<PAGE>
As filed with the Securities and Exchange Commission
on May 17, 1996
Securities Act File No. 333-
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.
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3
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
________________ ____________ _________ __________ ________________
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.
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 on such
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
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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>
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 , 1996
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
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 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
Shares, for an aggregate total of
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 % 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 , 1996 and June , 1996 were $ and
$ , respectively. The last reported sale prices of
shares of the Common Stock on the New York Stock Exchange on
those dates were $ 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.
The Fund is a non-diversified, closed-end management
investment company. The Fund's investment objective is to seek
<PAGE>
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 of
this Prospectus, may be obtained without charge by calling the
Fund at (800) .
2
<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.
3
<PAGE>
Estimated Estimated
Subscription Estimated Proceeds to
Price (1) Sales Load (2) Fund (3)
Per Share
Total Maximum(4)
Smith Barney Inc.
The date of this Prospectus is June , 1996.
4
<PAGE>
(Continued from the previous page)
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."
_________________________
(1) Estimated on the basis of the [closing market price per share
on the New York Stock Exchange] on , 1996.
(Footnotes Continued on Next Page)
5
<PAGE>
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) .
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.
(Footnotes Continued)
_________________________
(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 % 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 % 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 $ , 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 Bank of Boston 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.
6
<PAGE>
EXPENSE INFORMATION
Shareholder Transaction Expenses
Sales Load (as a percentage of offering price)(l) .... %
Annual Expenses (as a percentage of net assets)(2)
Advisory fee(3) ...................................... 1.00%
Administration fee(3) ................................ .15%
Other expenses ....................................... ____
Total annual expenses .................................... %
=====
(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 $ . 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
1 year 3 years 5 years l0 years
You would pay the following expenses
on a $1,000 investment, assuming a
5% annual return ...................
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 % 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.
7
<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
8
<PAGE>
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."
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
Shares ( 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."
9
<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
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 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 % 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 % 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 % 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."
10
<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)
IMPORTANT DATES TO REMEMBER
Event Date
----- ----
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*
________________________________________
* 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
11
<PAGE>
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."
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, % of the Fund's total assets were invested in
Sovereign Debt Obligations, including Collateralized Brady Bonds
12
<PAGE>
that represented % 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, 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 , 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
pursuant to either Tender Offer as a consequence of any such
condition, the Fund will commence one or more additional tender
offers (a "Subsequent Offer").
13
<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
14
<PAGE>
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 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.
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
15
<PAGE>
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
16
<PAGE>
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 meets its
liquidity requirements or in response to specific economic events
such as a deterioration in the creditworthiness of the issuer.
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 , 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."
17
<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 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.
Six Months November 2, 1992*
Ended Year Ended Year Ended to
April 30, 1996 October 31, October 31, October 31,
(unaudited) 1995 1994 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 (c)
Total investment return
based on:
Market value 2.78% (7.52)% 59.14%
18
<PAGE>
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%
___________________
(Footnotes Begin on Next
Page)
19
<PAGE>
___________________
(Footnotes from Previous Page)
* Commencement of operations.
(a) Net of offering costs of $.13 per share.
(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 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.
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.
The Fund
--------------------------
Period ended Based on Net Based on
April 30, 1996 Asset Value Market Value EMBI
- -------------- ------------ ------------ -----------
One year 41.48% % 41.15%
Three years 13.02% % 14.00%
Since November 2, 1992 17.79% % 15.69%
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
20
<PAGE>
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 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 $
billion and included issues from twelve countries
including the United States. At April 30, 1996, the securities
included in the EMBI had a combined a 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.
21
<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.
30-Year U.S.
Quarter Ended EMBI Treasury Bond Spread
- ------------- ---- ------------- -------
% % %
% % %
% % %
% % %
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
22
<PAGE>
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 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
23
<PAGE>
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
Shares ( 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.
24
<PAGE>
Shareholders will have no right to rescind their
subscriptions after receipt of their payment for Shares by the
Subscription Agent.
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 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."
25
<PAGE>
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 % 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
$ ( % 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 $ ( % 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 June , 1996. The net asset
values per share of Common Stock at the close of business on June
, 1996 and July , 1996 were $ 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 $ and $ , respectively. [On July , 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.
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
26
<PAGE>
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 $ , plus reimbursement for out-of-pocket
expenses expected to be $ . Shareholder communications
should be directed to First Data Investor Services Group, Inc.,
53 State Street, Boston, Massachusetts 02109 (telephone
). 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:
(2) BY EXPRESS MAIL OR OVERNIGHT COURIER:
27
<PAGE>
(3) BY HAND:
(4) BY FACSIMILE:
FOR NOTICE OF GUARANTEED DELIVERY ONLY
Confirm facsimile by telephone to:
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 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.
28
<PAGE>
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:
29
<PAGE>
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)
Shareholders may also contact their brokers or nominees for
information with respect to the Offer.
The Information Agent will receive a fee for its services as
information agent estimated to be $ , plus reimbursement
for its out-of-pocket expenses related to the Offer expected to
be $ .
