A BENEFICIAL OWNER LISTING CONTAINING THE RECORD DATE POSITION
OF RIGHTS OWNED, THE NUMBER OF PRIMARY SHARES SUBSCRIBED AND THE NUMBER OF
OVER-SUBSCRIPTION SHARES, IF APPLICABLE, REQUESTED BY EACH SUCH OWNER.
2
<PAGE>
ALLIANCE WORLD DOLLAR
GOVERNMENT FUND, INC.
DIVIDEND REINVESTMENT PLAN
1. Each holder of shares (a "Shareholder") of
common stock in Alliance World Dollar Government Fund, Inc.
(the "Fund"), whose Fund shares are registered in his or her
own name will automatically be a participant (a
"Participant") in the Dividend Reinvestment Plan (the
"Plan"), unless any such Shareholder specifically elects to
receive all dividends and capital gains distributions in
cash paid by check mailed directly to the Shareholder. A
Shareholder whose shares are registered in the name of a
broker-dealer or other nominee (the "Nominee") will be a
Participant if such a service is provided by the Nominee.
The Shareholder Services Group, Inc. (the "Plan Agent") will
act as agent for Participants and will open an account under
the Plan for each Participant in the same name as such
Participant's common stock is registered on the books and
records of the transfer agent for the common stock.
2. Whenever the Fund declares a capital gains
distribution or an income dividend payable in shares of
common stock or cash, Participants will receive the
equivalent in shares of the Fund valued as described in
paragraph 3 below.
3. (i) If the shares are trading at net asset
value or at a premium above net asset value at the time of
valuation, the Fund will issue new Shares at the greater of
net asset value or 95% of the then current market price.
(ii) If the shares are trading at a discount
from net asset value at the time of valuation, the Plan
Agent will receive the dividend or distribution in cash and
apply it to the purchase of the Fund's Shares in the open
market, on the New York Stock Exchange (the "Exchange") or
elsewhere, for the Participants' accounts. Such purchases
will be made on or shortly after the payment date for such
dividend or distribution and in no event more than 30 days
after such date except where temporary curtailment or
suspension of purchase is necessary to comply with Federal
securities laws. If, before the Plan Agent has completed its
purchases, the market price exceeds the net asset value of a
share of common stock, the average purchase price per share
paid by the Plan Agent may exceed the net asset value of the
Fund's shares, resulting in the acquisition of fewer shares
than if the dividend or distribution had been in shares
issued by the Fund.
<PAGE>
4. For all purposes of the Plan: (i) the market
price of the Fund's common stock on a particular date shall
be the last sale price on the Exchange at the close of the
previous trading day or, if there is no sale on the Exchange
on that date, then the mean between the closing bid and
asked quotations for such stock on the Exchange on such date
and (ii) net asset value per share of common stock on a
particular date shall be as determined by or on behalf of
the Fund.
5. The open-market purchases provided for above
may be made on any securities exchange where the shares of
common stock of the Fund are traded, in the over-the-counter
market or in negotiated transactions, and may be on such
terms as to price, delivery and otherwise as the Plan Agent
shall determine. Monies held by the Plan Agent uninvested
will not bear interest, and it is understood that, in any
event, the Plan Agent shall have no liability in connection
with any inability to purchase shares of common stock within
30 days after the initial date of such purchase as herein
provided, or with the timing of any purchases effected. The
Plan Agent shall have no responsibility as to the value of
the shares of common stock of the Fund acquired for any
Participant's account.
6. The Plan Agent will hold shares of common
stock acquired pursuant to the Plan in the Plan Agent's name
or that of its Nominee. The Plan Agent will forward to each
Participant any proxy solicitation material and will vote
any shares of common stock so held for each Participant only
in accordance with the proxy returned by any such
Participant to the Fund. Upon any Participant's written
request, the Plan Agent will cause the Fund to deliver to
her or him, without charge, a certificate or certificates
for the full shares of common stock. Shares represented by
certificates acquired in this manner will continue to be
included in the Participant's account under the Plan.
7. The Plan Agent will confirm to each
Participant acquisitions made for its account as soon as
practicable but not later than 60 days after the date
thereof. Although a Participant may from time to time have
an undivided fractional interest (computed to three decimal
places) in a share of common stock of the Fund, no
certificates for a fractional share will be issued. However,
dividends and distributions on fractional shares of common
stock will be credited to Participants' accounts.
8. Any stock dividends or split shares
distributed by the Fund on shares of common stock held by
the Plan Agent for any Participant will be credited to such
2
<PAGE>
Participant's account. In the event that the Fund makes
available to Participants rights to purchase additional
shares of common stock or other securities, the Plan Agent
will sell such rights and apply the proceeds of the sale to
the purchase of additional shares of common stock of the
Fund for the account of Participants.
9. The Plan Agent's service fee for handling
capital gains distributions or income dividends will be paid
by the Fund. Participants will be charged a pro rata share
of brokerage commissions on all open market purchases.
10. Any Participant may withdraw shares from such
Participant's account or terminate such Participant's
account under the Plan by notifying the Plan Agent in
writing. Such withdrawal or termination will be effective
immediately if notice is received by the Plan Agent not less
than 10 days prior to any dividend or distribution record
date, otherwise such withdrawal or termination will be
effective, with respect to any subsequent dividend or
distribution, on the first trading day after the dividends
paid for such record date have been credited to the
Participant's account. The Plan may be terminated by the
Fund or the Plan Agent with the Fund's prior consent upon
notice in writing mailed to each Participant at least 90
days prior to any record date for the payment of any
dividend or distribution by the Fund. Upon any withdrawal or
termination, the Plan Agent will cause to be delivered to
each Participant a certificate or certificates for the
appropriate number of full shares and a cash adjustment for
any fractional share (valued at the market value of the
shares at the time of withdrawal or termination); provided,
however that any Participant may elect by notice to the Plan
Agent in writing in advance of such termination to have the
Plan Agent sell part or all of the shares in question and
remit the proceeds to such Participant, net of any broker-
age commissions. A $5.00 fee will be charged by the Plan
Agent upon any cash withdrawal or termination, and the Plan
Agent is authorized to sell a sufficient number of the
Participant's shares to cover such fee and any brokerage
commission on such sale.
11. These terms and conditions may be amended or
supplemented by the Fund or the Plan Agent with the Fund's
prior consent only by mailing to each Participant
appropriate written notice at least 90 days prior to the
effective date thereof. The amendment or supplement shall be
deemed to be accepted by each Participant unless, with
respect to any such Participant, prior to the effective date
thereof, the Plan Agent receives written notice of the
termination of that Participant's account under the Plan.
3
<PAGE>
Any such amendment may include an appointment by the Plan
Agent in its place and stead of a successor Plan Agent under
these terms and conditions, with full power and authority to
perform all or any of the acts to be performed by the Plan
Agent under these terms and conditions. Upon any such
appointment of a successor plan agent for the purpose of
receiving dividends and distributions, the Fund will be
authorized to pay to such successor plan agent, for
Participants' accounts, all dividends and distributions
payable on the shares of common stock held in each
Participant's name or under the Plan for retention or
application by such successor plan agent as provided in
these terms and conditions.
12. The Plan Agent shall at all times act in good
faith and agree to use its best efforts within reasonable
limits to ensure the accuracy of all services performed
under this agreement and to comply with applicable law, but
assumes no responsibility and shall not be liable for loss
or damage due to errors unless such error is caused by its
or its employees' negligence, bad faith or willful
misconduct.
13. The Participant shall have no right to draw
checks or drafts against such Participant's Account or to
give instructions to the Plan Agent in respect of any shares
or cash held therein except as expressly provided herein.
14. The Participant agrees to notify the Plan
Agent promptly in writing of any change of address. Notices
to the Participant may be given by the Plan Agent by letter
addressed to the Participant as shown on the records of the
Plan Agent.
15. This Agreement and the account established
hereunder for the Participant shall be governed by and
construed in accordance with the laws of the Commonwealth of
Massachusetts and the Rules and Regulations of the
Securities and Exchange Commission, as they may be changed
or amended from time to time.
4
00250230.AK2
<PAGE>
DRAFT DATED
6/19/96
DEALER MANAGER AGREEMENT
June 21, 1996
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Alliance World Dollar Government Fund, Inc., a
corporation formed under the laws of the State of Maryland (the
"Company"), Alliance Capital Management L.P., a limited
partnership formed under the laws of the State of Delaware
("Alliance") and Smith Barney Inc., a corporation formed under
the laws of the State of Delaware ("Smith Barney"), confirm their
agreement, subject to the terms and conditions set out below,
with respect to the proposed issuance by the Company to its
shareholders of rights entitling their holders to subscribe for
shares of the Company's Common Stock, par value $.01 per share.
1. Definitions
The following terms have the following meanings when
used in this Agreement:
(a) "Acts" means the Securities Act and the Investment
Company Act collectively.
(b) "Advisory Agreement" means the Advisory Agreement,
dated as of October 29, 1992, between the Company and
Alliance.
(c) "Administration Agreement" means the Administration
Agreement, dated as of October 1, 1994, between the Company
and Alliance.
(d) "Agreement" means this Dealer Manager Agreement as
originally executed and as amended, modified, supplemented or
restated from time to time.
(e) "Availability Date" has the meaning set forth in
Section 8(d) of this Agreement.
<PAGE>
(f) "Business Day" means any day on which the NYSE is
open for trading.
(g) "Code" means the U.S. Internal Revenue Code of
1986, as amended.
(h) "Commission" means the U.S. Securities and Exchange
Commission.
(i) "Common Stock" means the Company's Common Stock,
par value $.01 per share.
(j) "Company Agreements" means, collectively, the
Subscription Agent Agreement, the Advisory Agreement, the
Custody Agreement, the Transfer Agency Agreement and the
Administration Agreement.
(k) "Confirmation Date" is the date nine business days
following the Expiration Date when confirmation notices are
sent to Shareholders as set forth in the Prospectus.
(l) "Custodian" means The Bank of New York.
(m) "Custody Agreement" means the Custody Agreement,
dated as of October 3, 1994, between the Company and the
Custodian.
(n) "Effective Date" means the date of the Effective
Time.
(o) "Effective Time" has the meaning set forth in
Section 4(a) of this Agreement.
(p) "Exchange Act" means the U.S. Securities Exchange
Act of 1934, as amended.
(q) "Exercising Rights Holders" means Rights Holders
purchasing Shares in the Primary Subscription.
(r) "Expiration Date" means July 19, 1996, unless
extended by the Fund until a date not later than July 26,
1996.
(s) "Investment Advisers Act" means the U.S. Investment
Advisers Act of 1940, as amended.
(t) "Investment Company Act" means the U.S. Investment
Company Act of 1940, as amended.
(u) "NYSE" means the New York Stock Exchange, Inc.
2
<PAGE>
(v) "Offer" means the offer of Shares contemplated by
the Company's proposed issuance of Rights.
(w) Over-Subscription Privilege" means the entitlement
of Exercising Rights Holders who fully exercise their Rights
to subscribe for additional Shares, as described in the
Prospectus, and the option of the Company to increase the
number of Shares subject to subscription by up to 25% of the
Shares, or 721,058 Shares, in order to cover over-
subscription requests, as described in the Prospectus.
(x) "Primary Subscription" means a Record Date
Shareholder's right to acquire Shares (other than Shares that
may be acquired pursuant to the Over-Subscription Privilege)
during the Subscription Period at the Subscription Price.
(y) "Prospectus" means the form of prospectus and
statement of additional information relating to the Offer,
dated June 21, 1996 as first filed with the Commission
pursuant to and in accordance with Rule 497(h) under the
Securities Act or (if no such filing is required) as included
in the Registration Statement.
(z) "Record Date" means June 21, 1996.
(aa) "Record Date Shareholders" means the Company's
shareholders of record as of the close of business on the
Record Date.
(bb) "Registration Statement" means the registration
statement relating to the Offer on Form N-2 (File Nos.
333-04015 and 811-07108) under the Acts, as amended at the
Effective Time, including all information (if any) deemed to
be a part of such registration statement as of the Effective
Time pursuant to Rule 430A(b) under the Securities Act, filed
by the Company with the Commission.
(bb) "Rights" means the non-transferable rights
proposed to be issued by the Company to Record Date
Shareholders, which non-transferable rights entitle their
holders to subscribe for Shares.
(cc) "Rights Holders" means Record Date Shareholders.
(dd) "Rules and Regulations" means the rules and
regulations adopted by the Commission under the Securities
Act and/or the Investment Company Act.
(ee) "Securities Act" means the U.S. Securities Act of
1933, as amended.
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(ff) "Shares" means an aggregate of up to 3,605,293
shares of Common Stock for which Rights Holders may
subscribe, including 721,058 Shares the Company may make
available pursuant to the Over-Subscription Privilege.
(gg) "Subscription Agent" means First Data Investor
Services Group, Inc.
(hh) "Subscription Agent Agreement" means the
Subscription Rights Agency Agreement, dated as of June 21,
1996, between the Company and the Subscription Agent.
(ii) "Subscription Period" means the period of time
beginning on June 21, 1996 and ending at 5:00 p.m., Eastern
time, on the Expiration Date.
(jj) "Subscription Price" means the Subscription Price
set forth in the Prospectus.
(kk) "Transfer Agency Agreement" means the Transfer
Agency and Registrar Agreement dated November 5, 1992 between
the Fund and First Data Investor Services Group, Inc.
2. The Offer
The Company is proposing to issue Rights to Record Date
Shareholders, which Rights entitle their holders to subscribe for
Shares. Under the Company's proposal, each Record Date
Shareholder will be issued one Right for each full share of
Common Stock owned on the Record Date. No fractional Rights will
be issued. The Rights will entitle each Record Date Shareholder
to acquire in the Primary Subscription at the Subscription Price
one Share for each three Rights held. All Rights will be able to
be exercised immediately upon receipt and until 5:00 p.m.,
Eastern time, on the Expiration Date. Any Record Date
Shareholder who fully exercises all Rights initially issued to
him or her (other than those Rights that cannot be exercised
because they represent the right to acquire less than one Share)
will be entitled to subscribe for, subject to allotment, Shares
that are not otherwise subscribed for by Exercising Rights
Holders in the Primary Subscription pursuant to the Over-
Subscription Privilege. Additional terms and conditions of the
Offer are set out in the Registration Statement.
3. Appointment of Dealer Manager
The Company appoints Smith Barney as the exclusive
dealer manager in connection with the Offer and Smith Barney
accepts that appointment. Smith Barney represents and warrants
that it is a broker-dealer registered under the Exchange Act.
4
<PAGE>
4. Representations and Warranties of the Company
The Company represents and warrants to, and agrees with,
Smith Barney that:
(a) A registration statement (No. 333-04015) including
a form of prospectus and statement of additional information
relating to the Offer has been filed with the Commission and
either (i) has been declared effective under the Securities
Act and is not proposed to be amended or (ii) is proposed to
be amended by amendment or post-effective amendment. If the
Company does not propose to amend such registration statement
and if any post-effective amendment to such registration
statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent
such amendment has been declared effective by the Commission.
For purposes of this Agreement, "Effective Time" means (i) if
the Company has advised Smith Barney that is does not propose
to amend such registration statement, the date and time as of
which such registration statement, or the most recent
post-effective amendment thereto (if any) filed prior to the
execution and delivery of this Agreement, was declared
effective by the Commission, or (ii) if the Company has
advised Smith Barney that it proposes to file an amendment or
post-effective amendment to such registration statement, the
date and time as of which such registration statement, as
amended by such amendment or post-effective amendment, as the
case may be, is declared effective by the Commission.
(b) If the Effective Time is prior to the execution and
delivery of this Agreement: (i) on the Effective Date, the
Registration Statement conformed in all material respects to
the requirements of the Acts and the Rules and Regulations
and did not include any untrue statement of a material fact
or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and (ii) on the date of this Agreement, the
Registration Statement and the Prospectus conform, and at the
time of filing of the Prospectus pursuant to Rule 497(h)
under the Securities Act, the Prospectus will conform, in all
respects to the requirements of the Acts and the Rules and
Regulations, and neither of such documents includes, or will
include, any untrue statement of a material fact or omits, or
will omit, to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading (in the case of the Prospectus, in light of the
circumstances under which such statements were made). If the
Effective Time is subsequent to the execution and delivery of
this Agreement: on the Effective Date, the Registration
Statement and the Prospectus will conform in all respects to
the requirements of the Acts and the Rules and Regulations,
5
<PAGE>
and neither of such documents will include any untrue
statement of a material fact or will omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading. The two
preceding sentences do not apply to statements in or
omissions from the Registration Statement or Prospectus based
upon written information furnished to the Company by Smith
Barney specifically for use therein.
(c) Ernst & Young LLP, whose report appears in the
Prospectus, is a firm of independent accountants as required
by the Acts and the Rules and Regulations with respect to the
Company. The financial statements and financial highlights
(including the related notes) included in the Registration
Statement or the Prospectus present fairly the financial
position, results of operations, changes in net assets and
financial highlights of the Company at the dates and for the
periods indicated therein and have been prepared in
accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods
indicated.
(d) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of
the State of Maryland, with full power and authority to own
or lease its properties and conduct its business as described
in the Prospectus and is duly qualified to do business and is
in good standing as a foreign corporation in each
jurisdiction in which the character of the business conducted
by it or the location of the properties owned or leased by it
make such qualification necessary. The Company has no
subsidiaries.
(e) All of the outstanding shares of Common Stock have
been duly authorized and are validly issued, fully paid and
nonassessable, with no personal liability attaching to the
ownership thereof; the Rights and the Shares have been duly
authorized, or, with respect to Shares to be issued pursuant
to the Over-Subscription Privilege, will be duly authorized,
and the Rights and the Shares, upon issuance and delivery
and, in the case of the Shares, payment therefor, as
described in the Registration Statement and the Prospectus,
will be validly issued, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof.
Except for the Rights, there are no preemptive rights or
other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any shares of
Common Stock (including the Shares). Neither the filing of
the Registration Statement nor the Offer as contemplated by
this Agreement and the Subscription Agent Agreement gives
rise to any rights, other than those which have been waived
6
<PAGE>
or satisfied, for or relating to the registration of any
shares of Common Stock or other securities of the Company.
The capitalization of the Company is as set forth in the
Prospectus, and the Rights and the Shares conform to the
descriptions thereof contained in the Prospectus.
(f) Except as described in or contemplated by the
Registration Statement and the Prospectus, (A) there has not
been any material adverse change in, or adverse development
which materially affects, the condition (financial or other),
results of operation, business, net worth or prospects, of
the Company from the date as of which information is given in
the Prospectus, (B) the Company has not incurred any
liabilities or obligations, direct or contingent, or entered
into any transactions, other than in the ordinary course of
business, that are material to the Company, (C) the Company
has no outstanding long-term debt and (D) there have been no
transactions which are material to the Company other than
those in the ordinary course of business.
(g) Except as described in the Prospectus, there is no
litigation or governmental proceeding to which the Company is
a party or to which any property of the Company is subject or
which is pending or, to the knowledge of the Company,
contemplated against the Company which might result in any
material adverse change in the condition (financial or
other), results of operations, business, net worth or
prospects of the Company or which might materially and
adversely affect the properties and assets thereof or which
is required to be disclosed in the Prospectus.
(h) The Company is not in violation of its Articles of
Incorporation or Bylaws or in default under any agreement,
indenture or instrument to which the Company is a party or by
which it is bound, or to which any of its properties is
subject.
(i) The Company is not in violation of any law,
ordinance, governmental rule or regulation or court decree to
which it may be subject which violation might have a material
adverse effect on the condition (financial or other), results
of operation, business, net worth or prospects of the
Company.
(j) The Company Agreements have been duly authorized,
executed and delivered by the Company and, assuming due
authorization, execution and delivery by the other parties
thereto, constitute the valid and binding agreement of the
Company and are enforceable against the Company in accordance
with their terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium or other laws relating
7
<PAGE>
to or affecting creditors' rights and to general equitable
principles (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(k) This Agreement has been duly authorized, executed
and delivered by the Company and constitutes the valid and
binding agreement of the Company, and is enforceable against
the Company in accordance with its terms subject, as to
enforcement, to bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting creditors'
rights and to general equitable principles (regardless of
whether enforceability is considered in a proceeding in
equity or at law) subject to the qualification that the right
to indemnity and contribution thereunder may be limited by
Federal or State law.
(l) The Company is not, or with the giving of notice or
lapse of time or both would not be, in violation of or in
default under, nor will the execution or delivery hereof and
of the Subscription Agent Agreement or consummation of the
transactions contemplated hereby or by the Company
Agreements, including, without limitation, the distribution
of the Rights and the allotment, issue and sale of the
Shares, result in a violation of, or constitute a default
under, the Articles of Incorporation or by-laws of the
Company, or any agreement, indenture or other instrument, to
which the Company is a party or by which it is bound, or to
which any of its properties is subject, nor will the
performance by the Company of its obligations hereunder or
under the Company Agreements violate any law, rule,
administrative regulation or decree of any court, or any
governmental agency or body having jurisdiction over the
Company, or any of its properties, or result in the creation
or imposition of any lien, charge, claim or encumbrance upon
any property or asset of the Company. Except for permits and
similar authorizations required under the Acts and the
securities or "Blue Sky" laws of certain jurisdictions and
for such permits and authorizations which have been obtained,
no consent, approval, authorization or order or filing with,
of any court, governmental agency or body or financial
institution is required in connection with the consummation
of the transactions contemplated by this Agreement or the
Company Agreements.
(m) The Company (A) has not taken and shall not take,
directly or indirectly, any action designed to cause or
result in, or which has constituted or which might reasonably
be expected to constitute, the stabilization or manipulation
of the price of the shares of Common Stock to facilitate the
Offer, (B) has not since the filing of the Registration
Statement sold, bid for or purchased, or paid anyone any
8
<PAGE>
compensation for soliciting purchases of, shares of Common
Stock of the Company and (C) will not, until the later of the
expiration of the Rights or the completion of the
distribution (within the meaning of Rule 10b-6 under the
Exchange Act) of the Shares, sell, bid for or purchase, pay
or agree to pay to any person any compensation for soliciting
another to purchase any securities of the Company (except for
the solicitation of the exercises of Rights pursuant to this
Agreement); provided that any action in connection with the
Company's dividend reinvestment plan taken in accordance with
the terms of such plan will not be deemed to be within the
terms of this Section 4(m) and further provided that the
Company makes no representation with respect to any
transactions by Smith Barney or any other broker or dealer
other than Alliance Fund Distributors, Inc. to stabilize the
price of the shares of Common Stock in connection with the
Offer.
(n) The Company is duly registered with the Commission
under the Investment Company Act as a closed-end
non-diversified management investment company and no order of
suspension or revocation of such registration has been issued
or proceedings therefor initiated or threatened by the
Commission.
(o) Each of the Company Agreements complies in all
material respects with all applicable provisions of the
Investment Company Act.
(p) The Common Stock has been duly listed on the New
York Stock Exchange and, prior to their issuance, the Shares
will have been approved for listing, subject to official
notice of issuance.
(q) The Company intends to direct the investment of the
proceeds of the Offer described in the Registration Statement
and the Prospectus in such a manner as to comply with the
requirements of Subchapter M of the Code ("Subchapter M"),
and is qualified and intends to continue to qualify as a
regulated investment company under Subchapter M.
(r) There are no material restrictions, limitations or
regulations with respect to the ability of the Company to
invest its assets as described in the Prospectus other than
as described therein or as may be imposed by law.