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 of
(i) payment of the full Subscription Price for the Shares
subscribed for during the Primary Subscription and any
30
<PAGE>
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 days 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
Bank of Boston 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.
31
<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 , 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.
32
<PAGE>
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 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
33
<PAGE>
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.
34
<PAGE>
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 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 , 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
Event Date
----- ----
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*
________________________________________
* 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.
35
<PAGE>
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, % of the Fund's total assets were
invested in Sovereign Debt Obligations, including Collateralized
Brady Bonds that represented % 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:
36
<PAGE>
Algeria 0.9%
Argentina 8.2%
Brazil 12.7%
Bulgaria 7.8%
Ecuador 6.9%
Mexico 6.1%
Morocco 5.6%
Nigeria 4.9%
Panama 4.4%
Poland 6.6%
Venezuela 10.2%
United States* 26.7%
------
Total 100.0%
======
___________________
* Consisted solely of Zero Coupon Obligation.
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, 1995 the average weekly trading volume of
the Fund's shares was shares and the aggregate net
assets of the Fund at April 30, 1995 were $ .
There are currently 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) .
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
37
<PAGE>
Common Stock. If the Fund increases the number of Shares subject
to the Offer by 25%, or 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.
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.
38
<PAGE>
Premium (or
Discount)
as a
Percentage
Market Price Net Asset Value of Net Asset Value
------------ --------------- ------------------
Quarter Ended High Low High Low High Low
- ------------- ---- --- ---- --- ---- ---
January 31, 1994$22.500 $17.500
April 30, 1994 $18.250 $14.000
July 31, 1994 $15.250 $13.000
October 31, 1994$13.875 $13.000
January 31, 1995$13.000 $9.875
April 30, 1995 $11.375 $9.000
July 31, 1995 $11.875 $11.050
October 31, 1995$11.875 $10.750
January 31, 1996
April 30, 1996
July 31, 1996*
___________________
* Through , 1996.
The Fund's shares have generally traded at a discount from
their net asset value per share. At the close of business on
July , 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
39
<PAGE>
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.
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
40
<PAGE>
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.
The Fund's investment objective and its policy of 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 or (ii) more than 50% of the outstanding
shares. The Fund's investment policies that are not designated
as fundamental policies may be changed by the Fund without
shareholder approval, but the Fund will not change its 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.
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 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
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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
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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 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.
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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
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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.
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
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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
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underlying security increased or remained the same or 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
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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 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
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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
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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 "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
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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.
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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 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
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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.
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
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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
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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 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
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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
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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 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,
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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 services 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 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
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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
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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 % in A and above, % in Ba or BB, % in B,
% in Caa or CCC and % in non-rated. Debt securities rated
below investment grade, i.e., those rated Ba1 or lower by 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
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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.
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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. 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 , 1996, the Fund's
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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 , 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.
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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 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
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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
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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 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."
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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
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portfolio securities to meet requests for redemption and the
shares of the Fund would no longer be listed on the 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 overseas offices of
subsidiaries in Bombay, Istanbul, London, Sydney, Tokyo, Toronto,
Bahrain, Luxembourg and Singapore. The 50 registered investment
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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 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.
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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
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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).
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
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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 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
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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
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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 shares
were outstanding as of June , 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.
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
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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
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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 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 % 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
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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 % 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.
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.
78
<PAGE>
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
79
<PAGE>
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.
80
<PAGE>
TABLE OF CONTENTS
OF
STATEMENT OF ADDITIONAL INFORMATION
Page
Certain Investment Practices .............................
Investment Restrictions ..................................
Management of the Fund ...................................
Brokerage and Portfolio Transactions .....................
Dividend Reinvestment Plan ...............................
Taxation .................................................
Certain Owners of Record .................................
Financial Statements .....................................
00250230.AE9
<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.
<PAGE>
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.
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.
2
<PAGE>
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.
3
00250230.AE9
<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
Page
----
Expense Information
Prospectus Summary
Financial Highlights
The Offer
The Fund
Use of Proceeds
Net Asset Value and Market Price
Information
Investment Objective and Policies
Special Risk Considerations
Tenders Offers and Share
Repurchases; Conversion
to Open-End Status
Management of the Fund
Net Asset Value
Dividends and Distributions
Dividend Reinvestment Plan
Taxation
Description of Common Stock
Distribution Arrangements
Custodian
Transfer Agent, Dividend-Paying Agent
and Registrar
Legal Matters
Experts
Available Information
<PAGE>
Table of Contents of Statement of
Additional Information
Appendix - Bond Ratings
ALLIANCE WORLD DOLLAR
GOVERNMENT FUND, INC.
Shares of Common Stock Issuable upon Exercise of
Rights to Subscribe for Such Shares of Common Stock
PROSPECTUS
SMITH BARNEY INC.
, 1996
00250230.AE9
<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.
00250230.AE9
<PAGE>
Subject to Completion , 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 , 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 . This SAI incorporates
by reference the entire Prospectus. Defined terms used herein
shall have the same meaning as provided in the Prospectus.
________________________
TABLE OF CONTENTS
Page
Certain Investment Practices ............................
Investment Restrictions .................................
Management of the Fund ..................................