(s) The advertising and sales literature used by the
Company in connection with the public offering and sale of
the Shares and filed by the Company with the NASD for review
(the "Prospectus Wrapper") complies with the Acts and the
rules and regulations thereunder and does not contain an
9
<PAGE>
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading.
(t) There are no contracts or other documents which are
required to be filed as exhibits to the Registration
Statement by the Acts or by the Rules and Regulations
thereunder which have not been filed as exhibits to the
Registration Statement or incorporated therein by reference
as permitted by the Rules and Regulations under the Acts.
5. Representations and Warranties of Alliance
Alliance represents and warrants to, and agrees with,
Smith Barney that:
(a) Alliance has been duly organized and is validly
existing and in good standing as a limited partnership under
the laws of the State of Delaware, with partnership power and
authority to own its properties and conduct its business as
described in the Prospectus and is duly licensed or qualified
as a foreign entity to do business in each other jurisdiction
in which its ownership of property or the conduct of its
business requires such qualification or license, except where
the failure to be so qualified or licensed, considering all
such cases in the aggregate, would not have a material
adverse effect on Alliance.
(b) Alliance is duly registered as an investment
adviser under the Investment Advisers Act and is not
prohibited by the Investment Advisers Act or the Investment
Company Act, or the rules and regulations under such acts,
from acting as Alliance for the Company as contemplated by
the Prospectus and there does not exist any proceeding which
could adversely affect the registration or good standing of
Alliance with the Commission.
(c) This Agreement and the Advisory Agreement have each
been duly authorized, executed and delivered on behalf of
Alliance and each constitutes a valid and binding obligation
of Alliance enforceable in accordance with its terms,
subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws relating
to or affecting creditors' rights generally and to general
equity principles (regardless of whether enforceability is
considered in a proceeding in equity or at law); and neither
the execution and delivery of this Agreement or the Advisory
Agreement nor the performance by Alliance of its obligations
thereunder will conflict with or result in a breach or
violation of any of the terms and provisions of the Agreement
of Limited Partnership of Alliance or any law, order, rule or
10
<PAGE>
regulation applicable to Alliance of any United States
jurisdiction, court, federal or state regulatory body,
administrative agency or other governmental body, stock
exchange or securities association having jurisdiction over
Alliance or its properties or operations.
(d) There has not, since the date of the Prospectus,
been any material adverse change, or to the knowledge of
Alliance any development, reasonably likely to cause a
material adverse change, in Alliance's ability to perform its
obligations under this Agreement, the Advisory Agreement or
the Administration Agreement.
(e) Except as set forth in the Prospectus, there is not
pending or, to the knowledge of Alliance, threatened, any
action, suit or proceeding to which Alliance is a party
before or by any court or governmental agency or body, which
is likely to have a material adverse effect upon the Company
or Alliance or upon the ability of Alliance to perform its
obligations under this Agreement, the Advisory Agreement or
the Administration Agreement.
(f) Alliance (i) has not taken, directly or indirectly,
any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of
any security of the Company to facilitate the issuance of the
Rights or the sale or resale of the Shares, (ii) has not
since the filing of the Registration Statement sold, bid for
or purchased, or paid anyone any compensation for soliciting
purchases of, shares of Common Stock of the Company and (iii)
will not, until the later of the expiration of the Rights or
the completion of the distribution (within the meaning of
Rule 10b-6 under the Exchange Act) of the Shares, sell, bid
for or purchase, pay or agree to pay any person any
compensation for soliciting another to purchase any
securities of the Company (except for the solicitation of
exercises of Rights pursuant to this Agreement); provided
that any action in connection with the Company's dividend
reinvestment plan taken in accordance with the terms of such
plan will not be deemed to be within the terms of this
Section 5(g) and further provided that Alliance makes no
representation with respect to any transactions by Smith
Barney or any other broker or dealer other than Alliance Fund
Distributors, Inc. to stabilize the price of the shares of
Common Stock in connection with the Offer.
(g) Alliance owns, possesses or has obtained and
currently maintains all material governmental licenses,
permits, consents, orders, approvals and other authorizations
("Authorizations"), as are necessary for Alliance to carry on
11
<PAGE>
its business as set forth in and contemplated by the
Prospectus except where the failure to obtain such
Authorizations would not have a material adverse effect on
the ability of Alliance to perform its obligations under this
Agreement, the Advisory Agreement or the Administration
Agreement.
(h) The description of Alliance and its businesses in
the Registration Statement and the Prospectus complies with
the requirements of the Act, the Investment Company Act and
the Rules and Regulations and does not contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to
make the statements therein not misleading in light of the
circumstances under which they were made.
(i) There are no material restrictions, limitations or
regulations with respect to the ability of the Company to
invest its assets as described in the Prospectus other than
as may be described therein or as may be imposed by law.
6. Solicitation of Exercise of Rights; Financial Advisory
Services
(a) On the basis of the representations and warranties,
and subject to the terms and conditions, set forth in this
Agreement:
(i) The Company hereby appoints Smith Barney and other
soliciting dealers entering into a Soliciting Dealer
Agreement, in the form attached hereto as Exhibit A, with the
Dealer Manager (the "Soliciting Dealers"), to solicit, in
accordance with applicable law, and their customary practice,
the exercise of the Rights, subject to the terms and
conditions of this Agreement, the procedures described in the
Registration Statement and, where applicable, the terms and
conditions of such Soliciting Dealer Agreement;
(ii) The Company agrees to furnish, or cause to be
furnished, to Smith Barney, lists, or copies of those lists,
showing the names and addresses of, and number of Shares held
by, Record Date Shareholders as of the Record Date, and Smith
Barney agrees to use such information only in connection with
the Offer, and not to furnish the information to any other
person except for securities brokers and dealers that Smith
Barney has requested to solicit exercises of Rights; and
(iii) The Company will advise or cause the Subscription
Agent to advise the Dealer Manager and each Soliciting Dealer
from day to day during the period of, and promptly after the
termination of, the Offer, as to the names and addresses of
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<PAGE>
all shareholders exercising Rights, the total number of
Rights exercised by each shareholder during the immediately
preceding day, indicating the total number of Rights verified
to be in proper form for exercise, rejected for exercise and
being processed and, for the Dealer Manager and each
Soliciting Dealer, the number of Rights exercised on exercise
forms indicating the Dealer Manager or such Soliciting
Dealer, as the case may be, as the broker-dealer with respect
to such exercise, and as to such other information as the
Dealer Manager may reasonably request; and will notify the
Dealer Manager and each Soliciting Dealer, not later than
5:00 P.M., Eastern time, on the first business day following
the Expiration Date, of the total number of Rights exercised
and Shares related thereto, the total number of Rights
verified to be in proper form for exercise, rejected for
exercise and being processed and, for the Dealer Manager and
each Soliciting Dealer, the number of Rights exercised on
exercise forms indicating the Dealer Manager or such
Soliciting Dealer, as the case may be, as the broker-dealer
with respect to such exercise, and as to such other
information as the Dealer Manager may reasonably request.
(b) Smith Barney agrees to provide to the Company, in
addition to the services described in paragraph (a) of this
Section 6, financial advisory services and marketing assistance
in connection with the Offer. No fee, other than the fees
provided for in Section 7 of this Agreement and the reimbursement
of the Dealer Manager's out-of-pocket expenses as described in
Section 8 of this Agreement, will be payable by the Company to
the Dealer Manager in connection with the services provided by
the Dealer Manager pursuant to this Section 6.
(c) The Company and Smith Barney agree that Smith
Barney is an independent contractor with respect to its
solicitation of the exercise of Rights contemplated by this
Agreement and the performance of financial advisory services and
marketing assistance to the Company contemplated by this
Agreement.
(d) In rendering the services contemplated by this
Agreement, Smith Barney agrees not to make any representations,
oral or written, to any shareholders or prospective shareholders
of the Company that are not contained in the Prospectus, unless
previously authorized to do so in writing by the Company.
(e) In rendering the services contemplated by this
Agreement, Smith Barney will not be subject to any liability to
the Company, Alliance or any of their affiliates, for any act or
omission on the part of any securities broker or dealer (other
than itself or any of its affiliates) or any other person, and
Smith Barney will not be liable for its own acts or omissions in
13
<PAGE>
performing its obligations under this Agreement, except for any
losses, claims, damages, liabilities and expenses that resulted
from any acts or omissions undertaken or omitted to be taken by
Smith Barney through its gross negligence or willful misconduct.
7. Dealer Manager and Solicitation Fees
In full payment for the services rendered and to be
rendered hereunder, the Company agrees to pay in immediately
available funds on the Confirmation Date:
(a) to Smith Barney, as compensation for its services
to the Company as financial adviser in connection with the
Offer, a fee equal to an amount computed by multiplying (i)
.0125, by (ii) the aggregate number of Shares purchased in
the Offer (whether such Shares are purchased pursuant to the
exercise of Rights or the Over-Subscription Privilege), by
(iii) the Subscription Price;
(b) to each Soliciting Dealer (including Smith Barney)
designated on any subscription form related to the Rights
("Listed Broker") a fee equal to an amount computed by
multiplying (i) .025, by (ii) the number of Shares purchased
pursuant to each subscription form upon which the Listed
Broker is designated (whether such Shares are purchased
pursuant to the exercise of Rights or the Over-Subscription
Privilege), by (iii) the Subscription Price; and
(c) to Smith Barney a fee equal to an amount computed
by multiplying (i) .025, by (ii) the number of Shares
purchased pursuant to each subscription form upon which
neither Smith Barney nor any Listed Broker is designated
(whether such Shares are purchased pursuant to the exercise
of Rights or the Over-Subscription Privilege), by (iii) the
Subscription Price.
(d) The Company shall be under no liability for any
payment of soliciting fees that may be owed to any Soliciting
Dealer pursuant to paragraphs (b) or (c) of this Section 7
which payment fees are paid in accordance with written
instructions received from the Dealer Manager.
8. Covenants of the Company, Alliance
The Company, Alliance (but in the case of Alliance, only
with respect to paragraphs (f)(iv) and (m)) and Smith Barney (but
in the case of Smith Barney, only with respect to paragraph
(f)(iv)) agree:
(a) If the Effective Time is prior to the execution and
delivery of this Agreement, the Company will file the
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<PAGE>
Prospectus with the Commission pursuant to and in accordance
with Rule 497(h) under the Securities Act not later than the
earlier of (a) the second business day following execution
and delivery of this Agreement or (b) the fifteenth business
day after the Effective Date.
The Company will advise Smith Barney promptly of any
such filing pursuant to Rule 497(h).
(b) The Company will advise Smith Barney promptly of
any proposal to amend or supplement the Registration
Statement as filed, or the Prospectus and will not effect
such amendment or supplementation without Smith Barney's con-
sent, which shall not be unreasonably withheld; the Company
will also advise Smith Barney promptly of the effectiveness
of the Registration Statement (if the Effective Time is
subsequent to the execution and delivery of this Agreement)
and of any amendments or supplementation of the Registration
Statement or the Prospectus, and of the institution by the
Commission of any stop order proceedings in respect of the
Registration Statement, and will use its best efforts to
prevent the issuance of any such stop order and to obtain as
soon as possible its lifting, if issued; the Company will
also advise Smith Barney of the suspension of the
qualification of the Shares for offering or sale in any
jurisdiction.
(c) If at any time when the Prospectus relating to the
Offer is required to be delivered under the Securities Act,
any event occurs as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of
a material fact, or omit to state any material fact necessary
to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or
if it is necessary at any time to amend the Prospectus to
comply with the Acts, the Company promptly will prepare and
file with the Commission an amendment or supplement which
will correct such statement or omission or an amendment which
will effect such compliance.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make
generally available to its security holders an earnings
statement covering a period of at least twelve months
beginning after the effective date of the Registration
Statement which will satisfy the provisions of Section 11(a)
of the Securities Act. For the purpose of the preceding
sentence "Availability Date" means the 60th day after the end
of the fourth fiscal quarter following the fiscal quarter
that includes the Effective Date, except that, if such fiscal
quarter is the last quarter of the Company's fiscal year,
15
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"Availability Date" means the 90th day after the end of such
fourth fiscal quarter.
(e) The Company will, without charge, furnish to Smith
Barney copies of the Registration Statement (one of which
will be signed and will include all exhibits), the
Prospectus, and all amendments and supplements to such
documents, in each case as soon as available and in such
quantities as Smith Barney requests.
(f) (i) The Company will pay all expenses incident to
the performance of its obligations under this Agreement,
including, but not limited to, expenses relating to (i) the
printing and filing of the Registration Statement as
originally filed and of each amendment thereto, (ii) the
preparation, issuance and delivery of the certificates for
the Shares and exercise forms relating to the Rights, (iii)
the fees and disbursements of the Company's counsel
(including the fees and disbursements of local counsel) and
accountants, (iv) the qualification of the Rights and the
Shares under securities laws in accordance with the
provisions of Section 8(g) of this Agreement and the
preparation and printing of a Blue Sky Memorandum (including
related fees and expenses of counsel to Smith Barney),
(v) the printing or other production and delivery to Smith
Barney of copies of the Registration Statement as originally
filed and of each amendment thereto and of the Prospectus and
any amendments or supplements thereto, (vi) the fees and
expenses incurred with respect to filing with the National
Association of Securities Dealers, Inc., (vii) the printing
or other production and delivery of this Agreement and the
Soliciting Dealer Agreement, (viii) the fees and expenses
incurred in connection with the listing of the Shares on the
NYSE, (ix) the printing or other production, mailing and
delivery expenses (including any such expenses incurred by
the Dealer Manager) incurred in connection with the
Prospectus and all advertising and sales literature,
including the Prospectus Wrapper, used in connection with the
Offer, (x) the transportation and other expenses incurred by
or on behalf of Company representatives in connection with
presentations in connection with the Offer, and (xi) the fees
and expenses incurred with respect to the Subscription Agent
and the Information Agent.
(ii) In addition to any fees that may be payable to
Smith Barney under this Agreement, the Company agrees to
reimburse Smith Barney upon request made from time to time
for its reasonable expenses incurred in connection with its
activities under this Agreement, including the reasonable
fees and disbursements of its legal counsel (excluding Blue
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<PAGE>
Sky fees and expenses which are paid directly by the
Company), in an amount up to $100,000.
(iii) If this agreement is terminated by Smith Barney in
accordance with the provisions of Section 10(a), 10(b),
11(c)(i), 11(c)(iv) or 11(c)(v), the Company agrees to
reimburse Smith Barney for all of its reasonable out-of-
pocket expenses incurred in connection with its performance
hereunder, including the reasonable fees and disbursements of
counsel for Smith Barney. In the event the transactions
contemplated hereunder are not consummated, the Company
agrees to pay all of the costs and expenses set forth in
paragraphs (i) of this Section 8(f) which the Company would
have paid if such transactions had been consummated.
(iv) In the event the transactions contemplated hereby
are consummated and less than 1,442,118 Shares are purchased
pursuant to the exercise of Rights, (x) Alliance agrees to
reimburse the Company for one-half of the costs and expenses
set forth in paragraphs (i) and (ii) of this Section 8(f),
and (y) Smith Barney agrees to reimburse Alliance for its
reasonable expenses incurred in connection with such
transactions in an amount equal to the amount received by
Smith Barney pursuant to paragraph (ii) of this Section 8(f).
(g) To use every reasonable effort in cooperating with
Smith Barney to permit the distribution of the Rights and the
offer and sale of the Shares under the securities laws of the
United States (including any state, territory or possession
and the District of Columbia) for so long as necessary for
the distribution of the Rights and the Shares, provided,
however, that the Company shall not be obligated to file any
general consent to service of process, or to qualify as a
foreign corporation or as a dealer in securities in any
jurisdiction in which it is not now so qualified.
(h) During the period of five years hereafter, the
Company will furnish to Smith Barney, as soon as practicable
after the end of each fiscal year, a copy of its annual
report to stockholders for such year; and the Company will
furnish to Smith Barney (i) as soon as available, a copy of
each report or definitive proxy statement of the Company
filed with the Commission under the Investment Company Act or
the Exchange Act or mailed to stockholders, and (ii) from
time to time, such other information concerning the Company
as Smith Barney may reasonably request.
(i) To advise Smith Barney promptly of any action by
the NYSE rejecting, suspending or terminating the application
for the listing of, or the listing of, the Shares.
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<PAGE>
(j) For a period of 180 days from the date of this
Agreement, the Company will not, without the prior consent of
Smith Barney, offer or sell, or enter into any agreement to
sell, any equity or equity related securities of the Company
or securities convertible into such securities, other than
the Shares and the Common Stock issued in reinvestment of
dividends or distributions.
(k) The Company will apply the net proceeds from the
Offer as set forth under "Use of Proceeds" in the Prospectus.
(l) The Company will use its best efforts to maintain
its qualification as a regulated investment company under
Subchapter M.
(m) The Company and Alliance will not take, directly or
indirectly, any action designed to cause or to result in, or
that has constituted or which might reasonably be expected to
constitute the stabilization or manipulation of the price of
any security of the Company to facilitate the issuance of the
Rights or the sale or resale of the Shares; provided that any
action in connection with the Company's dividend reinvestment
plan taken in accordance with the terms of such plan will not
be deemed to be within the meaning of this Section 8(m).
9. Indemnification and Contribution
(a) The Company and Alliance, jointly and severally,
agree to indemnify and hold harmless Smith Barney and each
person, if any, who controls Smith Barney within the meaning of
the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which Smith Barney or such
controlling person may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, the
Prospectus, the Prospectus Wrapper or any amendment or supplement
thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading (in the case of the Prospectus and the Prospectus
Wrapper, in light of the circumstances under which such
statements were made); and will reimburse Smith Barney and each
such controlling person for any legal or other expenses
reasonably incurred by Smith Barney or such controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company
and Alliance will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement or
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<PAGE>
omission or alleged omission made in any of such documents in
reliance upon and in conformity with written information
furnished to the Company by Smith Barney specifically for use
therein. This indemnity agreement will be in addition to any
liability which the Company and Alliance may otherwise have.
(b) Smith Barney agrees to indemnify and hold harmless
the Company and its directors, Alliance and its general partner,
each of the Company's officers who have signed the Registration
Statement and each person, if any, who controls the Company,
Alliance and/or the general partner of Alliance within the
meaning of the Securities Act, against any losses, claims,
damages or liabilities to which the Company, Alliance or any such
director, officer or controlling person may become subject, under
the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement, the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading (in the case of the Prospectus, in light of the
circumstances under which such statements were made), in each
case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Company by Smith Barney specifically
for use therein; and will reimburse any legal or other expenses
reasonably incurred by the Company, Alliance or any such
director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage,
liability or action. This indemnity agreement will be in addition
to any liability Smith Barney may otherwise have.
(c) Promptly after receipt by an indemnified party
under this Section of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section, notify
the indemnifying party (enclosing copies of the papers served) of
the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which
it may have to any indemnified party otherwise than under this
Section. No indemnification provided for in Section 9(a) or (b)
hereof shall be available to any party who shall fail to give
notice as provided in this Section 9(c) if the party to whom
notice was not given was unaware of the proceeding to which such
notice would have related and was prejudiced by the failure to
give such notice, but the omission so to notify such indemnifying
party of such action shall not relieve it from any liability that
it may have to any indemnified party for contribution or
19
<PAGE>
otherwise than on account of the provisions in Section 9(a) or
(b). In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice
from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party under this Section
for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other
than the reasonable costs of investigation. The counsel employed
by the indemnified party will be at the expense of such
indemnified party unless (i) the employment of counsel by the
indemnified party has been authorized in writing by the
indemnifying party, (ii) the indemnified party has reasonably
concluded that there may be legal defenses available to it or
other indemnified parties that are different from or in addition
to those available to the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (iii) the
indemnifying party has not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving
notice of the commencement of the action, in each of which cases
the reasonable fees and expenses of counsel will be at the
expense of the indemnifying party or parties. No indemnifying
party shall be liable under the foregoing indemnity agreement in
respect of any compromise or settlement of any such action
without its written consent. If settlement is made with the
consent of the indemnifying party, such indemnifying party shall
indemnify and hold harmless the indemnified party against any
loss or liability incurred by reason of such settlement.
(d) In no case shall the indemnification provided in
this Section 9 be available to protect any person against any
liability to which any such person would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in
the performance of its or his obligations or duties hereunder, or
by reason of its or his reckless disregard of its or his
obligations and duties thereunder.
(e) If the indemnification provided for in this Section
is unavailable, for any reason other than as specified therein,
to hold harmless an indemnified party under subsection (a), (b)
or (c) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result
of the losses, claims, damages or liabilities referred to in
subsection (a), (b) or (c) above in such proportion as is
20
<PAGE>
appropriate to reflect the relative benefits received by the
Company and Alliance on the one hand and Smith Barney on the
other from the Offer. If the allocation provided by the
immediately preceding sentence is not permitted by applicable law
in the case of a claim for contribution by an indemnified party
under subsection (a) above, then the Company and Alliance shall
each contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities
referred to in subsection (a) above in such proportion as is
appropriate to reflect not only the relative benefits referred to
in the immediately preceding sentence but also the relative fault
of the Company, Alliance and Smith Barney in connection with the
statements or omissions which resulted in such losses, claims,
damages or liabilities as well as any other relevant equitable
considerations. If the allocation provided by the second
preceding sentence is not permitted by applicable law in the case
of a claim for contribution by an indemnified party under
subsection (b) above, then Smith Barney shall contribute to the
amount paid or payable by such indemnified party as a result of
the losses, claims, damages or liabilities referred to in
subsection (b) above in such proportion as is appropriate to
reflect not only the relative benefits referred to in the second
preceding sentence but also the relative fault of the Company and
Alliance on the one hand and Smith Barney on the other in
connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits
received by the Company and Alliance on the one hand and Smith
Barney on the other shall be deemed to be in the same proportion
as the total net proceeds from the subscription for the Shares
before deducting expenses received by the Company bear to the
total fees received by Smith Barney pursuant to Section 7 of this
Agreement with respect to the Offer. The relative fault of the
Company and Alliance and Smith Barney shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by the Company and Alliance or Smith Barney and the parties'
relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in this subsection (d)
shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with
investigating or defending any action or claim which is the
subject of this subsection (d). Notwithstanding the provisions
of this subsection (d), Smith Barney shall not be required to
contribute any amount in excess of the amount by which the total
fees received by Smith Barney pursuant to Section 7 of this
Agreement exceeds the amount of any damages that Smith Barney has
otherwise been required to pay by reason of such untrue or
21
<PAGE>
alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) The obligations of the Company and Alliance under
this Section shall be in addition to any liability which the
Company or Alliance may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls
Smith Barney within the meaning of the Securities Act; and the
obligations of Smith Barney under this Section shall be in
addition to any liability which Smith Barney may otherwise have
and shall extend, upon the same terms and conditions, to each
director of the Company, to each officer of the Company who has
signed the Registration Statement and to each person, if any, who
controls the Company or Alliance within the meaning of the
Securities Act.
(g) The Company and Alliance agree to indemnify each
Soliciting Dealer and its controlling persons to the same extent
and subject to the same conditions and to the same agreements,
including with respect to contribution, provided for in
subsections (a), (b), (c), (d) and (e) of this Section 9.
10. Termination
Smith Barney may terminate this Agreement, in its
absolute discretion, by notice given to and received by the
Company prior to the issuance of the Rights, or if (a) the
Company or Alliance has failed, refused or been unable to perform
any material agreement on its part to be performed under this
Agreement, (b) there has been, since the dates as of which
information is given in the Registration Statement, any material
adverse change in the net asset value of the Company or the tax,
exchange control or other laws or regulations applicable to the
Company in Brazil, Argentina, Bulgaria, Venezuela or the United
States, the effect of which, in the reasonable judgment of Smith
Barney, renders it impracticable to proceed with the solicitation
of the exercise of Rights, or (c) any other condition of Smith
Barney's obligations under this Agreement is not fulfilled. Any
termination of this Agreement pursuant to this Section 10 will be
without liability on the part of the Company, Alliance or Smith
Barney except as otherwise provided in Section 8(f), Section 9
and/or Section 12 of this Agreement.
11. Conditions of Smith Barney's Obligations
The obligations of Smith Barney to perform and to
continue to perform as Dealer Manager under this Agreement will
at all times be subject to the accuracy, when made and at all
22
<PAGE>
times during the Offer and the Subscription Period, including any
extension thereof, of the representations and warranties of the
Company and Alliance herein, to the accuracy of the statements of
the officers of the Company and Alliance made pursuant to the
provisions hereof, to the performance by the Company and Alliance
of their respective obligations hereunder and to each of the
following additional conditions precedent:
(a) Smith Barney shall have received a letter, dated
the date of delivery thereof (which, if the Effective Time is
prior to the execution and delivery of this Agreement, shall
be on or prior to the date of this Agreement or, if the
Effective Time is subsequent to the execution and delivery of
this Agreement, shall be prior to the filing of the amendment
or post-effective amendment to the registration statement to
be filed shortly prior to the Effective Time), of Ernst &
Young LLP confirming that they are independent accountants
within the meaning of the Acts and the Rules and Regulations
and stating in effect that:
(i) in their opinion the audited financial
statements including the schedules audited by them and
included in the Registration Statement comply in form in
all material respects with the applicable accounting
requirements of the Acts and the related published Rules
and Regulations as applicable to Form N-2;
(ii) they have read the latest available minutes of
meetings of the Board of Directors of the Company as set
forth in the minute books through a specified date not
more than five business days prior to the date of
delivery of such letter, and have made inquiries of
certain officials of the Company who have responsibility
for financial and accounting matters, as to whether, at
a specified date not more than five days prior to the
date of this Agreement, there was any change in the
Common Stock, any increase in long-term debt of the
Company or any decrease in net assets, as compared with
amounts shown on the latest balance sheet included in
the Prospectus, except in all cases for changes,
increases or decreases which the Prospectus discloses
have occurred or may occur, and they shall state any
specific changes, increases or decreases; and
(iii) they have compared certain dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Registration
Statement, which have been specified by Smith Barney, to
the appropriate accounts in the Company's accounting
records subject to the initial controls of the Company's
accounting system and to schedules prepared by the
23
<PAGE>
Company therefrom and have found such dollar amounts,
percentages and other financial information to be in
agreement. Smith Barney will inform Ernst & Young LLP
as to which amounts and information shall be subject to
the comparison described in this subsection (iii).
For purposes of this subsection, if the Effective Time
is subsequent to the execution and delivery of this Agreement,
"Registration Statement" shall mean the registration statement as
proposed to be amended by the amendment or post-effective
amendment to be filed shortly prior to the Effective Time, and
"Prospectus" shall mean the prospectus included in the
Registration Statement.
(b) If the Effective Time is not prior to execution and
delivery of this Agreement, the Effective Time shall have
occurred not later than 10:00 P.M., New York City Time, on
the date of this Agreement, or such later date as shall have
been consented to by Smith Barney. At or before the date of
this Agreement, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted, or
to the knowledge of the Company, Alliance or Smith Barney,
shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or
any development involving a prospective change, in or
affecting particularly the business or properties of the
Company which, in the reasonable judgment of Smith Barney,
materially impairs the investment quality of the Shares, (ii)
any suspension or limitation of trading in securities
generally on the NYSE, the American Stock Exchange or the
over-the-counter market in the United States or the principal
stock exchange in any of Argentina, Brazil, Bulgaria or
Venezuela or any setting of minimum prices for trading on any
of such exchanges, or any suspension of trading of the Common
Stock of the Company on any exchange or in the
over-the-counter market; (iii) any banking moratorium
declared by federal or New York authorities or by any of
Argentine, Brazilian, Bulgarian or Venezuelan authorities;
(iv) any outbreak or escalation of major hostilities
(including any civil hostilities) in which the United States,
Argentina, Brazil, Bulgaria or Venezuela is involved, any
declaration of war by Congress or Argentine, Brazil, Bulgaria
or Venezuela or any other substantial U.S. national or
international calamity or emergency if, in the judgment of
Smith Barney the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or
inadvisable to proceed with the solicitation of the exercise
of the Rights; or (v) any material adverse change in general
24
<PAGE>
economic, political or financial conditions that, or any
international conditions, the effect of which on the
financial markets in the United States, Argentina, Brazil,
Bulgaria or Venezuela is such that, in the judgment of Smith
Barney, it is impractical or inadvisable to proceed with the
solicitation of the exercise of the Rights.
(d) On the date of this Agreement, there shall have
been furnished to Smith Barney a letter from Seward & Kissel,
counsel for the Company, dated the date of this Agreement,
and addressed to Smith Barney, substantially to the effect
set forth in Exhibit A to this Agreement.
(e) On the date of this Agreement, there shall have
been furnished to Smith Barney a letter from Seward & Kissel,
counsel for Alliance, dated the date of this Agreement, and
addressed to Smith Barney, substantially to the effect set
forth in Exhibit B to this Agreement.
(f) Smith Barney shall have received from Simpson
Thacher & Bartlett, counsel for Smith Barney, such opinion or
opinions, dated the date of this Agreement, with respect to
the incorporation of the Company, the validity of the Shares,
the Registration Statement, the Prospectus, and other related
matters as Smith Barney may require, and the Company shall
have furnished to such counsel such documents as they request
for the purpose of enabling them to pass upon such matters.
(g) Smith Barney shall have received certificates of
the Chairman, President or any Vice-President and a principal
financial or accounting officer of the Company, and of the
President or any Senior Vice-President of the General Partner
of Alliance, each dated the date of this Agreement, in which
such officers, to the best of their knowledge after
reasonable investigation, shall state that each such party
has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied at or prior to the
date of this Agreement, that the representations and
warranties of such party in this Agreement are true and
correct as of such date, that as of such date neither the
Registration Statement nor the Prospectus shall include any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading (in the case of
the Prospectus, in light of the circumstances under which
such statements were made), and, in the case of the
certificate of officers of the Company, that no stop order
suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been
instituted or are contemplated by the Commission, and that,
subsequent to the date of the balance sheet in the
25
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Prospectus, there has been no material adverse change in the
financial position or results of operation of the Company
except as set forth or contemplated in the Prospectus or as
described in such certificate.
The Company and Alliance will furnish Smith Barney with such
conformed copies of such opinions, certificates, letters and
documents as Smith Barney reasonably requests.
12. Survival of Certain Representations and Obligations
The respective indemnities, agreements, representations,
warranties, and other statements of the Company and Alliance or
their respective officers and of Smith Barney set forth in or
made pursuant to this Agreement will remain in full force and
effect, regardless of termination of this Agreement, and
regardless of any investigation, or statement as to the results
thereof, made by or on behalf of Smith Barney or the Company and
Alliance or any of their respective officers or directors or any
controlling person, and will survive delivery of the Rights and
the Shares.
13. Notices
All communications hereunder will be in writing and, if
sent to Smith Barney will be mailed, delivered or telegraphed and
confirmed to it at 388 Greenwich Street, New York, New York
10013, Attention: William B. Ogden, IV, if sent to the Company,
will be mailed, delivered or telegraphed and confirmed to it at
1345 Avenue of the Americas, New York, New York 10105, Attention:
Secretary, or if sent to Alliance, will be mailed, delivered or
telegraphed and confirmed to it at 1345 Avenue of the Americas,
New York, New York 10105, Attention: Secretary.
14. Successors
This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors
and the officers and directors and controlling persons referred
to in Section 9, and no other person will have any right or
obligation hereunder.
15. Applicable Law
This Agreement will be governed by, and construed in
accordance with, the laws of New York applicable to contracts
made and to be performed within the State of New York.
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<PAGE>
16. Counterparts.
This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the
executed counterparts will each be deemed to be an original but
all such counterparts will together constitute one and the same
instrument.
* * * * *
If the foregoing correctly sets forth the agreement
among the Company, Alliance and Smith Barney, please indicate
Smith Barney's acceptance in the space provided for that purpose
below, whereupon it will become a binding agreement among the
Company, Alliance and Smith Barney in accordance with its terms.
Very truly yours,
ALLIANCE WORLD DOLLAR GOVERNMENT
FUND, INC.
By:_________________________________
Name:
Title:
ALLIANCE CAPITAL MANAGEMENT L.P.
By: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, its General
Partner
By:____________________________
Name:
Title:
Accepted as of the date
first above written:
SMITH BARNEY INC.
By: ________________________
Name:
Title:
27
00250230.AL5
<PAGE>
EXHIBIT A
Form of Opinion of Seward & Kissel, as Counsel to the Company
Seward & Kissel is of the opinion that:
(1) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the State of Maryland, with full corporate power and authority
to own its properties and conduct its business as described in
the Prospectus; and the Company is duly qualified to do business
as a foreign corporation in good standing in New York, and in all
other United States jurisdictions in which it owns or leases
substantial properties or in which the conduct of its business
requires such qualification except where failure to so qualify
would not have a material adverse effect on the business of the
Company.
(2) The Company's authorized capitalization is as set
forth in the Prospectus; the outstanding shares of the Common
Stock of the Company have been duly authorized, validly issued,
fully paid and nonassessable; the Offer, the Rights and the
Shares have been, or with respect to the Shares to be issued
pursuant to the Over-Subscription Privilege will be, duly
authorized, and the Rights and the Shares, upon issuance and
delivery and, in the case of the Shares, upon payment therefor,
as described in the Registration Statement and the Prospectus,
will be, validly issued, fully paid and nonassessable; the Rights
conform to the statements concerning them included in the
Prospectus; the Shares conform to the description thereof
contained under the caption "Common Stock" in the Prospectus; the
Common Stock has been duly listed on the NYSE and the Shares are
duly authorized for listing, subject to official notice of
issuance, on the NYSE and are registered under the Exchange Act;
and the stockholders of the Company have no preemptive rights
(except for the Rights) with respect to the Shares.
(3) This Agreement and the Company Agreements have each
been duly authorized, executed and delivered by the Company and
comply with all applicable provisions of the Investment Advisers
Act and the Investment Company Act and, assuming due
authorization, execution and delivery by the other parties
thereto, constitute the valid and binding agreement of the
Company and are enforceable against the Company, in accordance
with their terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization or other laws relating to or affecting
creditors' rights and to general equity principles (regardless of
A-1
<PAGE>
whether enforceability is considered in a proceeding in equity or
at law) and, with respect to this Agreement, subject to the
qualification that the right to indemnity and contribution
thereunder may be limited by Federal or State law.
(4) The Company is duly registered with the Commission
under the Investment Company Act as a closed-end non-diversified
management investment company, and all required action has been
taken by the Company under the Acts and the Exchange Act to make
the public offering and consummate the issuance of the Rights and
sale of the Shares pursuant to this Agreement; the provisions of
the Articles of Incorporation and By-laws of the Company comply
as to form in all material respects with the requirements of the
Investment Company Act; and no consent, approval, authorization
or order of any court or governmental agency, authority or body
is required under Maryland corporate law, the laws of New York or
federal securities laws for the consummation of the transactions
contemplated herein or in the Company Agreements in connection
with the issuance of the Rights or the sale of the Shares by the
Company except such as have been obtained under the Acts and the
Exchange Act or from the NYSE and such as may be required under
state securities laws in connection with the distribution of the
Rights and the Shares.
(5) The execution, delivery and performance of this
Agreement and the Company Agreements and the consummation of the
transactions contemplated herein and in the Company Agreements
will not result in a breach or violation of any of the terms and
provisions of the Articles of Incorporation or By-laws of the
Company or any Federal, New York or Maryland law, order of which
such counsel has knowledge, rule or regulation applicable to the
Company of any Federal, New York or Maryland court, regulatory
body, administrative agency or other governmental body or stock
exchange having jurisdiction over the Company, or its properties
or operations, or, to the knowledge of such counsel, constitute,
with or without giving notice or lapse of time or both, a default
under, any agreement or instrument to which the Company is a
party or by which the Company is bound.
(6) The Registration Statement was declared effective
under the Securities Act as of the date and as of the time
specified in such opinion, the Prospectus was either filed with
the Commission pursuant to the subparagraph of Rule 497(h)
specified in such opinion on the date specified therein or was
included in the Registration Statement (as the case may be), and,
to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, and the
Registration Statement and the Prospectus (except as to the
financial statements and other financial data contained therein,
A-2
<PAGE>
as to which they express no belief), as of their respective
effective or issue dates, complied as to form in all material
respects with the requirements of the Acts and the Rules and
Regulations.
(7) The descriptions in the Registration Statement and
Prospectus of United States statutes, treaties, doctrines or
practices, legal and governmental proceedings and contracts and
other documents are accurate and fairly present the information
required to be shown; and such counsel do not know of any legal
or governmental proceedings required to be described in the
Prospectus which are not described as required, nor of any
contracts or documents of a character required to be described in
the Registration Statement or Prospectus or to be filed or
incorporated by reference as exhibits to the Registration
Statement which are not described or filed or incorporated as
required.
In rendering such opinion, such counsel may rely (A) as
to matters involving the application of the laws of the State of
Maryland, on the opinion of Venable, Baetjer and Howard LLP, (B)
as to matters involving the application of laws of any
jurisdiction other than the States of New York or Maryland or the
United States, to the extent they deem proper, and specified in
such opinion, upon the opinion of other counsel of good standing
whom they believe to be reliable and who are satisfactory to
counsel for the Dealer Manager and (C) as to matters of fact, to
the extent they deem proper, on certificates of responsible
officers of the Company and public officials.
Such counsel shall also state that, while they have not
themselves checked the accuracy and completeness of or otherwise
verified, and are not passing upon and assume no responsibility
for the accuracy or completeness of, the statements contained in
the Registration Statement or the Prospectus, except to the
limited extent stated in paragraph (7) above, in the course of
their review and discussion of the contents of the Registration
Statement and Prospectus with certain officers and employees of
the Company and its independent accountants, no facts have come
to their attention which cause them to believe that either the
Registration Statement or the Prospectus, or any amendment or
supplement thereto (except as to any financial statements or
other financial data included in the Registration Statement, the
Prospectus or any such amendment or supplement, as to which they
express no belief), as of such respective effective or issue
dates, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements contained therein, with respect
to the Prospectus, in light of the circumstances under which such
statements were made, not misleading.
A-3
00250230.AL5
<PAGE>
EXHIBIT B
Form of Opinion of Seward & Kissel, Counsel for Alliance
Counsel for Alliance is of the opinion that:
(1) Alliance has been duly organized and is validly
existing as a limited partnership in good standing under the
laws of the State of Delaware, with partnership power and
authority to conduct its business as described in the
Prospectus, and is duly licensed or qualified as a foreign
entity and in good standing to do business in each other
jurisdiction in which its ownership of property or the
conduct of its business requires such qualification or
license, except where the failure to be so qualified,
considering all such cases in the aggregate, would not have a
material adverse effect on Alliance.
(2) Alliance is duly registered as an investment
adviser under the Investment Advisers Act and is not
prohibited by the Investment Advisers Act or the Investment
Company Act, or the rules and regulations under such acts,
from acting as Alliance for the Company as contemplated by
the Prospectus.
(3) This Agreement and the Advisory Agreement have each
been duly authorized, executed and delivered on behalf of
Alliance and the Advisory Agreement complies with all
applicable provisions of the Investment Advisers Act and
Investment Company Act; the Advisory Agreement, assuming due
authorization execution and delivery by the other party
thereto, constitutes a valid and binding obligation of
Alliance enforceable in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting creditors'
rights and to general equity principles (regardless of
whether enforceability is considered in a proceeding in
equity or at law); and neither the execution and delivery of
this Agreement or the Advisory Agreement nor the performance
by Alliance of its obligations thereunder will conflict with
or result in a breach or violation of any of the terms and
provisions of the Agreement of Limited Partnership (As
Amended and Restated) of Alliance or any Federal, New York or
Delaware law, order of which such counsel has knowledge, rule
or regulation applicable to Alliance or any Federal, New York
or Delaware court, regulatory body, administrative agency or
other governmental body or stock exchange having jurisdiction
over Alliance or its properties or operations, or, to the
knowledge of such counsel, constitute, with or without giving
B-1
<PAGE>
notice or lapse of time or both, a default under, any
agreement or instrument to which Alliance is a party or by
which Alliance or to which any of the properties of Alliance
is subject.
(4) To the knowledge of such counsel, except as set
forth in the Prospectus, there is not pending or threatened,
any action, suit or proceeding to which Alliance is a party
before or by any court or governmental agency or body, which
is likely to have a material adverse effect upon the Company
or Alliance or upon the ability of Alliance to perform its
obligations under the Advisory Agreement.
(5) To the knowledge of such counsel, Alliance owns,
possesses or has obtained and currently maintains all
material authorizations under New York, Delaware or United
States law as are necessary for Alliance to perform its
obligations under the Advisory Agreement as set forth in and
contemplated by the Prospectus except where the failure to
obtain such authorizations would not have a material adverse
effect on Alliance.
(6) The description of Alliance and its business in the
Registration Statement and the Prospectus complies with the
requirements of the Act, the Investment Company Act, and the
rules and regulations of the Commission under such Acts and,
to the knowledge of such counsel, does not contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to
make the statements therein not misleading in light of the
circumstances under which they were made.
In rendering such opinion, such counsel may rely (A) as
to matters involving the application of laws of any jurisdiction
other than the States of New York or Delaware or the United
States to the extent such counsel deems proper, and specified in
such opinion, upon the opinion of other counsel of good standing
whom such counsel believes to be reliable and who are
satisfactory to counsel for the Dealer Manager, (B) as to matters
of fact, to the extent such counsel deems proper, on certificates
of responsible officers of Alliance and public officials and (C)
as to the legal proceeding to which Alliance is a party referred
to in Part I, Item 3, of the Annual Report on Form 10-K filed by
Alliance with the Commission pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the fiscal year ended
December 31, 1995, and in Part II, Item I, of the Quarterly
Report on Form 10-Q filed by Alliance with the Commission
pursuant to Section 13 or 15(d) of the Securities and Exchange
Act of 1934 for the quarterly period ended March 31, 1996, with
respect to which proceeding such counsel is not representing
Alliance, as the basis for such opinion, on the representations
B-2
<PAGE>
of Alliance set forth in Section 5 of this Agreement as certified
to pursuant to Section 11(g) of this Agreement.
B-3
00250230.AL5
<PAGE>
DRAFT DATED
6/20/96
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
Rights Offering for Shares of Common Stock
SOLICITING DEALER AGREEMENT
THE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN TIME,
JULY 19, 1996,
UNLESS EXTENDED
To Securities Dealers and Brokers:
Alliance World Dollar Government Fund, Inc. (the "Company") is
issuing to its shareholders of record ("Record Date
Shareholders") as of the close of business on July 21, 1996 (the
"Record Date") non-transferable rights ("Rights") entitling the
Record Date Shareholders to subscribe for an aggregate of
2,884,235 shares (the "Shares") of common stock, par value $.01
per share ("Common Stock"), of the Company upon the terms and
subject to the conditions set forth in the Company's Prospectus
and Statement of Additional Information (the "Prospectus") dated
June __, 1996 (the "Offer"). Pursuant to the Over-Subscription
Privilege (as hereinafter defined) in connection with the Offer,
the Company may, at the discretion of the Board of Directors,
increase the number of Shares subject to subscription by up to
25%, or 721,058 Shares, for a total of 3,605,293 Shares. Each
such Record Date Shareholder is being issued one Right for each
whole share of Common Stock owned on the Record Date. The Rights
entitle the Record Date Shareholder during the Subscription
Period (as hereinafter defined) to acquire at the Subscription
Price (as hereinafter defined) one Share for each three Rights
held in the primary subscription. No fractional Shares will be
issued. The Subscription Price will be 95% of the lower of (i)
the average of the last reported sales price of a share of the
Fund's Common Stock on the New York Stock Exchange on the date of
the expiration of the Offer (the "Pricing Date") and on the four
preceding business days and (ii) the net asset value per share as
of the close of business on the Pricing Date. The Subscription
Period will commence on June 21, 1996 and end on the Expiration
Date. (With respect to the Offer, the term "Expiration Date"
means 5:00 p.m., Eastern time, on July 19, 1996, unless and until
the Company shall, in its sole discretion, have extended the
period for which the Offer is open to a date not later than July
26, 1996, in which event the term "Expiration Date" with respect
<PAGE>
to the Offer will mean the latest time and date on which the
Offer, as so extended by the Company, will expire.) Any Record
Date Shareholder who fully exercises all Rights issued to him
(other than those Rights, which cannot be exercised because they
represent the right to acquire less than one Share) is entitled
to subscribe for Shares which were not otherwise subscribed for
by others on primary subscription (the "Over-Subscription
Privilege"). Shares acquired pursuant to the Over-Subscription
Privilege are subject to allotment, as more fully discussed in
the Prospectus.
For the duration of the Offer, the Company has agreed to
pay Soliciting Fees (as defined below) to any qualified broker or
dealer executing a Soliciting Dealer Agreement who solicits the
exercise of Rights in connection with the Offer and who complies
with the procedures described below (a "Soliciting Dealer").
Upon timely delivery to First Data Investor Services Group, Inc.,
the Company's Subscription Agent for the Offer (the "Subscription
Agent"), of payment for Shares purchased pursuant to the exercise
of Rights and the Over-Subscription Privilege and of properly
completed and executed documentation as set forth in this
Soliciting Dealer Agreement, a Soliciting Dealer will be entitled
to receive Soliciting Fees equal to 2.50% of the Subscription
Price per Share for each Share so purchased ("Soliciting Fees").
A qualified broker or dealer is a broker dealer which is a member
of a registered national securities exchange in the United States
or the National Association of Securities Dealers, Inc. ("NASD")
or any foreign broker or dealer not eligible for membership who
agrees to conform to the Rules of Fair Practice of the NASD,
including Sections 8, 24 and 36 thereof as though it were such a
member and Section 25 thereof as it applies to a non-member
broker or dealer in a foreign country, in making solicitations in
the United States to the same extent as if it were a member
thereof.
The Company has agreed to pay the Soliciting Fees
payable to the undersigned Soliciting Dealer and to indemnify
such Soliciting Dealer on the terms set forth in the Dealer
Manager Agreement, dated June 21, 1996, among Smith Barney Inc.,
as Dealer Manager, the Company and Alliance Capital Management
L.P., the Company's investment adviser. Solicitation and other
activities by Soliciting Dealers may be undertaken only in
accordance with the applicable rules and regulations of the
Securities and Exchange Commission and only in those states and
other jurisdictions where such solicitations and other activities
may lawfully be undertaken and in accordance with the laws
thereof. Compensation will not be paid for solicitations in any
state or other jurisdiction in which, in the opinion of counsel
to the Company or counsel to the Dealer Manager, such
compensation may not lawfully be paid. No Soliciting Dealer
shall be paid Soliciting Fees with respect to Shares purchased
2
<PAGE>
pursuant to an exercise of Rights or the Over-Subscription
Privilege for its own account or for the account of any affiliate
of the Soliciting Dealer. No Soliciting Dealer or any other
person is authorized by the Company or the Dealer Manager to give
any information or make any representations in connection with
the Offer other than those contained in the Prospectus and other
authorized solicitation material furnished by the Company through
the Dealer Manager. No Soliciting Dealer is authorized to act as
agent of the Company or the Dealer Manager in any connection or
transaction. In addition, nothing herein contained shall
constitute the Soliciting Dealers partners with the Dealer
Manager or with one another, or agents of the Dealer Manager or
of the Company, or create any association between such parties,
or shall render the Dealer Manager or the Company liable for the
obligations of any Soliciting Dealer. The Dealer Manager shall
be under no liability to make any payment to any Soliciting
Dealer, and shall be subject to no other liabilities to any
Soliciting Dealer, and no obligations of any sort shall be
implied.