Brokerage and Portfolio Transactions ....................
00250230.AE9
<PAGE>
Dividend Reinvestment Plan ..............................
Taxation ................................................
Certain Owners of Record ................................
Financial Statements ....................................
The Prospectus and this SAI omit certain of the information
contained in the registration statement filed with the Securities
and Exchange Commission, Washington, D.C. The registration
statement may be obtained from the Securities and Exchange
Commission upon payment of the fee prescribed, or inspected at
the Securities and Exchange Commission's office at no charge.
________________________
This Statement of Additional Information is dated , 1996.
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 , 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 , 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 , 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 $ , $ , $ , 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 $ 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 Smith Barney 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, Smith Barney 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
$ , $ , and $ , 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 .
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 [or beneficially] 5% or
more of the outstanding shares of Common Stock of the Fund as of
the close of business on , 1996.
21
00250230.AE9
<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(4)
D(3) Form of Notice of Guaranteed Delivery(4)
D(4) Form of DTC Participant Over-Subscription Exercise(4)
Form/Nominee Holder Over-Subscription Exercise
Form(4)
D(5) Form of Beneficial Owner Listing Certification(4)
D(6) Form of Subscription, Distribution and Escrow Agency
Agreement(4)
E Dividend Reinvestment Plan(4)
F Inapplicable
G Advisory Agreement
H(1) Form of Dealer Manager Agreement(4)
H(2) Form of Soliciting Dealer Agreement(4)
I Inapplicable
C-1
<PAGE>
J Custody Agreement(4)
K(1) Transfer Agency and Registrar Agreement(4)
K(2) Administration Agreement
K(3) Shareholder Inquiry Agency Agreement
L(1) Opinion and Consent of Seward & Kissel(4)
L(2) Opinion and Consent of Venable, Baetjer and Howard,
LLP(4)
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
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. To be provided by subsequent pre-effective amendment.
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 ..................................... $
National Association of Securities Dealers, Inc. fees . $
Printing .............................................. $
Fees and expenses of qualifications under state
securities laws (including fees of counsel) ......... $
Legal fees and expenses ............................... $
Auditing fees and expenses ............................ $
New York Stock Exchange listing fees .................. $
Subscription Agent fees and expenses .................. $
Information Agent fees and expenses ................... $
Reimbursement of Dealer Manager expenses .............. $
Miscellaneous.......................................... $
_______
$
========
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
Not applicable
ITEM 28. NUMBER OF HOLDERS OF SECURITIES (AS OF May 10, 1996)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
- -------------- ------------------------
Common Stock ($.01 par value per share) 934
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.
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 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 17th day of May, 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 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 May 17, 1996
________________________
John D. Carifa
(2) Principal Financial and
Accounting Officer:
/s/ Mark D. Gersten Treasurer and May 17, 1996
________________________ Chief Financial
Mark D. Gersten Officer
(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 P. Bergan, Jr. May 17, 1996
_________________________
Edmund B. Bergan, Jr.
Attorney-in-Fact
C-6
<PAGE>
EXHIBIT INDEX
EXHIBIT
_______
G Advisory Agreement
K(2) Administration Agreement
K(3) Shareholder Inquiry Agency Agreement
N Consent of Independent Auditors
R Financial Data Schedule
Other
Exhibits: Powers of Attorney of Messrs. Carifa, Dievler,
Dobkin, Foulk, Hester, Michel and White and
Ms. Block
7
00250230.AE9
<PAGE>
ADVISORY AGREEMENT
Alliance World Dollar Government Fund, Inc.
1345 Avenue Of The Americas
New York, New York 10105
October 29, 1992
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
We, the undersigned Alliance World Dollar Government
Fund, Inc., herewith confirm our agreement with you as follows:
1. We are a closed-end, non-diversified management
investment company registered under the Investment Company Act of
1940 (the "Act"). We propose to engage in the business of
investing and reinvesting our assets in securities ("the
portfolio assets") of the type and in accordance with the
limitations specified in our Articles of Incorporation, Bylaws,
Registration Statement filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Act, and any
representations made in our prospectus, all in such manner and to
such extent as may from time to time be authorized by our Board
of Directors. We enclose copies of the documents listed above
and will from time to time furnish you with any amendments
thereof.
2. (a) We hereby employ you to manage the investment
and reinvestment of the portfolio assets as above specified and,
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without limiting the generality of the foregoing, to provide
management and other services specified below.
(b) You will make decisions with respect to all
purchases and sales of the portfolio assets. To carry out such
decisions, you are hereby authorized, as our agent and attorney-
in-fact, for our account and at our risk and in our name, to
place orders for the investment and reinvestment of the portfolio
assets. In all purchases, sales and other transactions in the
portfolio assets you are authorized to exercise full discretion
and act for us in the same manner and with the same force and
effect as we might or could do with respect to such purchases,
sales or other transactions, as well as with respect to all other
things necessary or incidental to the furtherance or conduct of
such purchases, sales or other transactions.
(c) You will report to our Board of Directors at
each meeting thereof all changes in the portfolio assets since
the prior report, and will also keep us in touch with important
developments affecting the portfolio assets and on your own
initiative will furnish us from time to time with such
information as you may believe appropriate for this purpose,
whether concerning the individual issuers whose securities are
included in our portfolio, the industries in which they engage,
or the conditions prevailing in the economy generally. You will
also furnish us with such statistical and analytical information
with respect to the portfolio assets as you may believe
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appropriate or as we reasonably may request. In making such
purchases and sales of the portfolio assets, you will bear in
mind the policies set from time to time by our Board of Directors
as well as the limitations imposed by our Articles of
Incorporation and in our Registration Statement under the Act and
the Securities Act of 1933, the limitations in the Act and of the
Internal Revenue Code of 1986, as amended, in respect of
regulated investment companies.
(d) It is understood that you will from time to
time employ or associate with yourselves such persons as you
believe to be particularly fitted to assist you in the execution
of your duties hereunder, the cost of performance of such duties
to be borne and paid by you. No obligation may be incurred on
our behalf in any such respect. During the continuance of this
agreement at our request you will provide us persons satisfactory
to our Board of Directors to serve as our officers. Such
personnel may be employees of you or your affiliates. Nothing
contained herein shall be construed to restrict our right to hire
our own employees or to contract for services to be performed by
third parties. Furthermore, you or your affiliates (other than
us) shall furnish us without charge with such management
supervision and assistance and such office facilities as you may
believe appropriate or as we may reasonably request subject to
the requirements of any regulatory authority to which you may be
subject.
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3. We hereby confirm that, subject to the foregoing,
we shall be responsible and hereby assume the obligation for
payment of all our other expenses, including: (a) payment of the
fee payable to you under paragraph 5 hereof; (b) brokerage and
commission expenses; (c) federal, state, local and foreign taxes,
including issue and transfer taxes, incurred by or levied on us;
(d) interest charges on borrowings; (e) our organizational and
offering expenses, whether or not advanced by you; (f) fees and
expenses of registering our shares under the appropriate federal
securities laws and of qualifying our shares under applicable
state securities laws; (g) fees and expenses of listing and
maintaining the listing of our shares on any securities exchange;
(h) expenses of printing and distributing reports to
shareholders; (i) costs of proxy solicitation; (j) charges and
expenses of our administrator, custodians and registrar, transfer
and dividend paying agent; (k) compensation of our Directors,
officers and employees who do not devote any part of their time
to your affairs or the affairs of your affiliates other than us;
(l) legal and auditing expenses; (m) the cost of stock
certificates representing shares of our common stock; and
(n) costs of stationery and supplies.
4. We shall expect of you, and you will give us the
benefit of, your best judgment and efforts in rendering these
services to us, and we agree as an inducement to your undertaking
these services that you shall not be liable hereunder for any
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mistake of judgment or in any event whatsoever, except for lack
of good faith, provided that nothing herein shall be deemed to
protect, or purport to protect, you against any liability to us
or to our security holders to which you would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties
hereunder.
5. In consideration of the foregoing we will pay you a
monthly fee at an annualized rate of 1.00% of our average weekly
net assets. For purposes of the calculation of such fee, average
weekly net assets shall be 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 the Friday of such
weekly period with the net assets on the Friday of the
immediately preceding weekly period. When a Friday is not a
business day for us, then the calculation will be based on our
net assets on the business day immediately preceding such Friday.
Such fee shall be payable in arrears on the last day of each
calendar month for services performed hereunder during such
month. If our initial Registration Statement is declared
effective by the Securities and Exchange Commission after the
beginning of a month or this agreement terminates prior to the
end of a month, such fee shall be prorated according to the
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proportion which such portion of the month bears to the full
month.
6. This agreement shall become effective on the date
on which our pending Registration Statement on Form N-2 relating
to our shares becomes effective and shall remain in effect until
the first meeting of our shareholders held after such date and,
if approved by the vote of a majority of the outstanding voting
securities, as defined in the Act, at such meeting, shall
continue in effect until September 30, 1994 and may be continued
for successive twelve-month periods (computed from each
October 1) provided that such continuance is specifically
approved at least annually by our Board of Directors or by
majority vote of the holders of our outstanding voting securities
(as defined in the Act), and in either case, by a majority of our
Board of Directors who are not interested persons, as defined in
the Act, of any party to this agreement (other than as Directors
of our corporation), provided further, however, that if the
continuation of this agreement is not approved, you may continue
to render the services described herein in the manner and to the
extent permitted by the Act and the rules and regulations
thereunder. Upon the effectiveness of this agreement, it shall
supersede all previous agreements between us covering the subject
matter hereof. This agreement may be terminated at any time,
without the payment of any penalty, by vote of a majority of our
outstanding voting securities (as so defined), or by a vote of
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our Board of Directors on 60 days written notice to you, or by
you on 60 days written notice to us.
7. This agreement may not be transferred, assigned,
sold or in any manner hypothecated or pledged by you and this
agreement shall terminate automatically in the event of any such
transfer, assignment, sale, hypothecation or pledge by you. The
term "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed hereto by governing
law and any interpretation thereof contained in rules or
regulations promulgated by the Securities and Exchange Commission
thereunder.