In order for a Soliciting Dealer to receive Soliciting
Fees, the Subscription Agent must have received from such
Soliciting Dealer no later than 5:00 p.m., New York City time, on
the Expiration Date, either (i) a properly completed and duly
executed Subscription Certificate with respect to Shares
purchased pursuant to the exercise of Rights or the Over-
Subscription Privilege and full payment for such Shares; or (ii)
a Notice of Guaranteed Delivery guaranteeing delivery to the
Subscription Agent by close of business on the third business day
after the Expiration Date of (a) full payment for such Shares and
(b) a properly completed and duly executed Subscription
Certificate with respect to Shares purchased pursuant to the
exercise of Rights or the Over-Subscription Privilege. Soliciting
Fees will only be paid after receipt by the Subscription Agent of
a properly completed and duly executed Soliciting Dealer
Agreement (or a facsimile thereof). In the case of a Notice of
Guaranteed Delivery, Soliciting Fees will only be paid after
delivery in accordance with such Notice of Guaranteed Delivery
has been effected. Soliciting Fees will only be paid to a
Soliciting Dealer who is designated on the Subscription
Certificate. If no Soliciting Dealer is designated, the
Soliciting Fee will be paid to the Dealer Manager.
All questions as to the form, validity and eligibility
(including time of receipt) of this Soliciting Dealer Agreement
will be determined by the Company, in its sole discretion, which
determination shall be final and binding. Unless waived, any
irregularities in connection with a Soliciting Dealer Agreement
or delivery thereof must be cured within such time as the Company
shall determine. None of the Company, the Dealer Manager, the
Subscription Agent, the Information Agent for the Offer
3
<PAGE>
(Shareholder Communications Corporation) or any other person will
be under any duty to give notification of any defects or
irregularities in any Soliciting Dealer Agreement or incur any
liability for failure to give such notification.
The acceptance of Soliciting Fees from the Company by
the undersigned Soliciting Dealer shall constitute a
representation by such Soliciting Dealer to the Company that: (i)
it has received and reviewed the Prospectus; (ii) in soliciting
purchases of Shares pursuant to the exercise of the Rights or the
Over-Subscription Privilege, it has complied with the applicable
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the applicable rules and regulations
thereunder, any applicable securities laws of any state or
jurisdiction where such solicitations may lawfully be made, and
the applicable rules and regulations of any self-regulatory
organization or registered national securities exchange; (iii) in
soliciting purchases of Shares pursuant to the exercise of the
Rights or the Over-Subscription Privilege, it has not published,
circulated or used any soliciting materials other than the
Prospectus and any other authorized solicitation material
furnished by the Company through the Dealer Manager; (iv) it has
not purported to act as agent of the Company or the Dealer
Manager in any connection or transaction relating to the Offer;
(v) the information contained in this Soliciting Dealer Agreement
is, to its best knowledge, true and complete; (vi) it is not
affiliated with the Company; (vii) it will not accept Soliciting
Fees paid by the Company pursuant to the terms hereof with
respect to Shares purchased by the Soliciting Dealer pursuant to
an exercise of Rights or the Over-Subscription Privilege for its
own account; (viii) it will not remit, directly or indirectly,
any part of Soliciting Fees paid by the Company pursuant to the
terms hereof to any beneficial owner of Shares purchased pursuant
to the Offer; and (ix) it has agreed to the amount of the
Soliciting Fees and the terms and conditions set forth herein
with respect to receiving such Soliciting Fees. By returning a
Soliciting Dealer Agreement and accepting Soliciting Fees, a
Soliciting Dealer will be deemed to have agreed to indemnify the
Company and the Dealer Manager against losses, claims, damages
and liabilities to which the Company or the Dealer Manager, as
the case may be, may become subject as a result of the breach of
such Soliciting Dealer's representations made herein and
described above. In making the foregoing representations,
Soliciting Dealers are reminded of the possible applicability of
Rule 10b-6 under the Exchange Act if they have bought, sold,
dealt in or traded in any Shares for their own account since the
commencement of the Offer.
Soliciting Fees due to eligible Soliciting Dealers will
be paid [as soon as practicable immediately following the receipt
of payment by the Subscription Agent for Shares acquired pursuant
4
<PAGE>
to the exercise of Rights or the Over-Subscription Privilege].
Upon expiration of the Offer, no Soliciting Fees will be payable
to Soliciting Dealers with respect to Shares purchased
thereafter.
Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Dealer Manager
Agreement or, if not defined therein, in the Prospectus.
This Soliciting Dealer Agreement will be governed by the
laws of the State of New York.
This Soliciting Dealer Agreement may be signed in two or
more counterparts, each of which will be an original, with the
same effect as if the signatures were upon the same instrument.
Please execute this Soliciting Dealer Agreement below
accepting the terms and conditions hereof and confirming that you
are a member firm of a registered national securities exchange or
of the NASD or a foreign broker or dealer not eligible for
membership who has conformed to the Rules of Fair Practice of the
NASD, including Sections 8, 24 and 36 thereof as though you were
such a member and Section 25 thereof as it applies to a non-
member broker or dealer in a foreign country, in making
solicitations of the type being undertaken pursuant to the Offer
in the United States to the same extent as if you were a member
thereof, and certifying that you have solicited the purchase of
the Shares pursuant to exercise of the Rights or the Over
Subscription Privilege, all as described above, in accordance
with the terms and conditions set forth in this Soliciting Dealer
Agreement.
Very truly yours,
SMITH BARNEY INC.
By:
Name:
Title:
5
<PAGE>
ACCEPTED AND CONFIRMED BY
SOLICITING DEALER
____________________________ ____________________________
Printed Firm Name Address
____________________________ ____________________________
Authorized Signature Area Code and Telephone Number
____________________________
Name and Title
Dated:
Payment of the Solicitation Fee
shall be mailed by check to the following:
Name of Bank or other
Recipient Institution: ________________________________
Address: _______________________________________
Attention: _____________________________________
ALL SOLICITING DEALER AGREEMENTS SHOULD BE RETURNED
TO SMITH BARNEY INC. BY
FACSIMILE (TELECOPIER) AT ______________.
FACSIMILE TRANSMISSIONS MAY BE CONFIRMED
BY CALLING ______________.
ALL QUESTIONS CONCERNING SOLICITING DEALER AGREEMENTS
SHOULD BE DIRECTED TO SHAREHOLDER COMMUNICATIONS
CORPORATION AS FOLLOWS:
FOR BANK INQUIRIES, PLEASE CALL ______________ AND FOR
BROKER INQUIRIES, PLEASE CALL ________________.
6
00250230.AL6
<PAGE>
CUSTODY AGREEMENT
Agreement made as of this 3rd day of October, 1994, between
ALLIANCE WORLD DOLLAR GOVERNMENT FUND,INC., a corporation
organized and existing under the laws of the State of Maryland
having its principal office and place of business at 1345 Avenue
of the Americas, New York, New York 10105 hereinafter called the
"Fund"), and THE BANK OF NEW YORK, a New York corporation
authorized to do a banking business, having its principal office
and place of business at 48 Wall Street, New York, New York 10286
(hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter
set forth, the Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and federal
agency securities, its successor or successors and its nominee or
nominees.
2. "Call Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder,
upon timely exercise and payment of the exercise price, as
specified therein, to purchase from the writer thereof the
specified underlying Securities.
3. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is actually received
by the Custodian and signed on behalf of the Fund by any two
Officers, and the term Certificate shall also include
instructions by the Fund to the Custodian communicated by a
Terminal Link.
4. "Clearing Member" shall mean a registered broker-dealer
which is a clearing member under the rules of O.C.C. and a member
of a national securities exchange qualified to act as a custodian
for an investment company, or any broker-dealer reasonably
believed by the Custodian to be such a clearing member.
<PAGE>
5. "Collateral Account" shall mean a segregated account so
denominated which is specifically allocated to a Series and
pledged to the Custodian as security for, and in consideration
of, the Custodian's issuance of (a) any Put Option guarantee
letter or similar document described in paragraph 8 of Article V
herein, or (b) any receipt described in Article V or VIII herein.
6. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment of
the exercise price, as specified therein, to purchase from the
writer thereof the specified underlying Securities (excluding
Futures Contracts) which are owned by the writer thereof and
subject to appropriate restrictions.
7. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
Exchange Commission, its successor or successors and its nominee
or nominees. The term "Depository" shall further mean and include
any other person authorized to act as a depository under the
Investment Company Act of 1940, its successor or successors and
its nominee or nominees, specifically identified in a certified
copy of a resolution of the Fund's Board of Directors
specifically approving deposits therein by the Custodian.
8. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities including,
without limitation, U.S. Treasury Bills, U.S. Treasury Notes,
U.S. Treasury Bonds, domestic bank certificates of deposit, and
Eurodollar certificates of deposit, during a specified month at
an agreed upon price.
9. "Futures Contract" shall mean a Financial Futures
Contract and/or Stock Index Futures Contracts.
10. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
11. "Margin Account" shall mean a segregated account in the
name of a broker, dealer, futures commission merchant, or a
Clearing Member, or in the name of the Fund for the benefit of a
broker, dealer, futures commission merchant, or Clearing Member,
or otherwise, in accordance with an agreement between the Fund,
the Custodian and a broker, dealer, futures commission merchant
or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities
and/or money of the Fund shall be deposited and withdrawn from
time to time in connection with such transactions as the Fund may
from time to time determine. Securities held in the Book-Entry
System or the Depository shall be deemed to have been deposited
in, or withdrawn from, a Margin Account upon the Custodian's
effecting an appropriate entry in its books and records.
2
<PAGE>
12. "Money Market Security" shall be deemed to include,
without limitation, certain Reverse Repurchase Agreements, debt
obligations issued or guaranteed as to interest and principal by
the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public
authority, commercial paper, certificates of deposit and bankers'
acceptances, repurchase agreements with respect to the same and
bank time deposits, where the purchase and sale of such
securities normally requires settlement in federal funds on the
same day as such purchase or sale.
13. "O.C.C." shall mean the Options Clearing Corporation, a
clearing agency registered under Section 17A of the Securities
Exchange Act of 1934, its successor or successors, and its
nominee or nominees.
14. "Officers" shall be deemed to include the President, any
Vice President, the Secretary, the Treasurer, the Controller, any
Assistant Secretary, any Assistant Treasurer, and any other
person or persons, whether or not any such other person is an
officer of the Fund, duly authorized by the Board of Directors of
the Fund to execute any Certificate, instruction, notice or other
instrument on behalf of the Fund and listed in the Certificate
annexed hereto as Appendix A or such other Certificate as may be
received by the Custodian from time to time.
15. "Option" shall mean a Call Option, Covered Call Option,
Stock Index Option and/or a Put Option.
16. "Oral Instructions" shall mean verbal instructions
actually received by the Custodian from an Officer or from a
person reasonably believed by the Custodian to be an Officer.
17. "Put Option" shall mean an exchange traded option with
respect to Securities other than Stock Index Options, Futures
Contracts, and Futures Contract Options entitling the holder,
upon timely exercise and tender of the specified underlying
Securities, to sell such Securities to the writer thereof for the
exercise price.
18. "Reverse Repurchase Agreement" shall mean an agreement
pursuant to which the Fund sells Securities and agrees to
repurchase such Securities at a described or specified date and
price.
19. "Security" shall be deemed to include, without
limitation, Money Market Securities, Call Options, Put Options,
Stock Index Options, Stock Index Futures Contracts, Stock Index
Futures Contract Options, Financial Futures Contracts, Financial
Futures Contract Options, Reverse Repurchase Agreements, common
3
<PAGE>
stocks and other securities having characteristics similar to
common stocks, preferred stocks, debt obligations issued by state
or municipal governments and by public authorities, (including,
without limitation, general obligation bonds, revenue bonds,
industrial bonds and industrial development bonds), bonds,
debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments
representing rights to receive, purchase, sell or subscribe for
the same, or evidencing or representing any other rights or
interest therein, or any property or assets.
20. "Senior Security Account" shall mean an account
maintained and specifically allocated to a Series under the terms
of this Agreement as a segregated account, by recordation or
otherwise, within the custody account in which certain Securities
and/or other assets of the Fund specifically allocated to such
Series shall be deposited and withdrawn from time to time in
accordance with Certificates received by the Custodian in
connection with such transactions as the Fund may from time to
time determine.
21. "Series" shall mean the various portfolios, if any, of
the Fund as described from time to time in the current and
effective prospectus for the Fund.
22. "Shares" shall mean the shares of capital stock of the
Fund, each of which is, in the case of a Fund having Series,
allocated to a particular Series.
23. "Stock Index Futures Contract" shall mean a bilateral
agreement pursuant to which the parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount
times the difference between the value of a particular stock
index at the close of the last business day of the contract and
the price at which the futures contract is originally struck.
24. "Stock Index Option" shall mean an exchange traded
option entitling the holder, upon timely exercise, to receive an
amount of cash determined by reference to the difference between
the exercise price and the value of the index on the date of
exercise.
25. "Terminal Link" shall mean an electronic data
transmission link between the Fund and the Custodian requiring in
connection with each use of the Terminal Link by or on behalf of
the Fund use of an authorization code provided by the Custodian
and at least two access codes established by the Fund.
4
<PAGE>
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian
as custodian of the Securities and moneys at any time owned by
the Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter
set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to be
delivered to the Custodian all Securities and all moneys owned by
it, at any time during the period of this Agreement, and shall
specify with respect to such Securities and money the Series to
which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate
and apart. The Custodian will not be responsible for any
Securities and moneys not actually received by it. The Custodian
will be entitled to reverse any credits made on the Fund's behalf
where such credits have been previously made and moneys are not
finally collected. The Fund shall deliver to the Custodian a
certified resolution of the Board of Directors of the Fund,
substantially in the form of Exhibit A hereto, approving,
authorizing and instructing the Custodian on a continuous and
ongoing basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which
the same are specifically allocated and to utilize the Book-Entry
System to the extent possible in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities and deliveries and returns of Securities collateral.
Prior to a deposit of Securities specifically allocated to a
Series in the Depository, the Fund shall deliver to the Custodian
a certified resolution of the Board of Directors of the Fund,
substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and
ongoing basis until instructed to the contrary by a Certificate
actually received by the Custodian to deposit in the Depository
all Securities specifically allocated to such Series eligible for
deposit therein, and to utilize the Depository to the extent
possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities,
loans of Securities, and deliveries and returns of Securities
5
<PAGE>
collateral. Securities and moneys deposited in either the Book-
Entry System or the Depository will be represented in accounts
which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian
acts in a fiduciary or representative capacity and will be
specifically allocated on the Custodian's books to the separate
account for the applicable Series. Prior to the Custodian's
accepting, utilizing and acting with respect to Clearing Member
confirmations for Options and transactions in Options for a
Series as provided in this Agreement, the Custodian shall have
received a certified resolution of the Fund's Board of Directors,
substantially in the form of Exhibit C hereto, approving,
authorizing and instructing the Custodian on a continuous and
ongoing basis, until instructed to the contrary by a Certificate
actually received by the Custodian, to accept, utilize and act in
accordance with such confirmations as provided in this Agreement
with respect to such Series.
2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the
separate account for each Series all moneys received by it for
the account of the Fund with respect to such Series. Money
credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the
Series account from which payment is to be made and the purpose
for which payment is to be made; or
(c) In payment of the fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such
Series.
3. Promptly after the close of business on each day, the
Custodian shall furnish the Fund with confirmations and a
summary, on a per Series basis, of all transfers to or from the
account of the Fund for a Series, either hereunder or with any
co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to
the account of the Fund for a Series, the Custodian shall also by
book-entry or otherwise identify as belonging to such Series a
quantity of Securities in a fungible bulk of Securities
registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System
or the Depository. At least monthly and from time to time, the
Custodian shall furnish the Fund with a detailed statement, on a
per Series basis, of the Securities and moneys held by the
Custodian for the Fund.
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<PAGE>
4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held by the Custodian
hereunder, which are issued or issuable only in bearer form,
except such Securities as are held in the Book-Entry System,
shall be held by the Custodian in that form; all other Securities
held hereunder may be registered in the name of the Fund, in the
name of any duly appointed registered nominee of the Custodian as
the Custodian may from time to time determine, or in the name of
the Book-Entry System or the Depository or their successor or
successors, or their nominee or nominees. The Fund agrees to
furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee or in the name of
the Book-Entry System or the Depository any Securities which it
may hold hereunder and which may from time to time be registered
in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held
in the Book-Entry System or in the Depository in a separate
account in the name of such Series physically segregated at all
times from those of any other person or persons.
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate, the
Custodian by itself, or through the use of the Book-Entry System
or the Depository with respect to Securities held hereunder and
therein deposited, shall with respect to all Securities held for
the Fund hereunder in accordance with preceding paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable
upon such Securities which are called, but only if either (i) the
Custodian receives a written notice of such call, or (ii) notice
of such call appears in one or more of the publications listed in
Appendix B annexed hereto, which may be amended at any time by
the Custodian without the prior notification or consent of the
Fund;
(c) Present for payment and collect the amount payable
upon all Securities which mature;
(d) Surrender Securities in temporary form for
definitive Securities;
(e) Execute, as custodian, any necessary declarations
or certificates of ownership under the Federal Income Tax Laws or
the laws or regulations of any other taxing authority now or
hereafter in effect; and
(f) Hold directly, or through the Book-Entry System or
the Depository with respect to Securities therein deposited, for
7
<PAGE>
the account of a Series, all rights and similar securities issued
with respect to any Securities held by the Custodian for such
Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry System
or the Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authorizations,
and any other instruments whereby the authority of the Fund as
owner of any Securities held by the Custodian hereunder for the
Series specified in such Certificate may be exercised;
(b) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate in
exchange for other Securities or cash issued or paid in
connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or
the exercise of any conversion privilege and receive and hold
hereunder specifically allocated to such Series any cash or other
Securities received in exchange;
(c) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate to any
protective committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold hereunder specifically
allocated to such Series such certificates of deposit, interim
receipts or other instruments or documents as may be issued to it
to evidence such delivery;
(d) Make such transfers or exchanges of the assets of
the Series specified in such Certificate, and take such other
steps as shall be stated in such Certificate to be for the
purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the
Fund; and
(e) Present for payment and collect the amount payable
upon Securities not described in preceding paragraph 5(b) of this
Article which may be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain possession
of any instrument or certificate representing any Futures
Contract, any Option, or any Futures Contract Option until after
it shall have determined, or shall have received a Certificate
from the Fund stating, that any such instruments or certificates
are available. The Fund shall deliver to the Custodian such a
8
<PAGE>
Certificate no later than the business day preceding the
availability of any such instrument or certificate. Prior to such
availability, the Custodian shall comply with Section 17(f) of
the Investment Company Act of 1940, as amended, in connection
with the purchase, sale, settlement, closing out or writing of
Futures Contracts, Options, or Futures Contract Options by making
payments or deliveries specified in Certificates received by the
Custodian in connection with any such purchase, sale, writing,
settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation
reasonably believed by the Custodian to be in the form
customarily used by brokers, dealers, or future commission
merchants with respect to such Futures Contracts, Options, or
Futures Contract Options, as the case may be, confirming that
such Security is held by such broker, dealer or futures
commission merchant, in book-entry form or otherwise, in the name
of the Custodian (or any nominee of the Custodian) as custodian
for the Fund, provided, however, that notwithstanding the
foregoing, payments to or deliveries from the Margin Account, and
payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and
conditions of the Margin Account Agreement. Whenever any such
instruments or certificates are available, the Custodian shall,
notwithstanding any provision in this Agreement to the contrary,
make payment for any Futures Contract, Option, or Futures
Contract Option for which such instruments or such certificates
are available only against the delivery to the Custodian of such
instrument or such certificate, and deliver any Futures Contract,
Option or Futures Contract Option for which such instruments or
such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate
delivered to the Custodian shall be held by the Custodian
hereunder in accordance with, and subject to, the provisions of
this Agreement.
ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund,
other than a purchase of an Option, a Futures Contract, or a
Futures Contract Option, the Fund shall deliver to the Custodian
(i) with respect to each purchase of Securities which are not
Money Market Securities, a Certificate, and (ii) with respect to
each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a)
the Series to which such Securities are to be specifically
allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount
9
<PAGE>
purchased and accrued interest, if any; (d) the date of purchase
and settlement; (e) the purchase price per unit; (f) the total
amount payable upon such purchase; (g) the name of the person
from whom or the broker through whom the purchase was made, and
the name of the clearing broker, if any; and (h) the name of the
broker to whom payment is to be made. The Custodian shall, upon
receipt of Securities purchased by or for the Fund, pay to the
broker specified in the Certificate out of the moneys held for
the account of such Series the total amount payable upon such
purchase, provided that the same conforms to the total amount
payable as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures
Contract Option, or any Reverse Repurchase Agreement, the Fund
shall deliver to the Custodian (i) with respect to each sale of
Securities which Are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to each
such sale: (a) the Series to which such Securities were
specifically allocated; (b) the name of the issuer and the title
of the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e) the
sale price per unit; (f) the total amount payable to the Fund
upon such sale; (g) the name of the broker through whom or the
person to whom the sale was made, and the name of the clearing
broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the
Securities specifically allocated to such Series to the broker
specified in the Certificate against_payment of the total amount
payable to the Fund upon such sale, provided that the same
conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund,
the Fund shall deliver to the Custodian a Certificate specifying
with respect to each Option purchased: (a) the Series to which
such Option is specifically allocated; (b) the type of Option
(put or call); (c) the name of the issuer and the title and
number of shares subject to such Option or, in the case of a
Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options purchased; (d) the
expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the total amount payable by the Fund
in connection with such purchase; (h) the name of the Clearing
Member through whom such Option was purchased; and (i) the name
of the broker to whom payment is to be made. The Custodian shall
10
<PAGE>
pay, upon receipt of a Clearing Member's statement confirming the
purchase of such Option held by such Clearing Member for the
account of the Custodian (or any duly appointed and registered
nominee of the Custodian) as custodian for the Fund, out of
moneys held for the account of the Series to which such Option is
to be specifically allocated, the total amount payable upon such
purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount payable
as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the
Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to each such
sale: (a) the Series to which such Option was specifically
allocated; (b) the type of Option (put or call); (c) the name of
the issuer and the title and number of shares subject to such
Option or, in the case of a Stock Index Option, the stock index
to which such Option relates and the number of Stock
Index.Options sold; (d) the date of sale; (e) the sale price; (f)
the date of settlement; (g) the total amount payable to the Fund
upon such sale; and (h) the name of the Clearing Member through
whom the sale was made. The Custodian shall consent to the
delivery of the Option sold by the Clearing Member which
previously supplied the confirmation described in preceding
paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund,
provided that the same conforms to the total amount payable as
set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Call Option: (a) the Series to which such Call
Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Call Option; (c)
the expiration date; (d) the date of exercise and settlement; (e)
the exercise price per share; (f) the total amount to be paid by
the Fund upon such exercise; and (g) the name of the Clearing
Member through whom such Call Option was exercised. The Custodian
shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the moneys held for the account
of the Series to which such Call Option was specifically
allocated the total amount payable to the Clearing Member through
whom the Call Option was exercised, provided that the same
conforms to the total amount payable as set forth in such
Certificate.