8. (a) Except to the extent necessary to perform your
obligations hereunder, nothing herein shall be deemed to limit or
restrict your right, or the right of any of your employees, or
any of the officers or directors of Alliance Capital Management
Corporation, your general partner, who may also be a Director,
officer or employee of ours, or persons otherwise affiliated with
us (within the meaning of the Act) to engage in any other
business or to devote time and attention to the management or
other aspects of any other business, whether of a similar or
dissimilar nature, or to render service of any kind to any other
trust, corporation, firm, individual or association.
(b) You will notify us of any change in the general
partner of your partnership within a reasonable time after such
change.
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9. If you cease to act as our investment adviser, or,
in any event, if you so request in writing, we agree to take all
necessary action to change our name to a name not including the
term "Alliance". You may from time to time make available
without charge to us for our use such marks or symbols owned by
you, including marks or symbols containing the term "Alliance" or
any variation thereof, as you may consider appropriate. Any such
marks or symbols so made available will remain your property and
you shall have the right, upon notice in writing, to require us
to cease the use of such mark or symbol at any time.
10. This Agreement shall be construed in accordance
with the laws of the State of New York, provided, however, that
nothing herein shall be construed as being inconsistent with the
Act.
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
ALLIANCE WORLD DOLLAR GOVERNMENT
FUND, INC.
By: /s/ David H. Dievler
__________________________
Name:
Title:
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Agreed to and accepted
as of the date first set forth above.
ALLIANCE CAPITAL MANAGEMENT L.P.
By ALLIANCE CAPITAL MANAGEMENT
CORPORATION,
its General Partner
By: /s/ John D. Carifa
_______________________________
Name:
Title:
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00250230.AE4
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ADMINISTRATION AGREEMENT
Agreement made as of October 1, 1994, between ALLIANCE WORLD
DOLLAR GOVERNMENT FUND, INC., a Maryland corporation (the
"Fund"), and ALLIANCE CAPITAL MANAGEMENT L.P., a Delaware limited
partnership (the "Administrator").
WHEREAS, the Fund intends to operate as a closed-end
management investment company, and is so registered under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Fund has authorized the issuance of its shares
of common stock, par value $.01 per share (the "Common Stock");
WHEREAS, the Fund wishes to retain the Administrator to
provide certain administrative services to the Fund under the
terms and conditions stated below, and the Administrator is
willing to provide such services for the compensation set forth
below;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties agree as follows:
1. Appointment. The Fund hereby appoints the Administrator
to administer the Fund, and as such to furnish the services set
forth in paragraph 2 below and the Administrator accepts such
appointment and agrees that it will furnish such services.
2. Services and Duties of the Administrator. Subject to
the supervision of the Fund's Board of Directors, the
Administrator will provide the following services:
(a) oversee the determination and publication of the
Fund's net asset value in accordance with the
Fund's policy as adopted from time to time by the
Board of Directors;
(b) oversee the maintenance of the books and records of
the Fund required under Rule 31a-1(b)(4) under the
Investment Company Act;
(c) arrange for bank or other borrowing by the Fund,
pursuant to the investment adviser's determination
of the lenders or lenders, timing, amount and terms
of any such borrowing, in accordance with authority
granted by the Board of Directors of the Fund;
(d) prepare the Fund's federal, state and local income
tax returns;
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(e) prepare the financial information for the Fund's
proxy statements and quarterly, semi-annual and
annual reports to shareholders;
(f) on the basis of the Fund's books and records and
information furnished by the Fund or its investment
adviser, prepare the Fund's periodic financial and
other reports to the Securities and Exchange
Commission, the New York State Exchange and other
regulatory agencies or entities as required;
(g) respond to or refer to the Fund's officers or
transfer agent, as appropriate, shareholder
inquiries relating to the Fund;
(h) coordinate the audit examination with the Fund's
independent auditors for the annual audit of the
Fund and any required periodic compliance
examinations; and
(i) conduct asset maintenance tests and prepare
associated reports for purposes of compliance
reporting under the 1940 Act and guidelines.
All services to be furnished by the Administrator may be
furnished through the medium of any directors, officers or
employees of the Administrator. Each party shall bear all its
own expenses incurred in connection with this Agreement. It is
understood that the Administrator will from time to time employ
or associate with such persons, including one or more of the
Administrator's affiliates, as the Administrator believes to be
particularly fitted to assist the Administrator in the execution
of its duties under this Agreement, the cost of performance of
such duties to be borne and paid by the Administrator. No
obligation may be incurred on the Fund's behalf in any such
respect.
3. Compliance with the Fund's Governing Documents and
Applicable Law. In all matters relating to the performance of
this Agreement, the Administrator will act in conformity with the
Articles of Incorporation, By-Laws and Registration Statements of
the Fund and with the directions of the Fund's Board of Directors
and Fund executive officers and will conform to and comply with
the requirements of the 1940 Act and all other applicable federal
or state laws and regulations.