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall deliver to the Custodian a Certificate specifying with
respect to such Put Option: (a) the Series to which such Put
11
<PAGE>
Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the
exercise price per share; (f) the total amount to be paid to the
Fund upon such exercise; and (g) the name of the Clearing Member
through whom such Put Option was exercised. The Custodian shall,
upon receipt of the amount payable upon the exercise of the Put
Option, deliver or direct the Depository to deliver the
Securities specifically allocated to such Series, provided the
same conforms to the amount payable to the Fund as set forth in
such Certificate.
5. Promptly after the exercise by the Fund of any Stock
Index Option purchased by the Fund pursuant to paragraph 1
hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the
Series to which such Stock Index Option was specifically
allocated; (b) the type of Stock Index Option (put or call); (c)
the number of Options being exercised; (d) the stock index to
which such Option relates; (e) the expiration date; (f) the
exercise price; (g) the total amount to be received by the Fund
in connection with such exercise; and (h) the Clearing Member
from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying
with respect to such Covered Call Option: (a) the Series for
which such Covered Call Option was written; (b) the name of the
issuer and the title and number of shares for which the Covered
Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be
received by the Fund; (f) the date such Covered Call Option was
written; and (g) the name of the Clearing Member through whom the
premium is to be received. The Custodian shall deliver or cause
to be delivered, in exchange for receipt of the premium specified
in the Certificate with respect to .such Covered Call Option,
such receipts as are required in accordance with the customs
prevailing among Clearing Members dealing in Covered Call Options
and shall impose, or direct the Depository to impose, upon the
underlying Securities specified in the Certificate specifically
allocated to such Series such restrictions as may be required by
such receipts. Notwithstanding the foregoing, the Custodian has
the right, upon prior written notification to the Fund, at any
time to refuse to issue any receipts for Securities in the
possession of the Custodian and not deposited with the Depository
underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and
described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate instructing the Custodian to deliver, or to direct
12
<PAGE>
the Depository to deliver, the Securities subject to such Covered
Call Option and specifying: (a) the Series for which such Covered
Call Option was written; (b) the name of the issuer and the title
and number of shares subject to the Covered Call Option; (c) the
Clearing Member to whom the underlying Securities are to be
delivered; and (d) the total amount payable to the Fund upon such
delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian
shall deliver, or direct the Depository to deliver, the
underlying Securities as specified in the Certificate against
payment of the amount to be received as set forth in such
Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with
respect to such Put Option: (a) the Series for which such Put
Option was written; (b) the name of the issuer and the title and
number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise
price; (e) the premium to be received by the Fund; (I) the date
such Put Option is written; (g) the name of the Clearing Member
through whom the premium is to be received and to whom a Put
Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the
Senior Security Account for such Series; and (i) the amount of
cash and/or the amount and kind of Securities specifically
allocated to such Series to be deposited into the Collateral
Account for such Series. The Custodian shall, after making the
deposits into the Collateral Account specified in the
Certificate, issue a Put Option guarantee letter substantially in
the form utilized by the Custodian on the date hereof, and
deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said
Certificate. Notwithstanding the foregoing, the Custodian shall
be under no obligation to issue any Put Option guarantee letter
or similar document if it is unable to make any of the
representations contained therein.
9. Whenever a Put Option written by the Fund and described
in the preceding paragraph is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the Series
to which such Put Option was written; (b) the name of the issuer
and title and number of shares subject to the Put Option; (c) the
Clearing Member from whom the underlying Securities are to be
received; (d) the total amount payable by the Fund upon such
delivery; (e) the amount of cash and/or the amount and kind of
Securities specifically allocated to such Series to be withdrawn
from the Collateral Account for such Series and (f) the amount of
cash and/or the amount and kind of Securities, specifically
allocated to such Series, if any, to be withdrawn from the Senior
13
<PAGE>
Security Account. Upon the return and/or cancellation of any Put
Option guarantee letter or similar document issued by the
Custodian in connection with such Put Option, the Custodian shall
pay out of the moneys held for the account of the Series to which
such Put Option was specifically allocated the total amount
payable to the Clearing Member specified in the Certificate as
set forth in such Certificate against delivery of such
Securities, and shall make the withdrawals specified in such
Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying
with respect to such Stock Index Option: (a) the Series for which
such Stock Index Option was written; (b) whether such Stock Index
Option is a put or a call; (c) the number of options written; (d)
the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through
whom such Option was written; (h) the premium to be received by
the Fund; (i) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; (j) the
amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the
Collateral Account for such Series; and (k) the amount of cash
and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Margin Account, and
the name in which such account is to be or has been established.
The Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Senior Security
Account specified in the Certificate, and either (1) deliver such
receipts, if any, which the Custodian has specifically agreed to
issue, which are in accordance with the customs prevailing among
Clearing Members in Stock Index Options and make the deposits
into the Collateral Account specified in the Certificate, or (2)
make the deposits into the Margin Account specified in the
Certificate.
11. Whenever a Stock Index Option written by the Fund and
described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Stock Index Option:
(a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index
Option being exercised; (c) the Clearing Member through whom such
Stock Index Option is being exercised; (d) the total amount
payable upon such exercise, and whether such amount is to be paid
by or to the Fund; (e) the amount of cash and/or amount and kind
of Securities, if any, to be withdrawn from the Margin Account;
and (f) the amount of cash and/or amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for such
Series; and the amount of cash and/or the amount and kind of
14
<PAGE>
Securities, if any, to be withdrawn from the Collateral Account
for such Series. Upon the return and/or cancellation of the
receipt, if any, delivered pursuant to the preceding paragraph of
this Article, the Custodian shall pay out of the moneys held for
the account of the Series to which such Stock Index Option was
specifically allocated to the Clearing Member specified in the
Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to a
previously written Option described in paragraphs, 6, 8 or 10 of
this Article in a transaction expressly designated as a "Closing
Purchase Transaction" in order to liquidate its position as a
writer of an Option, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to the Option
being purchased: (a) that the transaction is a Closing Purchase
Transaction; (b) the Series for which the Option was written; (c)
the name of the issuer and the title and number of shares subject
to the Option, or, in the case of a Stock Index Option, the stock
index to which such Option relates and the number of Options
held; (d) the exercise price; (e) the premium to be paid by the
Fund; (f) the expiration date; (g) the type of Option (put or
call); (h) the date of such purchase; (i) the name of the
Clearing Member to whom the premium is to be paid; and (j) the
amount of cash and/or the amount and kind of Securities, if any,
to be withdrawn from the Collateral Account, a specified Margin
Account, or the Senior Security Account for such Series. Upon the
Custodian's payment of the premium and the return and/or
cancellation of any receipt issued pursuant to paragraphs 6, 8 or
10 of this Article with respect to the Option being liquidated
through the Closing Purchase Transaction, the Custodian shall
remove, or direct the Depository to remove, the previously
imposed restrictions on the Securities underlying the Call
Option.
13. Upon the expiration, exercise or consummation of a
Closing Purchase Transaction with respect to any Option purchased
or written by the Fund and described in this Article, the
Custodian shall delete such Option from the statements delivered
to the Fund pursuant to paragraph 3 Article III herein, and upon
the return and/or cancellation of any receipts issued by the
Custodian, shall make such withdrawals from the Collateral
Account, and the Margin Account and/or the Senior Security
Account as may be specified in a Certificate received in
connection with such expiration, exercise, or consummation.
15
<PAGE>
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract,
the Fund shall deliver to the Custodian a Certificate specifying
with respect to such Futures Contract, (or with respect to any
number of identical Futures Contract(s)): (a) the Series for
which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying stock index or
financial instrument); (c) the number of identical Futures
Contracts entered into; (d) the delivery or settlement date of
the Futures Contract(s); (e) the date the Futures Contract(s) was
(were) entered into and the maturity date; (f) whether the Fund
is buying (going long) or selling (going short) on such Futures
Contract(s); (g) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security
Account for such Series; (h) the name of the broker, dealer, or
futures commission merchant through whom the Futures Contract was
entered into; and (i) the amount of fee or commission, if any, to
be paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall
make the deposits, if any, to the Margin Account in accordance
with the terms and conditions of the Margin Account Agreement.
The Custodian shall make payment out of the moneys specifically
allocated to such Series of the fee or commission, if any,
specified in the Certificate and deposit in the Senior Security
Account for such Series the amount of cash and/or the amount and
kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or futures
commission merchant with respect to an outstanding Futures
Contract, shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment
from a broker, dealer, or futures commission merchant to the Fund
with respect to an outstanding Futures Contract, shall be
received and dealt with by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement is
made on such Futures Contract, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the Futures Contract and
the Series to which the same relates; (b) with respect to a Stock
Index Futures Contract, the total cash settlement amount to be
paid or received, and with respect to a Financial Futures
Contract, the Securities and/or amount of cash to be delivered or
received; (c) the broker, dealer, or futures commission merchant
16
<PAGE>
to or from whom payment or delivery is to be made or received;
and (d) the amount of cash and/or Securities to be withdrawn from
the Senior Security Account for such Series. The Custodian shall
make the payment or delivery specified in the Certificate, and
delete such Futures Contract from the statements delivered to the
Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to
offset a Futures Contract held by the Custodian hereunder, the
Fund shall deliver to the Custodian a Certificate specifying: (a)
the items of information required in a Certificate described in
paragraph 1 of this Article, and (b) the Futures Contract being
offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission,
if any, specified in the Certificate and delete the Futures
Contract being offset from the statements delivered to the Fund
pursuant to paragraph 3 of Article III herein, and make such
withdrawals from the Senior Security Account for such Series as
may be specified in such Certificate. The withdrawals, if any, to
be made from the Margin Account shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account
Agreement.
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract
Option by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to such Futures
Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option
(put or call); (c) the type of Futures Contract and such other
information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option purchased; (d) the
expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by
the Fund upon such purchase; (h) the name of the broker or
futures commission merchant through whom such option was
purchased; and (i) the name of the broker, or futures commission
merchant, to whom payment is to be made. The Custodian shall pay
out of the moneys specifically allocated to such Series, the
total amount to be paid upon such purchase to the broker or
futures commissions merchant through whom the purchase was made,
provided that the same conforms to the amount set forth in such
Certificate.
2. Promptly after the sale of any Futures Contract Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund
shall promptly deliver to the Custodian a Certificate specifying
with respect to each such sale: (a) Series to which such Futures
17
<PAGE>
Contract Option was specifically allocated; (b) the type of
Future Contract Option (put or call); (c) the type of Futures
Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract
Option; (d) the date of sale; (e) the sale price; (I) the date of
settlement; (g) the total amount payable to the Fund upon such
sale; and (h) the name of the broker of futures commission
merchant through whom the sale was made. The Custodian shall
consent to the cancellation of the Futures Contract Option being
closed against payment to the Custodian of the total amount
payable to the Fund, provided the same conforms to the total
amount payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund
pursuant to paragraph 1 is exercised by the Fund, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a)
the Series to which such Futures Contract Option was specifically
allocated; (b) the particular Futures Contract Option (put or
call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise;
(e) the name of the broker or futures commission merchant through
whom the Futures Contract Option is exercised; (f) the net total
amount, if any, payable by the Fund; (g) the amount, if any, to
be received by the Fund; and (h) the amount of cash and/or the
amount and kind of Securities to be deposited in the Senior
Security Account for such Series. The Custodian shall make, out
of the moneys and Securities specifically allocated to such
Series, the payments, if any, and the deposits, if any, into the
Senior Security Account as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be made
by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a) the
Series for which such Futures Contract Option was written; (b)
the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures
Contract Option; (d) the expiration date; (e) the exercise price;
(f) the premium to be received by the Fund; (g) the name of the
broker or futures commission merchant through whom the premium is
to be received; and (h) the amount of cash and/or the amount and
kind of Securities, if any, to be deposited in the Senior
Security Account for such Series. The Custodian shall, upon
receipt of the premium specified in the Certificate, make out of
the moneys and Securities specifically allocated to such Series
the deposits into the Senior Security Account, if any, as
specified in the Certificate. The deposits, if any, to be made to
18
<PAGE>
the Margin Account shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the Fund
which is a call is exercised, the Fund shall promptly deliver to
the Custodian a Certificate specifying: (a) the Series to which
such Futures Contract Option was specifically allocated; (b) the
particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom
such Futures Contract Option was exercised; (e) the net total
amount, if any, payable to the Fund upon such exercise; (f) the
net total amount, if any, payable by the Fund upon such exercise;
and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for
such Series. The Custodian shall, upon its receipt of the net
total amount payable to the Fund, if any, specified in such
Certificate make the payments, if any, and the deposits, if any,
into the Senior Security Account as specified in the Certificate.
The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions
of the Margin Account Agreement.
6. Whenever a Futures Contract Option which is written by
the Fund and which is a put is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying:
(a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying such Futures Contract
Option; (d) the name of the broker or futures commission merchant
through whom such Futures Contract Option is exercised; (e) the
net total amount, if any, payable to the Fund upon such exercise;
(f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash
to be withdrawn from or deposited in, the Senior Security Account
for such Series, if any. The Custodian shall, upon its receipt of
the net total amount payable to the Fund, if any, specified in
the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and
the deposits, if any, into the Senior Security Account as
specified in the Certificate. The deposits to and/or withdrawals
from the Margin Account, if any, shall be made by the Custodian
in accordance with the terms and conditions of the Margin Account
Agreement.
7. Whenever the Fund purchases any Futures Contract Option
identical to a previously written Futures Contract Option
described in this Article in order to liquidate its position as a
writer of such Futures Contract Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to
19
<PAGE>
the Futures-Contract Option being purchased: (a) the Series to
which such Option is specifically allocated; (b) that the
transaction is a closing transaction; (c) the type of Future
Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Option
Contract; (d) the exercise price; (e) the premium to be paid by
the Fund; (f) the expiration date; (g) the name of the broker or
futures commission merchant to whom the premium is to be paid;
and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Senior Security
Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the
Certificate. The withdrawals, if any, to be made from the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a
closing transaction with respect to, any Futures Contract Option
written or purchased by the Fund and described in this Article,
the Custodian shall (a) delete such Futures Contract Option from
the statements delivered to the Fund pursuant to paragraph 3 of
Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security
Account as may be specified in a Certificate. The deposits to
and/or withdrawals from the Margin Account, if any, shall be made
by the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this Article
shall be subject to Article VI hereof.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the
Fund, the Fund shall promptly deliver to the Custodian a
Certificate specifying:(a) the Series for which such short sale
was made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and
accrued interest or dividends, if any; (d) the dates of the sale
and settlement; (e) the sale price per unit; (f) the total amount
credited to the Fund upon such sale, if any, (g) the amount of
cash and/or the amount and kind of Securities, if any, which are
to be deposited in a Margin Account and the name in which such
Margin Account has been or is to be established; (h) the amount
of cash and/or the amount and kind of Securities, if any, to be
deposited in a Senior Security Account, and (i) the name of the
broker through whom such short sale was made. The Custodian shall
upon its receipt of a statement from such broker confirming such
20
<PAGE>
sale and that the total amount credited to the Fund upon such
sale, if any, as specified in the Certificate is held by such
broker for the account of the Custodian (or any nominee of the
Custodian) as custodian of the Fund, issue a receipt or make the
deposits into the Margin Account and the Senior Security Account
specified in the Certificate.
2. In connection with the closing-out of any short sale,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such closing out: (a) the Series
for which such transaction is being made; (b) the name of the
issuer and the title of the Security; (c) the number of shares or
the principal amount, and accrued interest or dividends, if any,
required to effect such closing-out to be delivered to the
broker; (d) the dates of closing-out and settlement; (e) the
purchase price per unit; (f) the net total amount payable to the
Fund upon such closing-out; (g) the net total amount payable to
the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the
Margin Account; (i) the amount of cash and/or the amount and kind
of Securities, if any, to be withdrawn from the Senior Security
Account; and (j) the name of the broker through whom the Fund is
effecting such closing-out. The Custodian shall, upon receipt of
the net total amount payable to the Fund upon such closing-out,
and the return and/ or cancellation of the receipts, if any,
issued by the Custodian with respect to the short sale being
closed-out, pay out of the moneys held for the account of the
Fund to the broker the net total amount payable to the broker,
and make the withdrawals from the Margin Account and the Senior
Security Account, as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase
Agreement with respect to Securities and money held by the
Custodian hereunder,the Fund shall deliver to the Custodian a
Certificate, or in the event such Reverse Repurchase Agreement is
a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in
connection with such Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the broker or dealer
through or with whom the Reverse Repurchase Agreement is entered;
(d) the amount and kind of Securities to be delivered by the Fund
to such broker or dealer; (e) the date of such Reverse Repurchase
Agreement; and (f) the amount of cash and/or the amount and kind
of Securities, if any, specifically allocated to such Series to
be deposited in a Senior Security Account for such Series in
connection with such Reverse Repurchase Agreement. The Custodian
21
<PAGE>
shall, upon receipt of the total amount payable to the Fund
specified in the Certificate, Oral Instructions, or Written
Instructions make the delivery to the broker or dealer, and the
deposits, if any, to the Senior Security Account, specified in
such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement
described in preceding paragraph 1 of this Article, the Fund
shall promptly deliver a Certificate or, in the event such
Reverse Repurchase Agreement is a Money Market Security, a
Certificate or Oral Instructions to the Custodian specifying: (a)
the Reverse Repurchase Agreement being terminated and the Series
for which same was entered; (b) the total amount payable by the
Fund in connection with such termination; (c) the amount and kind
of Securities to be received by the Fund and specifically
allocated to such Series in connection with such termination; (d)
the date of termination; (e) the name of the broker or dealer
with or through whom the Reverse Repurchase Agreement is to be
terminated; and (f) the amount of cash and/or the amount and kind
of Securities to be withdrawn from the Senior Securities Account
for such Series. The Custodian shall, upon receipt of the amount
and kind of Securities to be received by the Fund specified in
the Certificate or Oral Instructions, make the payment to the
broker or dealer, and the withdrawals, if any, from the Senior
Security Account, specified in such Certificate or Oral
Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian
hereunder, the Fund shall deliver or cause to be delivered to the
Custodian a Certificate specifying with respect to each such
loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the title
of the Securities, (c) the number of shares or the principal
amount loaned, (d) the~date of loan and delivery, (e) the total
amount to be delivered to the Custodian against the loan of the
Securities, including the amount of cash collateral and the
premium, if any, separately identified, and (f) the name of the
broker, dealer, or financial institution to which the loan was
made. The Custodian shall deliver the Securities thus designated
to the broker, dealer or financial institution to which the loan
was made upon receipt of the total amount designated as to be
delivered against the loan of Securities. The Custodian may
accept payment in connection with a delivery otherwise than
through the Book-Entry System or Depository only in the form of a
certified or bank cashier's check payable to the order of the
Fund or the Custodian drawn on New York Clearing House funds and
22
<PAGE>
may deliver Securities in accordance with the customs prevailing
among dealers in securities.
2. Promptly after each termination of the loan of
Securities by the Fund, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with respect
to each such loan termination and return of Securities: (a) the
Series to which the loaned Securities are specifically allocated;
(b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be
returned, (d) the date of termination, (e) the total amount to be
delivered by the Custodian (including the cash collateral for
such Securities minus any offsetting credits as described in said
Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned.
The Custodian shall receive all Securities returned from the
broker, dealer, or financial institution to which such Securities
were loaned and upon receipt thereof shall pay, out of the moneys
held for the account of the Fund, the total amount payable upon
such return of Securities as set forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such
deposits to, or withdrawals from, a Senior Security Account as
specified in a Certificate received by the Custodian. Such
Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the amount
and kind of Securities specifically allocated to such Series to
be deposited in, or withdrawn from, such Senior Security Account
for such Series. In the event that the Fund fails to specify in a
Certificate the Series, the name of the issuer, the title and the
number of shares or the principal amount of any particular
Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under
no obligation to make any such deposit or withdrawal and shall so
notify the Fund.
2. The Custodian shall make deliveries or payments from a
Margin Account to the broker, dealer, futures commission merchant
or Clearing Member in whose name, or for whose benefit, the
account was established as specified in the Margin Account
Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any Margin
Account shall be dealt with in accordance with the terms and
conditions of the Margin Account Agreement.
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<PAGE>
4. The Custodian shall have a continuing lien and security
interest in and to any property at any time held by the Custodian
in any Collateral Account described herein. In accordance with
applicable law the Custodian may enforce its lien and realize on
any such property whenever the Custodian has made payment or
delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the
event the Custodian should realize on any such property net
proceeds which are less than the Custodian's obligations under
any Put Option guarantee letter or similar document or any
receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the
Fund with a statement with respect to each Margin Account in
which money or Securities are held specifying as of the close of
business on the previous business day: (a) the name of the Margin
Account; (b) the amount and kind of Securities held therein; and
(c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures
commission merchant specified in the name of a Margin Account a
copy of the statement furnished the Fund with respect to such
Margin Account.
6. Promptly after the close of business on each business
day in which cash and/or Securities are maintained in a
Collateral Account for any Series, the Custodian shall furnish
the Fund with a statement with respect to such Collateral Account
specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next
succeeding the delivery to the Fund of such statement, the Fund
shall furnish to the Custodian a Certificate or Written
Instructions specifying the then market value of the Securities
described in such statement. In the event such then market value
is indicated to be less than the Custodians obligation with
respect to any outstanding Put Option guarantee letter or similar
document, the Fund shall promptly specify in a Certificate the
additional cash and/or Securities to be deposited in such
Collateral Account to eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the
resolution of the Board of Directors of the Fund, certified by
the Secretary or any Assistant Secretary, either (i) setting
forth with respect to the Series specified therein the date of
the declaration of a dividend or distribution, the date of
payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per
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<PAGE>
Share of such Series to the shareholders of record as of that
date and the total amount payable to the Dividend Agent and any
sub-dividend agent or co-dividend agent of the Fund on the
payment date, or (ii) authorizing with respect to the Series
specified therein the declaration of dividends and distributions
on a daily basis and authorizing the Custodian to rely on Oral
Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to
payment shall be determined, the amount payable per Share of such
Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian
shall pay out of the moneys held for the account of each Series
the total amount payable to the Dividend Agent and any sub-
dividend agent or co-dividend agent of the Fund with respect to
such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall
deliver to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date,
and price; and
(b) The amount of money to be received by the Custodian
for the sale of such Shares and specifically
allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account in the
name of the Series for which such money was received.
3. Upon issuance of any Shares of any Series described in
the foregoing provisions of this Article, the Custodian shall
pay, out of the money held for the account of such Series, all
original issue or other taxes required to be paid by the Fund in
connection with such issuance upon the receipt of a Certificate
specifying the amount to be paid.