4. Service Not Exclusive. Except to the extent necessary
to perform the Administrator's obligations under this Agreement,
nothing herein shall be deemed to limit or restrict the
Administrator's right, or the right of any of the Administrator's
employees, or any of the officers or directors of Alliance
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Capital Management Corporation, the Administrator's general
partner, who may also be a Director, officer or employee of the
Fund, or persons otherwise affiliated with the Fund (within the
meaning of the 1940 Act) to engage in any other business or to
devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or
to render service of any kind to any other trust, corporation,
firm, individual or association.
5. Compensation. For the services provided and expenses
assumed by the Administrator under this Agreement, the Fund will
pay the Administrator a monthly fee at an annualized rate of .15
of 1% of the Fund's average weekly net assets. For purposes of
the calculation of such fee, average weekly net total assets
shall be 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 the Friday of such weekly period with
the net assets on the Friday of the immediately preceding weekly
period. When a Friday is not a business day for the Fund, then
the calculation will be based on the Fund's assets on the
business day immediately preceding such Friday. Such fee shall
be payable in arrears on the last day of each calendar month for
services performed hereunder during such month. If this
Agreement becomes effective after the beginning of a month or
terminates prior to the end of a month, such fee shall be
prorated according to the proportion which such portion of the
month bears to the full month.
6. Limitation of Liability of the Administrator. The Fund
shall expect of the Administrator, and the Administrator will
give the Fund the benefit of, the Administrator's best judgment
and efforts in rendering these services to the Fund, and the Fund
agrees as an inducement to the Administrator's undertaking these
services that the Administrator shall not be liable under this
Agreement for any mistake of judgment or in any event whatsoever,
except for lack of good faith, provided that nothing herein shall
be deemed to protect, or purport to protect, the Administrator
against any liability to the Fund or to the Fund's security
holders to which the Administrator would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in
the performance of the Administrator's duties under this
Agreement, or by reason of the Administrator's reckless disregard
of the Administrator's obligations and duties under this
Agreement.
7. Assignment. This Agreement may not be transferred,
assigned, sold or in any manner hypothecated or pledged by the
Administrator and this Agreement shall terminate automatically in
the event of any such transfer, assignment, sale, hypothecation
or pledge by the Administrator. The term "transfer",
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"assignment" and "sale" as used in this paragraph shall have the
meanings ascribed hereto by governing law and any interpretation
thereof contained in rules or regulations promulgated by the
Securities and Exchange Commission thereunder.
8. Duration and Termination. This Agreement shall become
effective on the date hereof and shall continue in effect until
September 30, 1996 and may be continued for successive twelve-
month periods (computed from each October 1) provided that such
continuance is specifically approved at least annually by a vote
of the Fund's Board of Directors or by majority vote of the
holders of the Fund's outstanding voting securities (as defined
in the 1940 Act), and in either case, by the vote of a majority
of the Fund's Board of Directors who are not interested persons,
as defined in the 1940 Act, of any party to this Agreement (other
than as Directors of the Fund) cast in person at a meeting called
for the purpose of voting on such approval; provided further,
however, that if the continuation of this Agreement is not
approved, the Administrator may continue to render the services
described herein in the manner and to the extent permitted by the
1940 Act and the rules and regulations thereunder. Upon the
effectiveness of this Agreement, it shall supersede all previous
agreements between the Fund and the Administrator covering the
subject matter hereof. This Agreement may be terminated at any
time, without the payment of any penalty, by a vote of a majority
of the Fund's outstanding voting securities (as so defined), or
by a vote of the Fund's Board of Directors on 60 days written
notice to the Administrator, or by the Administrator on 60 days
written notice to the Fund.
9. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver or discharge or
termination is sought.
10. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, provided,
however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
11. Miscellaneous. The captions of this Agreement are
included for convenience of reference only and in no way define
or delimit any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
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IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as
of the day and year first above written.
ALLIANCE WORLD DOLLAR GOVERNMENT
FUND, INC.
By /s/ David H. Dievler
----------------------------
Name: David H. Dievler
Title: Chairman
ALLIANCE CAPITAL MANAGEMENT L.P.
By ALLIANCE CAPITAL MANAGEMENT
CORPORATION,
its General Partner
By /s/ John D. Carifa
---------------------------
Name: John D. Carifa
Title: President
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00250230.AF3
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ALLIANCE FUND SERVICES, INC.
SHAREHOLDER INQUIRY AGENCY AGREEMENT
AGREEMENT, dated as of November 28, 1995, between
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC., a Maryland
Corporation and a closed-end investment company registered with
the Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940 (the "Investment Company Act"),
having its principal place of business at 1345 Avenue of
Americas, New York, New York 10105 (the "Fund"), and ALLIANCE
FUND SERVICES, INC., a Delaware corporation, having its principal
place of business at 500 Plaza Drive, Secaucus, New Jersey 07094
("Fund Services").
WHEREAS, Fund Services 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 and others;
NOW THEREFORE, for and in consideration of the mutual
covenants and agreements contained herein, the parties do hereby
agree as follows:
SECTION 1. Upon the terms set forth in this Agreement,
the Fund hereby appoints Fund Services as its shareholder inquiry
agent, and Fund Services agrees to act in that capacity.
Capitalized terms used in this Agreement and not otherwise
defined shall have the meanings assigned to them in SECTION 10.