4. Whenever the Fund desires the Custodian to make payment
out of the money held by the Custodian hereunder in connection
with a redemption of any Shares, it shall furnish to the
Custodian:
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<PAGE>
(a) A resolution by the Board of Directors of the Fund
directing the Transfer Agent to redeem the Shares;
and
(b) A Certificate specifying the number and Series of
Shares redeemed; and
(c) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice
setting forth the Series and number of Shares received by the
Transfer Agent for redemption and that such Shares are in good
form for redemption, the Custodian shall make payment to the
Transfer Agent out of the moneys held in the separate account in
the name of the Series the total amount specified in the
Certificate issued pursuant to the foregoing paragraph 4 of this
Article.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance
funds on behalf of any Series which results in an overdraft
because the moneys held by the Custodian in the separate account
for such Series shall be insufficient to pay the total amount
payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate or Oral Instructions,
or which results in an overdraft in the separate account of such
Series for some other reason, or if the Fund is for any other
reason indebted to the Custodian with respect to a Series,
including any indebtedness to The Bank of New York under the
Fund's Cash Management and Related Services Agreement, (except a
borrowing for investment or for temporary or emergency purposes
using Securities as collateral pursuant to a separate agreement
and subject to the provisions of paragraph 2 of this Article),
such overdraft or indebtedness shall be deemed to be a loan made
by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per
annum (based on a 360-day year for the actual number of days
involved) equal to 1/2 percent over Custodian's prime commercial
lending rate in effect from time to time, such rate to be
adjusted on the effective date of any change in such prime
commercial lending rate but in no event to be less than 6 percent
per annum. In addition, the Fund hereby agrees that the Custodian
shall have a continuing lien and security interest in and to any
property specifically allocated to such Series at any time held
by it for the benefit of such Series or in which the Fund may
have an interest which is then in the Custodian's possession or
control or in possession or control of any third party acting in
the Custodian's behalf. The Fund authorizes the Custodian, in its
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<PAGE>
sole discretion, at any time to charge any such overdraft or
indebtedness together with interest due thereon against any
balance of account standing to such Series' credit on the
Custodian's books. In addition, the Fund hereby covenants that on
each Business Day on which either it intends to enter a Reverse
Repurchase Agreement and/or otherwise borrow from a third party,
or which next succeeds a Business Day on which at the close of
business the Fund had outstanding a Reverse Repurchase Agreement
or such a borrowing, it shall prior to 9 a.m., New York City
time, advise the Custodian, in writing, of each such borrowing,
shall specify the Series to which the same relates, and shall not
incur any indebtedness not so specified other than from the
Custodian.
2. The Fund will cause to be delivered to the Custodian by
any bank (including, if the borrowing is pursuant to a separate
agreement, the Custodian) from which it borrows money for
investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount of
collateral. The Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the
bank, (c) the amount and terms of the borrowing, which may be set
forth by incorporating by reference an attached promissory note,
duly endorsed by the Fund, or other loan agreement, (d) the time
and date, if known, on which the loan is to be entered into, (e)
the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market
value of Securities to be delivered as collateral for such loan,
including the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities, and
(h) a statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such
loan is in conformance with the Investment Company Act of 1940
and the Fund's prospectus. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified
collateral and the executed promissory note, if any, against
delivery by the lending bank of the total amount of the loan
payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may, at
the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note
or loan agreement. The Custodian shall deliver such Securities as
additional collateral as may be specified in a Certificate to
collateralize further any transaction described in this
paragraph. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian, and
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<PAGE>
the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund
fails to specify in a Certificate the Series, the name of the
issuer, the title and number of shares or the principal amount of
any particular Securities to be delivered as collateral by the
Custodian, the Custodian shall not be under any obligation to
deliver any Securities.
ARTICLE XV.
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be
obligated to have or utilize the Terminal Link, and the
provisions of this Article shall apply if, but only if, the Fund
in its sole and absolute discretion elects to utilize the
Terminal Link to transmit Certificates to the Custodian.
2. The Terminal Link shall be utilized by the Fund only for
the purpose of the Fund providing Certificates to the Custodian
with respect to transactions involving Securities or for the
transfer of money to be applied to the payment of dividends,
distributions or redemptions of Fund Shares, and shall be
utilized by the Custodian only for the purpose of providing
notices to the Fund. Such use shall commence only after the Fund
shall have delivered to the Custodian a Certificate substantially
in the form of Exhibit D and shall have established access codes.
Each use of the Terminal Link by the Fund shall constitute a
representation and warranty that the Terminal Link is being used
only for the purposes permitted hereby, that at least two
Officers have each utilized an access code, that such safekeeping
procedures have been established by the Fund, and that such use
does not contravene the Investment Company Act of 1940, as
amended, or the rules or regulations thereunder.
3. The Fund shall obtain and maintain at its own cost and
expense all equipment and services, including, but not limited to
communications services, necessary for it to utilize the Terminal
Link, and the Custodian shall not be responsible for the
reliability or availability of any such equipment or services.
4. The Fund acknowledges that any data bases made available
as part of, or through the Terminal Link and any proprietary
data, software, processes, information and documentation (other
than any such which are or become part of the public domain or
are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund shall, and shall
cause others to which it discloses the Information, to keep the
Information confidential by using the same care and discretion it
uses with respect to its own confidential property and trade
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secrets, and shall neither make nor permit any disclosure without
the express prior written consent of the Custodian.
5. Upon termination of this Agreement for any reason, the
Fund shall return to the Custodian any and all copies of the
Information which are in the Fund's possession or under its
control, or which the Fund distributed to third parties. The
provisions of this Article shall not affect the copyright status
of any of the Information which may be copyrighted and shall
apply to all Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Terminal
Link from time to time without notice to the Fund except that the
Custodian shall give the Fund notice not less than 75 days in
advance of any modification which would materially adversely
affect the Fund's operation, and the Fund agrees that the Fund
shall not modify or attempt to modify the Terminal Link without
the Custodian's prior written consent. The Fund acknowledges that
any software or procedures provided the Fund as part of the
Terminal Link are the property of the Custodian and, accordingly,
the Fund agrees that any modifications to the Terminal Link,
whether by the Fund, or by the Custodian and whether with or
without the Custodian's consent, shall become the property of the
Custodian.
7. Neither the Custodian nor any manufacturers and
suppliers it utilizes or the Fund utilizes in connection with the
Terminal Link makes any warranties or representations, express or
implied, in fact or in law, including but not limited to
warranties of merchantability and fitness for a particular
purpose.
8. The Fund will cause its Officers and employees to treat
the authorization codes and the access codes applicable to
Terminal Link with extreme care, and irrevocably authorizes the
Custodian to act in accordance with and rely on Certificates
received by it through the Terminal Link. The Fund acknowledges
that it is its responsibility to assure that only its Officers
use the Terminal Link on its behalf, and that a Custodian shall
not be responsible nor liable for use of the Terminal Link on the
Fund's behalf by persons other than such persons or Officers, or
by only a single Officer, nor for any alteration, omission, or
failure to promptly forward.
9(a). Except as otherwise specifically provided in Section
9(b) of this Article, the Custodian shall have no liability for
any losses,. damages, injuries, claims, costs or expenses arising
out of or in connection with any failure, malfunction or other
problem relating to the Terminal Link except for money damages
suffered as the direct result of the negligence of the Custodian
in an amount not exceeding for any incident $25,000 provided,
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<PAGE>
however, that the Custodian shall have no liability under this
Section 9 if the Fund fails to comply with the provisions of
Section 11.
9(b). The Custodian's liability for its negligence in
executing or failing to execute in accordance with a Certificate
received through Terminal Link shall be only with respect to a
transfer of funds which is not made in accordance with such
Certificate after such Certificate shall have been duly
acknowledged by the Custodian, and shall be contingent upon the
Fund complying with the provisions of Section 12 of this Article,
and shall be limited to (i) restoration of the principal amount
mistransferred, if and to the extent that the Custodian would be
required to make such restoration under applicable law, and (ii)
the lesser of (A) a Fund's actual pecuniary loss incurred by
reason of its loss of use of the mistransferred funds or the
funds which were not transferred, as the case may be, or (B)
compensation for the loss of the use of the mistransferred funds
or the funds which were not transferred, as the case may be, at a
rate per annum equal to the average federal funds rate as
computed from the Federal Reserve Bank of New York's daily
determination of the effective rate for federal funds, for the
period during which a Fund has lost use of such funds. In no
event shall the Custodian have any liability for failing to
execute in accordance with a Certificate a transfer of funds
where the Certificate is received by the Custodian through
Terminal Link other than through the applicable transfer module
for the particular instructions contained in such Certificate.
10. Without limiting the generality of the foregoing, in no
event shall the Custodian or any manufacturer or supplier of its
computer equipment, software or services relating to the Terminal
Link be responsible for any special, indirect, incidental or
consequential damages which the Fund may incur or experience by
reason of its use of the Terminal Link even if the Custodian or
any manufacturer or supplier has been advised of the possibility
of such damages, nor with respect to the use of the Terminal Link
shall the Custodian or any such manufacturer or supplier be
liable for acts of God, or with respect to the following to the
extent beyond such person's reasonable control: machine or
computer breakdown or malfunction, interruption or malfunction of
communication facilities, labor difficulties or any other similar
or dissimilar cause.
11. The Fund shall notify the Custodian of any errors,
omissions or interruptions in, or delay or unavailability of, the
Terminal Link as promptly as practicable, and in any event within
24 hours after the earliest of (i) discovery thereof, (ii) the
Business Day on which discovery should have occurred through the
exercise of reasonable care and (iii) in the case of any error,
the date of actual receipt of the earliest notice which reflects
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<PAGE>
such error, it being agreed that discovery and receipt of notice
may only occur on a business day. The Custodian shall promptly
advise the Fund whenever the Custodian learns of any errors,
omissions or interruption in, or delay or unavailability of, the
Terminal Link.
12. The Custodian shall verify to the Fund, by use of the
Terminal Link, receipt of each Certificate the Custodian receives
through the Terminal Link, and in the absence of such
verification the Custodian shall not be liable for any failure to
act in accordance with such Certificate and the Fund may not
claim that such Certificate was received by the Custodian. Such
verification, which may occur after the Custodian has acted upon
such Certificate, shall be accomplished on the same day on which
such Certificate is received.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Foreign Securities (as such term
is defined in paragraph (c)(l) of Rule 17f-5 under the Investment
Company Act of 1940, as amended) and other assets, the foreign
banking institutions and foreign securities depositories and
clearing agencies designated on Schedule I hereto ("Foreign Sub-
Custodians") to carry out their respective responsibilities in
accordance with the terms of the subcustodian agreement between
each such Foreign Sub-Custodian and the Custodian, copies of
which have been previously delivered to the Fund and receipt of
which is hereby acknowledged (each such agreement, a "Foreign
Sub-Custodian Agreement"). The Custodian shall be liable for the
acts and omissions of each Foreign Sub-Custodian constituting
negligence or willful misconduct in the conduct of its
responsibilities under the terms of the Foreign Sub-Custodian
Agreement. Upon receipt of a Certificate, together with a
certified resolution substantially in the form attached as
Exhibit E of the Fund's Board of Directors, the Fund may
designate any additional foreign sub-custodian with which the
Custodian has an agreement for such entity to act as the
Custodian's agent, as its subcustodian and any such additional
foreign sub-custodian shall be deemed added to Schedule I. Upon
receipt of a Certificate from the Fund, the Custodian shall cease
the employment of any one or more Foreign Sub-Custodians for
maintaining custody of the Fund's assets and such Foreign Sub-
Custodian shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be
substantially in the form previously delivered to the Fund and
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will not be amended in a way that materially adversely affects
the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as belonging
to each Series of the Fund the Foreign Securities of such Series
held by each Foreign Sub-Custodian. At the election of the Fund,
it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims by the Fund or any Series
against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred
by the Fund or any Series if and to the extent that the Fund or
such Series has not been made whole for any such loss, damage,
cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent
with the terms of the applicable Foreign Sub-Custodian Agreement,
use reasonable efforts to arrange for the independent accountants
of the Fund to be afforded access to the books and records of any
Foreign Sub-Custodian insofar as such books and records relate to
the performance of such Foreign Sub-Custodian under its agreement
with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time,
as mutually agreed upon, statements in respect of the securities
and other assets of each Series held by Foreign Sub-Custodians,
including but not limited to, an identification of entities
having possession of each Series' Foreign Securities and other
assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a
Foreign Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as
mutually agreed upon, information concerning the Foreign Sub-
Custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in
connection with the Fund's initial approval of such Foreign Sub-
Custodians and, in any event, shall include information
pertaining to (i) the Foreign Custodians' financial strength,
general reputation and standing in the countries in which they
are located and their ability to provide the custodial services
required, and (ii) whether the Foreign Sub-Custodians would
provide a level of safeguards for safekeeping and custody of
securities not materially different form those prevailing in the
United States. The Custodian shall monitor the general operating
performance of each Foreign Sub-Custodian, and at least annually
obtain and review the annual financial report published by such
Foreign Sub-Custodian to determine that it meets the financial
criteria of an "Eligible Foreign Custodian" under Rule 17f-
5(c)(2)(i) or (ii). The Custodian will promptly inform the Fund
in the event that the Custodian learns that a Foreign Sub-
Custodian no longer satisfies the financial criteria of an
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"Eligible Foreign Custodian" under such Rule. The Custodian
agrees that it will use reasonable care in monitoring compliance
by each Foreign Sub-Custodian with the terms of the relevant
Foreign Sub-Custodian Agreement and that if it learns of any
breach of such Foreign Sub-Custodian Agreement believed by the
Custodian to have a material adverse effect on the Fund or any
Series it will promptly notify the Fund of such breach. The
Custodian also agrees to use reasonable and diligent efforts to
enforce its rights under the relevant Foreign Sub-Custodian
Agreement.
7. The Custodian shall transmit promptly to the Fund all
notices, reports or other written information received pertaining
to the Fund's Foreign Securities, including without limitation,
notices of corporate action, proxies and proxy solicitation
materials.
8. Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for securities received for the
account of any Series and delivery of securities maintained for
the account of such Series may be effected in accordance with the
customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation,
delivery of securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such
securities from such purchaser or dealer.
ARTICLE XVII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in
Article XVI neither the Custodian nor its nominee shall be liable
for any loss or damage, including counsel fees, resulting from
its action or omission to act or otherwise, either hereunder or
under any Margin Account Agreement, except for any such loss or
damage arising out of its own negligence or willful misconduct.
In no event shall the Custodian be liable to the Fund or any
third party for special, indirect or consequential damages or
lost profits or loss of business, arising under or in connection
with this Agreement, even if previously informed of the
possibility of such damages and regardless of the form of action.
The Custodian may, with respect to questions of law arising
hereunder or under any Margin Account Agreement, apply for and
obtain the advice and opinion of counsel to the Fund or of its
own counsel, at the expense of the Fund, and shall be fully
protected with respect to anything done or omitted by it in good
faith in conformity with such advice or opinion. The Custodian
shall be liable to the Fund for any loss or damage resulting from
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<PAGE>
the use of the Book-Entry System or any Depository arising by
reason of any negligence or willful misconduct on the part of the
Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the
Custodian shall be under no obligation to inquire into, and shall
not be liable for:
(a) The validity of the issue of any Securities purchased,
sold, or written by or for the Fund, the legality of the
purchase, sale or writing thereof, or the propriety of the amount
paid or received therefor;
(b) The legality of the sale or redemption of any Shares, or
the propriety of the amount to be received or paid therefor:
(c) The legality of the declaration or payment of any
dividend by the Fund;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securities, nor
shall the Custodian be under any duty or obligation to see to it
that any cash collateral delivered to it by a broker, dealer, or
financial institution or held by it at any time as a result of
such loan of portfolio Securities of the Fund is adequate
collateral for the Fund against any loss it might sustain as a
result of such loan. The Custodian specifically, but not by way
of limitation, shall not be under any duty or obligation
periodically to check or notify the Fund that the amount of such
cash collateral held by it for the Fund is sufficient collateral
for the Fund, but such duty or obligation shall be the sole
responsibility of the Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer or
financial institution to which portfolio Securities of the Fund
are lent pursuant to Article XIV of this Agreement makes payment
to it of any dividends or interest which are payable to or for
the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian
shall promptly notify the Fund in the event that such dividends
or interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or
Collateral Account in connection with transactions by the Fund.
In addition, the Custodian shall be under no duty or obligation
to see that any broker, dealer, futures commission merchant or
Clearing Member makes payment to the Fund of any variation margin
payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or
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<PAGE>
Clearing Member, to see that any payment received by the
Custodian from any broker, dealer, futures commission merchant or
Clearing Member is the amount the Fund is entitled to receive, or
to notify the Fund of the Custodian's receipt or non-receipt of
any such payment.
3. The Custodian shall not be liable for, or considered to
be the Custodian of, any money, whether or not represented by any
check, draft, or other instrument for the payment of money,
received by it on behalf of the Fund until the Custodian actually
receives and collects such money directly or by the final
crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not
be liable for ascertaining or acting upon any calls, conversions,
exchange offers, tenders, interest rate changes or similar
matters relating to Securities held in the Depository, unless the
Custodian shall have actually received timely notice from the
Depository. In no event shall the Custodian have any
responsibility or liability for the failure of the Depository to
collect, or for the late collection or late crediting by the
Depository of any amount payable upon Securities deposited in the
Depository which may mature or be redeemed, retired, called or
otherwise become payable. However, upon receipt of a Certificate
from the Fund of an overdue amount on Securities held in the
Depository the Custodian shall make a claim against the
Depository on behalf of the Fund, except that the Custodian shall
not be under any obligation to appear in, prosecute or defend any
action suit or proceeding in respect to any Securities held by
the Depository which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all
expense and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation
to take action to effect collection of any amount due to the Fund
from the Transfer Agent of the Fund nor to take any action to
effect payment or distribution by the Transfer Agent of the Fund
of any amount paid by the Custodian to the Transfer Agent of the
Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation
to take action to effect collection of any amount, if the
Securities upon which such amount is payable are in default, or
if payment is refused after due demand or presentation, unless
and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any
such action.
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7. The Custodian may in addition to the employment of
Foreign Sub-Custodians pursuant to Article XVI appoint one or
more banking institutions as Depository or Depositories, as Sub-
Custodian or Sub-Custodians, or as Co-Custodian or Co-Custodians
including, but not limited to, banking institutions located in
foreign countries, of Securities and moneys at any time owned by
the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the
Custodian, the Fund and the appointed institution.
8. The Custodian shall not be under any duty or obligation
(a) to ascertain whether any Securities at any time delivered to,
or held by it or by any Foreign Sub-Custodian, for the account of
the Fund and specifically allocated to a Series are such as
properly may be held by the Fund or such Series under the
provisions of its then current prospectus, or (b) to ascertain
whether any transactions by the Fund, whether or not involving
the Custodian, are such transactions as may properly be engaged
in by the Fund.
9. The Custodian shall be entitled to receive and the Fund
agrees to pay to the Custodian all out-of-pocket expenses and
such compensation as may be agreed upon from time to time between
the Custodian and the Fund. The Custodian may charge such
compensation and any expenses with respect to a Series incurred
by the Custodian in the performance of its duties pursuant to
such agreement against any money specifically allocated to such
Series. Unless and until the Fund instructs the Custodian by a
Certificate to apportion any loss, damage, liability or expense
among the Series in a specified manner, the Custodian shall also
be entitled to charge against any money held by it for the
account of a Series such Series' pro rata share (based on such
Series net asset value at the time of the charge to the aggregate
net asset value of all Series at that time) of the amount of any
loss, damage, liability or expense, including counsel fees, for
which it shall be entitled to reimbursement under the provisions
of this Agreement. The expenses for which the Custodian shall be
entitled to reimbursement hereunder shall include, but are not
limited to, the expenses of sub-custodians and foreign branches
of the Custodian incurred in settling outside of New York City
transactions involving the purchase and sale of Securities of the
Fund.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by
the Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions actually received by the Custodian hereinabove
provided for. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming such Oral
Instructions in such manner so that such Certificate or facsimile
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<PAGE>
thereof is received by the Custodian, whether by hand delivery,
telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions are given to
the Custodian. The Fund agrees that the fact that such confirming
instructions are not received by the Custodian shall in no way
affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund agrees that
the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions given to the Custodian hereunder concerning
such transactions provided such instructions reasonably appear to
have been received from an Officer.
11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian and
reasonably believed by the Custodian to be given in accordance
with the terms and conditions of any Margin Account Agreement.
Without limiting the generality of the foregoing, the Custodian
shall be under no duty to inquire into, and shall not be liable
for, the accuracy of any statements or representations contained
in any such instrument or other notice including, without
limitation, any specification of any amount to be paid to a
broker, dealer, futures commission merchant or Clearing Member.
12. The books and records pertaining to the Fund which are
in the possession of the Custodian shall be the property of the
Fund. Such books and records shall be prepared and maintained as
required by the Investment Company Act of 1940, as amended, and
other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representatives, shall have access
to such books and records during the Custodian's normal business
hours. Upon the reasonable request of the Fund, copies of any
such books and records shall be provided by the Custodian to the
Fund or the Fund's authorized representative, and the Fund shall
reimburse the Custodian its expenses of providing such copies.
Upon reasonable request of the Fund, the Custodian shall provide
in hard copy or on micro-film, whichever the Custodian elects,
any records included in any such delivery which are maintained by
the Custodian on a computer disc, or are similarly maintained,
and the Fund shall reimburse the Custodian for its expenses of
providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, the Depository or O.C.C., and
with such reports on its own systems of internal accounting
control as the Fund may reasonably request from time to time.
14. Subject to the foregoing provisions of this Agreement,
including, without limitation, those contained in Article XVI the
Custodian may deliver and receive Securities, and receipts with
respect to such Securities, and arrange for payments to be made
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and received by the Custodian in accordance with the customs
prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver
Securities against payment, delivery of such Securities and
receipt of payment therefor may not be completed simultaneously.
The Fund assumes all responsibility and liability for all credit
risks involved in connection with the Custodian's delivery of
Securities pursuant to instructions of the Fund, which
responsibility and liability shall continue until final payment
in full has been received by the Custodian.
15. The Custodian shall have no duties or responsibilities
whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the
Custodian.
ARTICLE XVIII.
TERMINATION
1. Either of the parties hereto may terminate this
Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less
than ninety (90) days after the date of giving of such notice. In
the event such notice is given by the Fund, it shall be
accompanied by a copy of a resolution of the Board of Directors
of the Fund, certified by the Secretary or any Assistant
Secretary, electing to terminate this Agreement and designating a
successor custodian or custodians, each of which shall be a bank
or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. In the event such notice
is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a copy of a resolution
of the Board of Directors of the Fund, certified by the Secretary
or any Assistant Secretary, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the
Custodian may designate a successor custodian which shall be a
bank or trust company having not less than $2,000,000 aggregate
capital, surplus and undivided profits. Upon the date set forth
in such notice this Agreement shall terminate, and the Custodian
shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor
custodian all Securities and moneys then owned by the Fund and
held by it as Custodian, after deducting all fees, expenses and
other amounts for the payment or reimbursement of which it shall
then be entitled.
2. If a successor custodian is not designated by the Fund
or the Custodian in accordance with the preceding paragraph, the
Fund shall upon the date specified in the notice of termination
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of this Agreement and upon the delivery by the Custodian of all
Securities (other than Securities held in the Book-Entry System
which cannot be delivered to the Fund) and moneys then owned by
the Fund be deemed to be its own custodian and the Custodian
shall thereby be relieved of all duties and responsibilities
pursuant to this Agreement, other than the duty with respect to
Securities held in the Book Entry System which cannot be
delivered to the Fund to hold such Securities hereunder in
accordance with this Agreement.
ARTICLE XIX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by
two of the present Officers of the Fund under its corporate seal,
setting forth the names and the signatures of the present
Officers of the Fund. The Fund agrees to furnish to the Custodian
a new Certificate in similar form in the event any such present
Officer ceases to be an Officer of the Fund, or in the event that
other or additional Officers are elected or appointed. Until such
new Certificate shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement upon
the signatures of the Officers as set forth in the last delivered
Certificate.
2. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at 90 Washington Street, New York,
New York 10286, or at such other place as the Custodian may from
time to time designate in writing.
3. Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund shall be
sufficiently given if addressed to the Fund and mailed or
delivered vomit at its office at the address for the Fund first
above written, or at such other place as the Fund may from time
to time designate in writing.
4. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties
with the same formality as this Agreement and approved by a
resolution of the Board of Directors of the Fund.
5. This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by
the Fund without the written consent of the Custodian, or by the
Custodian without the written consent of the Fund, authorized or
approved by a resolution of the Fund's Board of Directors.
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6. This Agreement shall be construed in accordance with the
laws of the State of New York without giving effect to conflict
of laws principles thereof. Each party hereby consents to the
jurisdiction of a state or federal court situated in New York
City, New York in connection with any dispute arising hereunder
and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective corporate Officers,
"hereunto duly authorized and their respective corporate seals to
be hereunto affixed, as of the day and year first above written.
ALLIANCE WORLD DOLLAR
GOVERNMENT FUND,INC.
[SEAL] /s/
By: ____________________
Attest:
/s/ George O. Martinez
______________________
THE BANK OF NEW YORK
[SEAL] /s/
By: ____________________
Attest:
/s/
_____________________
40
00250230.AJ2
<PAGE>
APPENDIX B
I, Jorge Ramos, a Vice President with THE BANK OF NEW YORK do
hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
SCHEDULE I
Bank of New York Branches
and
Eligible Foreign Custodians
Country Bank Name and Address Status
Argentina The First National Bank
of Boston Correspondent
Florida 99, 1005 Buenos Aires,
Argentina.
Australia Australia and New Zealand
Banking Group, Limited Correspondent
35 Elizabeth Street,
Melbourne, Australia
Austria GiroCredit Bank Aktiengesellschaft Correspondent
der Sparkassen
A-1011 Wien, Schubertring 5,
Vienna, Austria
Belgium Banque Bruxelles Lambert, S.A. Correspondent
Cours Saint Michel 60
Brussels 1040
Belgium
Brazil The First National Bank of Boston Correspondent
Rua Libero Badaro, 497,
01009 Sao SP (Alt 226)
Brazil
Canada Royal Trust Corporation of Canada Correspondent
55 King Street West
Royal Trust Tower, Toronto,
Ontario M5W lP9, Canada
Chile Banco de Chile Correspondent
Departamento Comisiones de Confianza
Ahumada 251, Piso 3
Santiago
China Standard Chartered Bank Correspondent
8/F Edinburgh Tower
The Landmark, 15 Queens Road Central
Hong Kong
Denmark Den Danske Bank Correspondent
2-12 Holmens Kanal
DK 1092 Copenhagen K.
<PAGE>
Denmark
Euromarket Cedel, S.A. Depository
67 Boulevard Grande-Duchesse
Charlotte
L-1010, Luxembourg
Finland Union Bank of Finland Ltd. Correspondent
Aleksanterinkatu 30,
Helsinki, Finland
France Banque Paribas Correspondent
BP 141
3 Rue D'Antin
75078 Paris, France
Germany Dresdner Bank A.G. Correspondent
Jurgen-Ponto-Platz 1 (Alt 207)
6000 Frankfurt 11,
Federal Republic of Germany
Greece Creditbank Correspondent
Banking Relations Division
40 Stadiou Street
GR10252 Athens
Hong Kong The HongKong & Shanghai Banking Correspondent
Corporation
1 Queen's Road Central,
Hong Kong
India The HongKong & Shanghai Banking Correspondent
Corporation
52/60 Mahatma Gandi Road
Bombay 400 001
Indonesia The HongKong & Shanghai Banking Correspondent
Corporation
P.O. Box 2307, Jakarta 1001,
Indonesia
Ireland Allied Irish Bank Correspondent
P.O. Box 518
I.F.S.C.
Dublin 1
Israel Israel Discount Bank Limited Correspondent
27-31 Yehuda Halevi Street
65-546 Tel Aviv
Italy Citibank, N.A. Correspondent
<PAGE>
Foro Buonaparte, 16
20121 Milano
Italy
Japan The Yasuda Trust & Banking Correspondent
Company, Limited
2-1 Yaesu, 1-Chome
Chuo-ku, Tokyo 103,
Japan
Korea Bank of Seoul Correspondent
10-1, Namdaeman-Ro 2-Ka
Chung-ku, Seoul, 100-092,
Korea
Malaysia The HongKong & Shanghai Banking Correspondent
Corporation Ltd.
2 Leboh Ampang
Kuala Lumpur, Malaysia
Mexico Citibank, N.A. Correspondent
Paseo de la Reforma 390,
Mexico City, 06695
Mexico
Netherlands Amsterdam-Rotterdam Bank, N.V. Correspondent
Kemelstede 2, 4817 St. Breda
New Zealand Australia and New Zealand
Banking Group Ltd. Correspondent
UDC Tower
113-119, The Terrace
Wellington, l
New Zealand
Norway Den norske Bank AS Correspondent
P.O. Box 1171 Sentrum
0107 OSLO 1
Pakistan Standard Chartered Bank Correspondent
Box 4896
Ismail Ibrahim Chundrigar Road
Karachi 2
Philippines The HongKong & Shangahi Correspondent
Corporation Ltd.
San Miguel Avenue
Ortigas Centre
Pasig, Metro Manila
Portugal Banco Comercial Portugues Correspondent
<PAGE>
Avienda Jose Malhoa
Lote 1686, 7th Floor
1000 Lisbon
Singapore United Overseas Bank Limited Correspondent
1 Bonham Street,
Raffles Place
Singapore
South Africa Standard Bank of South Africa Correspondent
Limited
P.O. Box 3720
Johannesburg 2000
Spain Banco Bilbao Vizcaya, S.A. Correspondent
Clara Del Ray, 26-3 Floor
28002 Madrid
Sri Lanka Standard Chartered Bank Correspondent
P.O. Box 27
17 Janadhipathi Mawatha
Colombo 1
Sweden Skandinaviska Enskilda Banken Correspondent
Jakobsgatan 6
Stockholm, S-106 40
Switzerland Union Bank of Switzerland Correspondent
Bahnhofstrasse, 45
8021 Zurich
Taiwan The HongKong & Shanghai Banking Correspondent
Corporation
333 Section 1, Keelung Road
Taipei 10548
Thailand The Siam Commercial Bank, Ltd. Correspondent
1060 Phetchaburi Road,
Bangkok 10400, Thailand
Turkey Citibank, N.A. Correspondent
Abdi Ipekci Cad. 65
80200 Macka
Istanbul
United The Bank of New York Branch
Kingdom 3 Birchin Lane
London EC3V 9BY
Uruguay The Bank of Boston Correspondent
Zabala 1463
<PAGE>
Casilla de Correo 90
Montevideo
Venezuela Citibank, N.A. Correspondent
Carmelitas a Altagracia,
Edificio Citibank,
Caracas, 1010, Venezuela
00250230.AJ2
<PAGE>
TRANSFER AGENCY AND REGISTRAR SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 1ST day of October,
1994, between ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC. (the
"Fund"), organized under the laws of Maryland and having its
principal place of business at 500 Plaza Drive, 3rd Floor,
Seacaucus, New Jersey 07094, and THE SHAREHOLDER SERVICES GROUP,
INC. (the "Transfer Agent"), a Massachusetts corporation with
principal offices at One Exchange Place, 53 State Street, Boston,
Massachusetts 02109.
WITNESSETH
WHEREAS, the Fund desires to appoint the Transfer Agent
as its transfer agent, registrar, dividend disbursing agent and
agent in connection with certain other activities and the
Transfer Agent desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants
and promises hereinafter set forth, the Fund and the Transfer
Agent agree as follows:
Article 1 Definitions
1.1 Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall
have the following meanings:
(a) "Articles of Incorporation" shall mean the
Articles of Incorporation, Declaration of Trust, or
similar organizational document as the case may be, of
the Fund as the same may be amended from time to time.
(b) "Authorized Person" shall be deemed to include
(i) any authorized officer of the Fund; or (ii) any
person, whether or not such person is an officer or
employee of the Fund, duly authorized to give Oral
Instructions or Written Instructions on behalf of the
Fund as indicated in writing to the Transfer Agent from
time to time.
(c) "Board of Directors" shall mean the Board of
Directors or Board of Trustees of the Fund, as the case
may be.
(d) "Commission" shall mean the Securities and
Exchange Commission.
<PAGE>
(e) "Custodian" refers to any custodian or
subcustodian of securities and other property which the
Fund may from time to time deposit, or cause to be
deposited or held under the name or account of such a
custodian pursuant to a Custodian Agreement.
(f) "1940 Act" shall mean the Investment Company
Act of 1940 and the rules and regulations promulgated
thereunder, allas amended from time to time.
(g) "Oral Instructions" shall mean instructions,
other than Written Instructions, actually received by
the Transfer Agent from a person reasonably believed by
the Transfer Agent to be an Authorized Person;
(h) "Prospectus" shall mean the most recently
dated Fund Prospectus and Statement of Additional
Information, including any supplements thereto if any,
which has become effective under the Securities Act of
1933 and the 1940 Act.
(i) "Shares" refers collectively to such shares of
capital stock or beneficial interest, as the case may
be, or class thereof, of the Fund as may be issued from
time to time.
(j) "Shareholder" shall mean a record owner of
Shares.
(k) "Written Instructions" shall mean a written
communication signed by a person reasonably believed by
the Transfer Agent to be an Authorized Person and
actually received by the Transfer Agent. Written
Instructions shall include manually executed originals
and authorized electronic transmissions, including
telefacsimile of a manually executed original or
communications effected directly between
electro-mechanical or electronic devices or such other
process.
Article 2 Appointment of the Transfer Agent
2.1 The Fund hereby appoints and constitutes the
Transfer Agent as transfer agent and registrar for Shares of the
Fund, dividend disbursing agent and agent in connection with the
Fund's dividend reinvestment plan as more fully described in the
Prospectus and the Transfer Agent hereby accepts such
2
<PAGE>
appointments and agrees to perform the duties hereinafter set
forth.
Article 3 Duties of the Transfer Agent
3.1 The Transfer Agent shall be responsible for:
(a) Administering and/or performing the customary
services of a transfer agent; service agent in
connection with dividend and distribution functions; and
for performing shareholder account and administrative
agent functions in connection with the issuance and
transfer of Shares, as more fully described in the
written Schedule of Duties of the Transfer Agent annexed
hereto as Schedule A and incorporated herein, and in
accordance with the terms of the Prospectus, applicable
law and the procedures established from time to time
between the Transfer Agent and the Fund;
(b) Recording the issuance of Shares and
maintaining pursuant to SEC Rule 17Ad-10(e) a record of
the total number of Shares which are authorized, based
upon data provided to it by the Fund, and issued and
outstanding. The Transfer Agent shall provide the Fund
on a regular basis with the total number of Shares which
are authorized and issued and outstanding and shall have
no obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take
cognizance of any laws relating to the issue or sale of
such Shares, which functions shall be the sole
responsibility of the Fund.
3.2 The Transfer Agent shall serve as agent for
Shareholders pursuant to the Fund's dividend reinvestment and
cash purchase plan as amended from time to time in accordance
with the terms of the agreement to be entered into between the
Shareholders and the Transfer Agent.
3.3 In addition to the duties set forth herein, the
Transfer Agent shall perform such other duties and functions, and
shall be paid such amounts therefor, as may from time to time be
agreed upon in writing between the Fund and the Transfer Agent.
3.4 Notwithstanding any of the foregoing provisions of
this Agreement, the Transfer Agent shall be under no duty or
obligation to inquire into, and shall not be liable for: (i) the
legality of the issuance of Shares; (ii) the legality of the
declaration of any dividend by the Board of Directors, or the
3
<PAGE>
legality of the issuance of any Shares in payment of any
dividend; or (ii) the legality of any recapitalization or
readjustment of the Shares.
Article 4 Recordkeeping and Other Information
4.1 The Transfer Agent shall create and maintain all
records required of it pursuant to its duties hereunder and as
set forth in Schedule A in accordance with all applicable laws,
rules and regulations, including records required by Section
31(a) of the 1940 Act. Where applicable, such records shall be
maintained by the Transfer Agent for the periods and in the
places required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940
Act, the Transfer Agent agrees that all such records prepared or
maintained by the Transfer Agent relating to the services to be
performed by the Transfer Agent hereunder are the property of the
Fund and will be preserved, maintained and made available in
accordance with such section, and will be surrendered promptly to
the Fund on and in accordance with the Fund's request.
4.3 In case of any requests or demands for the
inspection of Shareholder records of the Fund, the Transfer Agent
will endeavor to notify the Fund of such request and secure
Written Instructions as to the handling of such request. The
Transfer Agent reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its
counsel that it may be held liable for the failure to comply with
such request.
4.4 Upon reasonable notice by the Fund, the Transfer
Agent shall make available during regular business hours such of
its facilities and premises employed in connection with the
performance of its duties under this Agreement for reasonable
visitation by the Fund, or any person retained by the Fund as may
be necessary for the Fund to evaluate the quality of the services
performed by the Transfer Agent pursuant hereto.
Article 5 Fund Instructions
5.1 The Transfer Agent will not be held to have any
notice of any change of authority of any Authorized Person until
receipt of a Written Instruction thereof from the Fund. The
Transfer Agent will also have no liability when processing Share
certificates which it reasonably believes to bear the proper
manual or facsimile signatures of the officers of the Fund and
4
<PAGE>
the proper countersignature of the Transfer Agent, or any prior
transfer agent.
5.2 At any time, the Transfer Agent may request Written
Instructions from the Fund and may seek advice from legal counsel
for the Fund, or its own legal counsel, with respect to any
matter arising in connection with this Agreement, and it shall
not be liable for any action taken or not taken or suffered by it
in good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for the
Transfer Agent. Written Instructions requested by the Transfer
Agent will be provided by the Fund within a reasonable period of
time.
5.3 The Transfer Agent, its officers, agents or
employees, shall accept Oral Instructions or Written Instructions
given to them by any person representing or acting on behalf of
the Fund only if said representative is an Authorized Person.
The Fund agrees that all Oral Instructions shall be followed
within one business day by confirming Written Instructions, and
that the Fund's failure to so confirm shall not impair in any
respect the Transfer Agent's right to rely on Oral Instructions.
Article 6 Compensation
6.1 The Fund will compensate the Transfer Agent for the
performance of its obligations hereunder in accordance with the
fees set forth in the written Fee Schedule annexed hereto as
Schedule B and incorporated herein.
6.2 In addition to those fees set forth in Section 6.1
above, the Fund agrees to pay, and will be billed separately for,
all out-of-pocket expenses incurred by the Transfer Agent in the
performance of its duties hereunder. Out-of-pocket expenses
shall include, but shall not be limited to, the items specified
in the written schedule of out-of-pocket charges annexed hereto
as Schedule C and incorporated herein. Unspecified out-of-pocket
expenses shall be limited to those out-of-pocket expenses
reasonably incurred by the Transfer Agent in the performance of
its obligations hereunder.
6.3 The Fund agrees to pay all fees and out-of-pocket
expenses within fifteen (15) days following the receipt of the
respective invoice.
6.4 Any compensation agreed to hereunder may be
adjusted from time to time by written agreement executed by the
parties hereto.
5
<PAGE>
Article 7 Documents
7.1 In connection with the appointment of the Transfer
Agent, the Fund shall, on or before the date this Agreement goes
into effect, but in any case within a reasonable period of time
for the Transfer Agent to prepare to perform its duties
hereunder, deliver or caused to be delivered to the Transfer
Agent the documents set forth in the written schedule of Fund
Documents annexed hereto as Schedule D.
Article 8 Transfer Agent System
8.1 The Transfer Agent shall retain title to and
ownership of any and all data bases, computer programs, screen
formats, report formats, interactive design techniques,
derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights,
trade secrets, and other related legal rights utilized by the
Transfer Agent in connection with the services provided by the
Transfer Agent to the Fund herein (the "Transfer Agent System").
8.2 The Transfer Agent hereby grants to the Fund a
limited license to the Transfer Agent System for the sole and
limited purpose of having the Transfer Agent provide the services
contemplated hereunder and nothing contained in this Agreement
shall be construed or interpreted otherwise and such license
shall immediately terminate with the termination of this
Agreement.
Article 9 Representations and Warranties of the Transfer
Agent
9.1 The Transfer Agent represents and warrants to the
Fund that:
(a) It is a corporation duly organized an existing
and in good standing under the laws of the Commonwealth
of Massachusetts;
(b) It is empowered under applicable laws and by
its Articles of Incorporation and By-Laws to enter into
and perform this Agreement;
(c) All requisite corporate proceedings have been
taken to authorized it to enter into this Agreement;
6
<PAGE>
(d) It is duly registered with its appropriate
regulatory agency as a transfer agent and such
registration will remain in effect for the duration of
this Agreement;
(e) It has and will continue to have access to the
necessary facilities, equipment and personnel to perform
its duties and obligations under this Agreement.
Article 11 Representations and Warranties of the Fund
11.1 The Fund represents and warrants to the Transfer
Agent that:
(a) It is duly organized and existing and in good
standing under the laws of the jurisdiction in which it
is organized;
(b) It is empowered under applicable laws and by
its Article of Incorporation and By-Laws to enter into
this Agreement;
(c) All corporate proceedings required by said
Articles of Incorporation, By-Laws and applicable laws
have been taken to authorized it to enter into this
Agreement;
(d) A registration statement under the Securities
Act of 1933, as amended is currently effective and will
remain effective, and all appropriate state securities
law filings have been made and will continue to be made,
with respect to all Shares of the Fund being offered for
sale;
Article 12 Indemnification
12.1 The Transfer Agent shall not be responsible for
and the Fund shall indemnify and hold the Transfer Agent harmless
from and against any and all claims, costs, expenses (including
reasonable attorneys' fees), losses, damages, charges, payments
and liabilities of any sort or kind which may be asserted against
the Transfer Agent or for which the Transfer Agent may be held to
be liable ("Claim") arising out of or attributable to any of the
following:
(a) Any actions of the Transfer Agent required to
be taken pursuant to this Agreement unless such Claim
resulted from a negligent act or omission to act or bad
7
<PAGE>
faith by the Transfer Agent in the performance of its
duties hereunder.
(b) The Transfer Agent's reasonable reliance on,
or reasonable use of information, data, records and
documents (including but not limited to magnetic tapes,
computer printouts, hard copies and microfilm copies)
received by the Transfer Agent from the Fund, or any
authorized third party acting on behalf of the Fund,
including but not limited the prior transfer agent for
the Fund, in the performance of the Transfer Agent's
duties and obligations hereunder.
(c) The reliance on, or the implementation of, any
Written or Oral Instructions or any other instructions
or requests of the Fund.
(d) The offer or sale of Shares in violation of
any requirement under the securities laws or regulations
of any state that such Shares be registered in such
state or in violation of any stop order or other
determination or ruling by any state with respect to the
offer or sale of such Shares in such state.
(e) The Fund's refusal or failure to comply with
the terms of this Agreement, or any Claim which arises
out of the Fund's negligence or misconduct or the breach
of any representation or warranty of the Fund made
herein.
12.2 In any case in which the Fund may be asked to
indemnify or hold the Transfer Agent harmless, the Transfer Agent
will notify the Fund promptly after identifying any situation
which it believes presents or appears likely to present a claim
for indemnification against the Fund; although the failure to do
so shall not prevent recovery by the Transfer Agent and shall
keep the Fund advised with respect to all developments concerning
such situation. The Fund shall have the option to defend the
Transfer Agent against any Claim which may be the subject of this
indemnification, and, in the event that the Fund so elects, such
defense shall be conducted by counsel chosen by the Fund and
satisfactory to the Transfer Agent, and thereupon the Fund shall
take over complete defense of the Claim and the Transfer Agent
shall sustain no further legal or other expenses in respect of
such Claim. The Transfer Agent will not confess any Claim or
make any compromise in any case in which the Fund will be asked
to provide indemnification, except with the Fund's prior written
8
<PAGE>
consent. The obligations of the parties hereto under this
Section 12 shall survive the termination of this Agreement.
Article 13 Standard of Care
13.1 The Transfer Agent shall at all times act in good
faith and agrees to use its best efforts within commercially
reasonable limits to ensure the accuracy of all services
performed under this Agreement, but assume no responsibility for
loss or damage to the Fund unless said errors are caused by the
Transfer Agent's own negligence, bad faith or willful misconduct
or that of its employees.
13.2 Notwithstanding the foregoing Section 12(a) or
anything else contained in this Agreement to the contrary, the
Transfer Agent's entire liability to the Fund for any loss or
damage, direct or indirect for any cause whatsoever (including
but not limited to those arising out of this Agreement), and
regardless of the form of action, shall be limited to the Fund's
actual direct out-of-pocket expenses which are reasonably
incurred by the Fund, but shall not under any circumstances
exceed the lesser of (i) an amount equivalent to the average of
twelve month's fees paid to the Transfer Agent under this
Agreement; or (ii) five-hundred thousand dollars ($500,000).
Article 14 Consequential Damages
14.1 In no event and under no circumstances shall
either party to this Agreement be liable to the other party for
consequential or indirect loss of profits, reputation or business
or any other special damages under any provision of this
Agreement or for any act or failure to act hereunder.
Article 15 Term and Termination
15.1 This Agreement shall be effective on the date
first written above and shall continue for a period of three (3)
years (the "Initial Term"), unless earlier terminated pursuant to
the terms of this Agreement. Thereafter, this Agreement shall
automatically be renewed for successive terms of one (1) year
("Renewal Terms") each.
15.2 Either party may terminate this Agreement at the
end of the Initial Term or any subsequent Renewal Term upon not
less than ninety (90) days written notice to the other party
prior to the end of either the Initial Term or any subsequent
Renewal Term.
9
<PAGE>
15.3 In the event a termination notice is given by the
Fund, all expenses associated with movement of records and
materials and conversion thereof to a successor transfer agent
will be borne by the Fund.
15.4 If a party hereto is guilty of a material failure
to perform its duties and obligations hereunder (a "Defaulting
Party") the other party (the "Non-Defaulting Party") may give
written notice thereof to the Defaulting Party, and if such
material breach shall not have been remedied within thirty (30)
days after such written notice is given, then the Non-Defaulting
Party may terminate this Agreement by giving thirty (30) days
written notice of such termination to the Defaulting Party. If
the Transfer Agent is the Non-Defaulting Party, its termination
of this Agreement shall not constitute a waiver of any other
rights or remedies of the Transfer Agent with respect to services
performed prior to such termination or rights of the Transfer
Agent to be reimbursed for out-of-pocket expenses. In all cases,
termination by the Non-Defaulting Party shall not constitute a
waiver by the Non-Defaulting Party of any other rights it might
have under this Agreement or otherwise against the Defaulting
Party.