SECTION 2.
(a) As shareholder inquiry agent hereunder, Fund
Services shall respond to telephone inquiries concerning the Fund
and matters relating thereto from Shareholders and others.
(b) In responding to the inquiries referred to in
SECTION 2(a), Fund Services shall be limited to providing
information that is otherwise publicly available.
(c) With respect to any inquiries that Fund Services is
unable to respond to or which are beyond the scope of its
services under this Agreement, to the extent reasonable under the
circumstances, Fund Services shall direct such inquiries to the
appropriate person.
SECTION 3. The Fund shall provide Fund Services with
copies of any materials relating to the Fund that are reasonably
requested by Fund Services for the purposes of performing its
services under this Agreement.
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SECTION 4. Upon the declaration of each dividend and
each capital gains distribution by the Fund's Directors, the Fund
shall notify Fund Services of the date of such declaration, the
amount payable per Share, the record date for determining the
Shareholders entitled to payment, the payment and the
reinvestment date price.
SECTION 5. Nothing contained in this Agreement is
intended to or shall require Fund Services to perform any
functions or duties on any day other than a Business Day.
Functions or duties normally scheduled to be performed on any day
which is not a Business Day shall be performed on, and as of, the
next Business Day, unless otherwise required by law.
SECTION 6. For the services rendered by Fund Services
as described above, the Fund shall pay to Fund Services a fee at
a rate to be mutually agreed upon from time to time, provided
that in no event shall the fee be more than the cost to Fund
Services of providing such services.
SECTION 7. Fund Services shall not be liable for any
taxes, assessments or governmental charges that may be levied or
assessed on any basis whatsoever in connection with the Fund or
any Shareholder, excluding taxes assessed against Fund Services
for compensation received by it hereunder.
SECTION 8.
(a) Fund Services shall at all times act in good faith
and with reasonable care in performing the services to be
provided by it under this Agreement, but shall not be liable for
any loss or damage unless such loss or damage is caused by the
negligence, bad faith or willful misconduct of Fund Services or
its employees or agents.
(b) Without limiting the foregoing:
(i) Fund Services may rely upon the statements and
instructions of Fund officers and advice of the Fund or counsel
to the Fund or Fund Services. Fund Services shall not be liable
for any action taken in good faith reliance upon such
instructions or advice;
(ii) Fund Services shall not be liable for any
action reasonably taken in good faith reliance upon any such
instructions or advice or upon a certified copy of any resolution
of the Fund's Directors. Fund Services may rely upon the
genuineness of any document, or copy thereof, reasonably believed
by Fund Services in good faith to have been validly executed;
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(iii) Fund Services may rely, and shall be
protected by the Fund in acting, upon any signature, instruction,
request, opinion of counsel, statement, report, notice or other
document reasonably believed by it in good faith to be genuine
and to have been duly signed or presented on behalf of the Fund.
(c) The Fund shall indemnify Fund Services and hold it
harmless from any and all losses, costs, damages, liabilities and
expenses, including reasonable expenses of counsel, incurred by
it resulting from any claim, demand, action or suit in connection
with the performance of its duties hereunder, including any
error, omission, inaccuracy or other deficiency contained in
materials provided to Fund Services by the Fund, or as a result
of acting upon any instruction reasonably believed by it to have
been properly given by a duly authorized officer of the Fund, or
out of the failure of the Fund to provide any information in the
Fund's possession needed by Fund Services to knowledgeably
perform its functions; provided the Fund shall have no obligation
to indemnify Fund Services or hold it harmless with respect to
any expenses, damages, claims, suits, liabilities, actions,
demands or losses caused directly or indirectly by acts or
omissions of Fund Services, and provided that this
indemnification shall not apply to actions or omissions of Fund
Services in cases of its own bad faith, willful misconduct or
negligence, and provided further that if in any case the Fund may
be asked to indemnify or hold Fund Services harmless pursuant to
this Section, the Fund shall have been fully and promptly advised
by Fund Services of all material facts concerning the situation
in question. The Fund shall have the option to defend Fund
Services against any claim which may be the subject of this
indemnification, and in the event that the Fund so elects, it
will so notify Fund Services, and thereupon the Fund shall retain
competent counsel to undertake defense of the claim, and Fund
Services shall in such situations incur no further legal or other
expenses for which it may seek indemnification under this
Section.
SECTION 9. This Agreement may be amended from time to
time by a written supplemental agreement executed by the Fund and
Fund Services and without notice to or approval of the
Shareholders; provided this Agreement may not be amended in any
manner which would substantially increase the Fund's obligations
hereunder unless the amendment is first approved by the Fund's
Directors, including a majority of the Directors who are not a
party to this Agreement or interested persons of any such party,
at a meeting called for such purpose, and thereafter is approved
by the Shareholders if such approval is required under the
Investment Company Act or the rules and regulations thereunder.
The parties hereto may adopt procedures as may be appropriate or
practical under the circumstances, and Fund Services may
conclusively rely on the determination of the Fund that any
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procedure that has been approved by the Fund does not conflict
with or violate any requirement of its Articles of Incorporation
or By-Laws, or any rule, regulation or requirement of any
regulatory body.