Article 16 Confidentiality
16.1 In connection with the services provided by the
Transfer Agent hereunder, certain confidential and proprietary
information regarding the Transfer Agent and the Fund may be
disclosed to the other. In connection therewith, the parties
agree as follows:
(a) Confidential Information disclosed under this
Agreement shall mean:
(i) any data or information that is
competitively sensitive material, and not generally
known to the public, including, but not limited to,
information about product plans, marketing
strategies, finance, operations, customer
relationships, customer profiles, sales estimates,
business plans, and internal performance results
relating to the past, present or future business
activities of the Transfer Agent or the Fund, their
respective parent corporations, their respective
subsidiaries and affiliated companies and the
customers, clients and suppliers of any of the
foregoing;
10
<PAGE>
(ii) any scientific or technical
information, design, process, procedure, formula,
or improvement that is commercially valuable and
secret in the sense that its confidentiality
affords the Transfer Agent or the Fund a
competitive advantage over its competitors; and
(iii) all confidential or proprietary
concepts, documentation, reports, data,
specifications, computer software, source code,
object code, flow charts, databases, inventions,
know-how, show-how and trade secrets, whether or
not patentable or copyrightable.
(b) Confidential Information includes, without
limitation, all documents, inventions, substances,
engineering and laboratory notebooks, drawings,
diagrams, specifications, bills of material, equipment,
prototypes and models, and any other tangible manifes-
tation of the foregoing which now exist or come into the
control or possession of the other party.
16.2 Except as expressly authorized by prior written
consent of the disclosing party ("Discloser"), the party
receiving Confidential Information ("Recipient") shall:
(a) limit access to Discloser's Confidential
Information to Recipient's employees who have a need-to-
know in connection with the subject matter thereof;
(b) advise those employees who have access to the
Confidential Information of the proprietary nature
thereof and of the obligations set forth in this
Confidentiality Agreement;
(c) take appropriate action by instruction or
agreement with the employees having access to
Discloser's Confidential Information to fulfill
Recipient's obligations under this Confidentiality
Agreement;
(d) safeguard all of Discloser's Confidential
Information by using a reasonable degree of care, but
not less than that degree of care used by Recipient in
safeguarding its own similar information or material;
(e) use all of Discloser's Confidential
Information solely for purposes that it was intended;
11
<PAGE>
(f) not disclose any of Discloser's Confidential
Information to third parties; and
(g) not disclose the existence of the discussions
to any third party.
16.3 Upon Discloser's request, Recipient shall
surrender to Discloser all memoranda, notes, records, drawings,
manuals, records, and other documents or materials (and all
copies of same) relating to or containing Discloser's
Confidential Information. When Recipient returns the materials,
Recipient shall certify in writing that it has returned all
materials containing or relating to the Confidential Information.
16.4 The obligations of confidentiality and restriction
on use in this Article 16 shall not apply to any Confidential
Information that Recipient proves:
(a) Was in the public domain prior to the date of
this Agreement or subsequently came into the public
domain through no fault of Recipient; or
(b) Was lawfully received by Recipient from a
third party free of any obligation of confidence to the
third party; or
(c) Was already in Recipient's possession prior to
receipt from Discloser; or
(d) Is required to be disclosed in a judicial or
administrative proceeding after all reasonable legal
remedies for maintaining such information in confidence
have been exhausted including, but not limited to,
giving Discloser as much advance notice as practical of
the possibility of disclosure to allow Discloser to stop
such disclosure or obtain a protective order concerning
such disclosure; or
(e) Is subsequently and independently developed by
Recipient's employees, consultants or agents without
reference to Confidential Information.
16.5 The Fund and the Transfer Agent agree that money
damages would not be a sufficient remedy for breach of this
Section 16. Accordingly, in addition to all other remedies that
either party may have, a party shall be entitled to specific
performance and injunctive or other equitable relief as a remedy
12
<PAGE>
for any breach of this Section 16. The parties agree to waive
any requirement for a bond in connection with any such injunctive
or other equitable relief.
Article 17 Force Majeure
17.1 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of
God, strikes, labor difficulties, mechanical breakdowns,
equipment or transmission failure or damage reasonably beyond its
control, or other causes reasonably beyond its control, such
party shall not be liable for damages to the other for any
damages resulting from such failure to perform or otherwise from
such causes.
Article 18 Amendments
18.1 This Agreement may only be amended or modified by
a written instrument executed by both parties.
Article 19 Subcontracting
19.1 The Fund agrees that the Transfer Agent may, in
its discretion, subcontract for certain of the services described
under this Agreement or the Schedules hereto; provided that the
appointment of any such Transfer Agent shall not relieve the
Transfer Agent of its responsibilities hereunder.
Article 20 Arbitration
20.1 Any claim or controversy arising out of or
relating to this Agreement, or breach hereof, shall be settled by
arbitration administered by the American Arbitration Association
in Boston, Massachusetts in accordance with its applicable rules,
except that the Federal Rules of Evidence and the Federal Rules
of Civil Procedure with respect to the discovery process shall
apply.
20.2 The parties hereby agree that judgment upon the
award rendered by the arbitrator may be entered in any court
having jurisdiction.
20.3 The parties acknowledge and agree that the
performance of the obligations under this Agreement necessitates
the use of instrumentalities of interstate commerce and,
notwithstanding other general choice of law provisions in this
Agreement, the parties agree that the Federal Arbitration Act
13
<PAGE>
shall govern and control with respect to the provisions of this
Section 20.
Article 21 Notice
21.1 Any notice or other instrument authorized or
required by this Agreement to be given in writing to the Fund or
the Transfer Agent, shall be sufficiently given if addressed to
that party and received by it at its office set forth below or at
such other place as it may from time to time designate in
writing.
To the Fund:
Alliance World Dollar Government Fund, Inc.
Alliance Capital Management
500 Plaza Drive
3rd Floor
Seacaucus, New Jersey 07094
Attention: Mark Gerstein,
Vice President and Treasurer
To the Transfer Agent:
The Shareholder Services Group, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: President
with a copy to the Transfer Agent's General Counsel
Article 22 Successors
22.1 This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors
and assigns, provided, however, that this Agreement shall not be
assigned to any person other than a person controlling,
controlled by or under common control with the assignor without
the written consent of the other party, which consent shall not
be unreasonably withheld.
Article 23 Governing Law
23.1 This Agreement shall be governed exclusively by
the laws of the Commonwealth of Massachusetts without reference
to the choice of law provisions thereof. Each party hereto
hereby (i) consents to the personal jurisdiction of the
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Commonwealth of Massachusetts courts over the parties hereto,
hereby waiving any defense of lack of personal jurisdiction; and
(iii) appoints the person to whom notices hereunder are to be
sent as agent for service of process.
Article 24 Counterparts
24.1 This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original;
but such counterparts shall, together, constitute only one
instrument.
Article 25 Captions
25.1 The captions of this Agreement are included for
convenience of reference only and in no way define or limit any
of the provisions hereof or otherwise affect their construction
or effect.
Article 26 Use of Transfer Agent/Fund Name
26.1 The Fund shall not use the name of the Transfer
Agent in any Prospectus, Statement of Additional Information,
Shareholders' report, sales literature or other material relating
to the Fund in a manner not approved prior thereto in writing;
provided, that the Transfer Agent need only receive notice of all
reasonable uses of its name which merely refer in accurate terms
to its appointment hereunder or which are required by any
government agency or applicable law or rule.
26.2 The Transfer Agent shall not use the name of the
Fund or material relating to the Fund on any documents or forms
for other than internal use in a manner not approved prior
thereto in writing; provided, that the Fund need only receive
notice of all reasonable uses of its name which merely refer in
accurate terms to the appointment of the Transfer Agent or which
are required by any government agency or applicable law or rule.
Article 27 Relationship of Parties
27.1 The parties agree that they are independent
contractors and not partners or co-venturers and nothing
contained herein shall be interpreted or construed otherwise.
Article 28 Entire Agreement; Severability
28.1 This Agreement and the Schedules attached hereto
constitute the entire agreement of the parties hereto relating to
15
<PAGE>
the matters covered hereby and supersede any previous agreements.
If any provision is held to be illegal, unenforceable or invalid
for any reason, the remaining provisions shall not be affected or
impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers, as of
the day and year first above written.
ALLIANCE WORLD DOLLAR GOVERNMENT
FUND, INC.
By: /s/ Mark D. Gersten
Title: Treasurer
THE SHAREHOLDER SERVICES
GROUP, INC.
/s/
By:
Title:
16
<PAGE>
Schedule A
DUTIES OF THE TRANSFER AGENT
1. Shareholder Information. The Transfer Agent shall
maintain a record of the number of Shares held by each
Shareholder of record which shall include name, address, taxpayer
identification and which shall indicate whether such Shares are
held in certificates or uncertificated form.
2. Shareholder Services. The Transfer Agent shall
respond as appropriate to all inquiries and communications from
Shareholders relating to Shareholder accounts with respect to its
duties hereunder and as may be from time to time mutually agreed
upon between the Transfer Agent and the Fund.
3. Share Certificates.
(a) At the expense of the Fund, the Fund shall
supply the Transfer Agent with an adequate supply of blank share
certificates to meet the Transfer Agent requirements therefor.
Such Share certificates shall be properly signed by facsimile.
The Fund agrees that, notwithstanding the death, resignation, or
removal of any officer of the Fund whose signature appears on
such certificates, the Transfer Agent or its agent may continue
to countersign certificates which bear such signatures until
otherwise directed by Written Instructions.
(b) The Transfer Agent shall issue replacement
Share certificates in lieu of certificates which have been lost,
stolen or destroyed, upon receipt by the Transfer Agent of
properly executed affidavits and lost certificate bonds, in form
satisfactory to the Transfer Agent, with the Fund and the
Transfer Agent as obligees under the bond.
(c) The Transfer Agent shall also maintain a
record of each certificate issued, the number of Shares
represented thereby and the Shareholder of record. With respect
to Shares held in open accounts or uncertificated form (i.e., no
certificate being issued with respect thereto) the Transfer Agent
shall maintain comparable records of the Shareholders thereof,
including their names, addresses and taxpayer identification.
The Transfer Agent shall further maintain a stop transfer record
on lost and/or replaced certificates.
4. Mailing Communications to Shareholders; Proxy
Materials. The Transfer Agent will address and mail to
Shareholders of the Fund, all reports to Shareholders, dividend
17
<PAGE>
and distribution notices and proxy material for the Fund's
meetings of Shareholders. In connection with meetings of
Shareholders, the Transfer Agent will prepare Shareholder lists,
mail and certify as to the mailing of proxy materials, process
and tabulate returned proxy cards, report on proxies voted prior
to meetings, act as inspector of election at meetings and certify
Shares voted at meetings.
5. Transfer of Shares.
(a) The Transfer Agent shall process all requests
to transfer Shares in accordance with the transfer procedures set
forth in the Fund's Prospectus.
(b) The Transfer Agent will transfer Shares upon
receipt of Written Instructions or otherwise pursuant to the
Prospectus and Share certificates, if any, properly endorsed for
transfer, accompanied by such documents as the Transfer Agent
reasonably may deem necessary.
(c) The Transfer Agent reserves the right to
refuse to transfer Shares until it is satisfied that the
endorsement on the instructions is valid and genuine. The
Transfer Agent also reserves the right to refuse to transfer
Shares until it is satisfied that the requested transfer is
legally authorized, and it shall incur no liability for the
refusal, in good faith, to make transfers which the Transfer
Agent in its good judgment, deems improper or unauthorized, or
until it is reasonably satisfied that there is no basis to any
claims adverse to such transfer.
7. Dividends.
(a) Upon the declaration of each dividend and each
capital gains distribution by the Board of Directors of the Fund
with respect to Shares of the Fund, the Fund shall furnish or
cause to be furnished to the Transfer Agent Written Instructions
setting forth the date of the declaration of such dividend or
distribution, the ex-dividend date, the date of payment thereof,
the record date as of which Shareholders entitled to payment
shall be determined, the amount payable per Share to the
Shareholders of record as of that date, the total amount payable
to the Transfer Agent on the payment date and whether such
dividend or distribution is to be paid in Shares at net asset
value.
(b) On or before the payment date specified in
such resolution of the Board of Directors, the Fund will pay to
18
<PAGE>
the Transfer Agent sufficient cash to make payment to the
Shareholders of record as of such payment date.
(c) If the Transfer Agent does not receive
sufficient cash from the Fund to make total dividend and/or
distribution payments to all Shareholders of the Fund as of the
record date, the Transfer Agent will, upon notifying the Fund,
withhold payment to all Shareholders of record as of the record
date until sufficient cash is provided to the Transfer Agent.
8. In addition to and neither in lieu nor in
contravention of the services set forth above, the Transfer Agent
shall: (i) perform all the customary services of a transfer
agent, registrar, dividend disbursing agent and agent of the
dividend reinvestment and cash purchase plan as described herein
consistent with those requirements in effect as at the date of
this Agreement. The detailed definition, frequency, limitations
and associated costs(if any) set out in the attached fee
schedule, include but are not limited to: maintaining all
Shareholder accounts, preparing Shareholder meeting lists,
mailing proxies, tabulating proxies, mailing Shareholder reports
to current Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts where applicable, preparing and
filing U.S. Treasury Department Forms 1099 and other appropriate
forms required with respect to dividends and distributions by
federal authorities for all registered Shareholders.
19
<PAGE>
Schedule B
Fee Schedule
In consideration for the services provided, the Fund
shall pay the Transfer Agent a fee based on assets in the fund.
The schedule is as follows:
* 3 basis points on the first 300 million dollars in
assets
* 2.8 basis points on 301 to 800 million dollars in
assets
* 2.5 basis points on assests greater than 800 million
dollars
This fee shall be based on the Total Aggregate Assets of the
funds that The Shareholder Services Group services for Alliance
Capital.
The shareholder shall also be charged a fee of $0.20 per
participation in the dividend reinvestment plan.
20
<PAGE>
Schedule C
OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for
applicable out-of-pocket expenses, including, but not limited to
the following items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates,
envelopes, checks and stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding,
first class) direct pass through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs,
including all lease, maintenance and line
costs
- Ad hoc reports
- Proxy solicitations, mailings and
tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and
insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and
other equipment and any expenses incurred in
connection with such terminals and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Overtime, as approved by the Fund
- Temporary staff, as approved by the Fund
- Travel and entertainment, as approved by the
Fund
- Record retention, retrieval and destruction
costs, including, but not limited to exit
fees charged by third party record keeping
vendors
- Third party audit reviews
- All conversion costs: including System start
up costs
- All Systems enhancements after the
conversion at the rate of $95.00 per hour
- Insurance
21
<PAGE>
- Such other miscellaneous expenses reasonably
incurred by the Transfer Agent in performing
its duties and responsibilities under this
Agreement.
22
<PAGE>
The Fund agrees that postage and mailing expenses will
be paid on the day of or prior to mailing as agreed with the
Transfer Agent. In addition, the Fund will promptly reimburse
the Transfer Agent for any other unscheduled expenses incurred by
the Transfer Agent whenever the Fund and the Transfer Agent
mutually agree that such expenses are not otherwise properly
borne by the Transfer Agent as part of its duties and obligations
under the Agreement.
23
<PAGE>
Schedule D
Fund Documents
- Certified copy of the Articles of Incorporation of
the Fund, as amended
- Certified copy of the By-laws of the Fund, as
amended,
- Copy of the resolution of the Board of Directors
authorizing the execution and delivery of this
Agreement
- Specimens of the certificates for Shares of the
Fund, if applicable, in the form approved by the
Board of Directors of the Fund, with a certificate
of the Secretary of the Fund as to such approval
- All account application forms and other documents
relating to Shareholder accounts or to any plan,
program or service offered by the Fund
- Certified list of Shareholders of the Fund with the
name, address and taxpayer identification number of
each Shareholder, and the number of Shares of the
Fund held by each, certificate numbers and
denominations (if any certificates have been
issued), lists of any accounts against which stop
transfer orders have been placed, together with the
reasons therefore, and the number of Shares
redeemed by the Fund
- All notices issued by the Fund with respect to the
Shares in accordance with and pursuant to the
Articles of Incorporation or By-laws of the Fund or
as required by law and shall perform such other
specific duties as are set forth in the Articles of
Incorporation including the giving of notice of any
special or annual meetings of shareholders and any
other notices required thereby.
24
00250230.AJ0
<PAGE>
Seward & Kissel
One Battery Park Plaza
New York, New York 10004
Telephone (212) 574-1200
Facsimile (212) 480-8421
June 19, 1996
Alliance World Dollar Government Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Alliance World Dollar Government Fund, Inc.
Registration Statement on Form N-2
(Securities Act File No. 333-04015)
___________________________________________
Dear Sirs:
We are counsel for Alliance World Dollar Government
Fund, Inc., a Maryland corporation, in connection with the
proposed registration, under the Securities Act of 1933, of
3,605,293 shares, consisting of 2,884,235 Primary
Subscription Shares and 721,058 Additional Over-Subscription
Shares, of the Fund's common stock, par value $.01 per
share, to be issued pursuant to the exercise of non-
transferable rights to purchase Common Stock to be
distributed to the Fund's shareholders in accordance with
the Fund's Registration Statement on Form N-2 in which this
letter is included as an exhibit (the "Registration
Statement"). Each capitalized term not otherwise defined
herein has the meaning set forth for that term in the
Registration Statement.
As counsel for the Fund we have participated in the
preparation of the Registration Statement and the form of
Subscription Certificate relating to the exercise of the
Rights and have examined and relied upon such corporate
records of the Fund and such other documents and
certificates as to factual matters as we have deemed to be
necessary to render the opinion expressed herein. We have
<PAGE>
Alliance World Dollar
Government Fund, Inc. -2- June 19, 1996
assumed that the Fund has no "Principal Shareholder" as
defined in Article Seventh of its Articles of Incorporation
and have relied upon the Certificate of the Secretary of the
Fund to the effect that the Fund has no knowledge of any
such Principal Shareholder.
Based on the foregoing, we are of the opinion that:
1. The Fund has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Maryland.
2. The Primary Subscription Shares of Common Stock
to be issued upon exercise of the Rights have been duly
authorized, and, upon such exercise, when the Primary
Subscription Shares have been issued and paid for as
contemplated by the Registration Statement, the Primary
Subscription Shares will have been validly and legally
authorized and issued and will be fully paid and non-
assessable. When the Pricing Committee of the Board of
Directors has authorized the issuance of the Additional
Over-Subscription Shares pursuant to the authority delegated
to it by the Board of Directors, the Additional Over-
Subscription Shares of Common Stock to be issued upon
exercise of the Rights will have been duly authorized and,
upon such exercise, when the Additional Over-Subscription
Shares have been issued and paid for as contemplated by the
Registration Statement, the Additional Over-Subscription
Shares will have been validly and legally authorized and
issued and will be fully paid and nonassessable.
As to the matters of Maryland law contained in the
foregoing opinion we have relied on the opinion of Venable,
Baetjer and Howard, LLP of Baltimore, Maryland, dated
June 19, 1996 pertaining to the subject matter hereof.
We hereby consent to the filing of this opinion
with the Securities and Exchange Commission as an exhibit to
the Registration Statement and to the reference to our firm
under the captions "Taxation" and "Legal Matters" in the
Registration Statement.
Very truly yours,
/s/ Seward & Kissel
00250230.AI9
<PAGE>
VENABLE, BAETJER AND HOWARD, LLP
1800 Mercantile Bank & Trust Building
Two Hopkins Plaza
Baltimore, Maryland 21201-2978
June 19, 1996
Seward & Kissel
One Battery Park Plaza
New York, New York 10004
Re: Alliance World Dollar Government Fund, Inc.
Ladies and Gentlemen:
We have acted as special Maryland counsel to
Alliance World Dollar Government Fund, Inc., a Maryland
corporation (the "Company"), in connection with the issuance
of up to 3,605,293 additional shares, consisting of
2,884,235 primary subscription shares (the "Primary
Subscription Shares") and up to 721,058 additional over-
subscription shares (the "Additional Over-Subscription
Shares"), which may at the discretion of the Board of
Directors, be issued pursuant to an over-subscription
privilege of the Company's common stock, par value $.01 per
share (the "Common Stock"), pursuant to the exercise of non-
transferable rights (the "Rights") to purchase Common Stock
to be distributed to the Company's shareholders in
accordance with the Company's Registration Statement on Form
N-2 (Securities Act File No. 333-04015, Investment Company
Act File No. 811-07108) (the "Registration Statement").
We have examined the Company's prospectus included
in the Registration Statement substantially in the form in
which it is to become effective (the "Prospectus"), the form
of subscription certificate for exercise of the Rights, the
Company's Charter and Bylaws, and resolutions adopted by the
Board of Directors of the Company and its Pricing Committee
with respect to the Rights, and have further examined and
relied upon a certificate of the Maryland State Department
of Assessments and Taxation to the effect that the Company
is duly incorporated and existing under the laws of the
State of Maryland and is in good standing and duly
authorized to transact business in the State of Maryland.
We have assumed that the Company has no "Principal
Shareholder" as defined in Article Seventh of the Charter
and have relied upon the Certificate of the Assistant
Secretary of the Company to the effect that the Company has
no knowledge of any such Principal Shareholder. We have
<PAGE>
also assumed that if the initial Expiration Date of the
offering and the Rights is extended as described in the
Registration Statement, such action will have been duly
authorized by the Pricing Committee of the Board of
Directors pursuant to the authority that has heretofore been
delegated to the Pricing Committee by the Board of
Directors.
We have also examined and relied upon such other
corporate records of the Company and documents and
certificates with respect to factual matters as we have
deemed necessary for purposes of this opinion. With respect
to the documents we have received, we have assumed, without
independent verification, the genuineness of all signatures,
the authenticity of all documents submitted to us as
originals, and the conformity with originals of all
documents submitted to us as copies.
Based on the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Maryland.
2. The Primary Subscription Shares of Common
Stock to be issued upon exercise of the Rights have been
duly authorized, and, upon such exercise, when the Primary
Subscription Shares have been issued and paid for as
contemplated by the Registration Statement, the Primary
Subscription Shares will have been validly and legally
authorized and issued and will be fully paid and
nonassessable. When the Pricing Committee of the Board of
Directors has authorized the issuance of the Additional
Over-Subscription Shares pursuant to the authority delegated
to it by the Board of Directors, the Additional Over-
Subscription Shares of Common Stock to be issued upon
exercise of the Rights will have been duly authorized and,
upon such exercise, when the Additional Over-Subscription
Shares have been issued and paid for as contemplated by the
Registration Statement, the Additional Over-Subscription
Shares will have been validly and legally authorized and
issued and will be fully paid and nonassessable.
This letter expresses our opinion with respect to
the Maryland General Corporation Law. It does not extend to
the securities or "Blue Sky" laws of Maryland, to federal
securities laws or to other laws.
You may rely on this opinion in rendering your
opinion to the Company that is to be filed as an exhibit to
the Registration Statement. We consent to the filing of
<PAGE>
this opinion as an exhibit to the Registration Statement and
to the reference to us in the Prospectus under the caption
"Legal Matters." We do not thereby admit that we are
"experts" within the meaning of the Securities Act of 1933
and the regulations thereunder. This opinion may not be
relied upon by any other person or for any other purpose
without our prior written consent.
Very truly yours,
/s/ Venable, Baetjer and
Howard, LLP
3
00250230.AE5
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights," "Experts" and "Independent Auditors"
and to the use of our report dated December 15, 1995, in
this Registration Statement (Form N-2, No. 811-07108) of
Alliance World Dollar Government Fund, Inc.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
June 20, 1996
00250230/AL4