SECTION 10. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or supplement
hereto, shall have the meanings specified below, insofar as the
context will allow.
(a) Business Day: The term Business Day shall mean any
day on which the Fund is open for business as described in its
Prospectus.
(b) Shareholders: The term Shareholders shall mean the
registered owners from time to time of the Shares, as reflected
on the stock registry records of the Fund.
(c) Shares: The term Shares shall mean all or any part
of each class of the shares of capital stock of the Fund which
from time to time are authorized and/or issued by the Fund.
SECTION 11. Fund Services shall not be liable for any
delays or errors occurring by reason of circumstances beyond its
control, including but not limited to acts of civil or military
authorities, national emergencies, fire, flood or catastrophe,
acts of God, insurrection, war, riot, or failure of
transportation, communication or power supply, except to the
extent that Fund Services shall have failed to use its best
efforts to minimize the likelihood of occurrence of such
circumstances or to mitigate any loss or damage to the Fund
caused by such circumstances.
SECTION 12. The Fund may give Fund Services sixty (60)
days and Fund Services may give the Fund ninety (90) days written
notice of the termination of this Agreement, such termination to
take effect at the time specified in the notice. Upon notice of
termination, the Fund may, but is not required to, appoint a
successor shareholder inquiry agent. Upon receipt from the Fund
of written notice of the appointment of the successor shareholder
inquiry agent and related instructions, Fund Services shall, upon
request of the Fund and the successor shareholder inquiry agent
and upon payment of Fund Services' reasonable charges and
disbursements, promptly transfer to the successor shareholder
inquiry agent all materials held by Fund Services hereunder and
cooperate with, and provide reasonable assistance to, the
successor shareholder inquiry agent in the transition to carry
out its responsibilities hereunder.
SECTION 13. Any notice or other communication required
by or permitted to be given in connection with this Agreement
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shall be in writing, and shall be delivered in person or sent by
first-class mail, postage prepaid, to the respective parties.
Notice to the Fund shall be given as follows until
further notice:
Alliance World Dollar Government Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
Notice to Fund Services shall be given as follows until
further notice:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
SECTION 14. The Fund represents and warrants to Fund
Services that the execution and delivery of this Agreement by the
undersigned officer of the Fund has been duly and validly
authorized by resolution of the Fund's Directors. Fund Services
represents and warrants to the Fund that the execution and
delivery of this Agreement by the undersigned officer of Fund
Services has also been duly and validly authorized.
SECTION 15. This Agreement may be executed in more than
one counterpart, each of which shall be deemed to be an original,
and shall become effective as of [January 1, 1995], unless
otherwise agreed by the parties. Unless sooner terminated
pursuant to SECTION 12, this Agreement will continue until
[ ] and will continue in effect thereafter for
successive 12 month periods only if such continuance is
specifically approved at least annually by the Directors or by a
vote of the Shareholders and in either case by a majority of the
Directors who are not parties to this Agreement or interested
persons of any such party, at a meeting called for the purpose of
voting on this Agreement.
SECTION 16. This Agreement shall extend to and shall
bind 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 Fund
Services or by Fund Services without the written consent of the
Fund, authorized or approved by a resolution of the Fund's
Directors. Notwithstanding the foregoing, either party may
assign this Agreement without the consent of the other party so
long as the assignee is an affiliate, parent or subsidiary of the
assigning party and is qualified to act under the Investment
Company Act, as amended from time to time.
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<PAGE>
SECTION 17. This Agreement shall be governed by the
laws of the state of New York.
WITNESS the following signatures:
Alliance World Dollar Government
Fund, Inc.
/s/ Edmund P. Bergan, Jr.
By:__________________________
Secretary
Title:_______________________
ALLIANCE FUND SERVICES, INC.
/s/ George Hrabovsky
By:_________________________
President
Title:______________________
6
00250230.AE3
<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
May 14, 1996
00250230.AF5
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below hereby revokes all prior powers granted
by the undersigned to the extent inconsistent herewith and
constitutes and appoints John D. Carifa and Edmund P. Bergan,
Jr., and each of them, to act severally as attorneys-in-fact and
agents, with power of substitution and resubstitution, for the
undersigned, solely for the purpose of signing on such person's
behalf any Registration Statement on Form N-2, and any amendments
thereto, of Alliance World Dollar Government Fund, Inc. and
filing the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/S/ Ruth Block
__________________________
Ruth Block
Dated: May 17, 1996
00250230.AD2
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below hereby revokes all prior powers granted
by the undersigned to the extent inconsistent herewith and
constitutes and appoints John D. Carifa and Edmund P. Bergan,
Jr., and each of them, to act severally as attorneys-in-fact and
agents, with power of substitution and resubstitution, for the
undersigned, solely for the purpose of signing on such person's
behalf any Registration Statement on Form N-2, and any amendments
thereto, of Alliance World Dollar Government Fund, Inc. and
filing the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/S/ John D. Carifa
__________________________
John D. Carifa
Dated: May 17, 1996
00250230.AD3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below hereby revokes all prior powers granted
by the undersigned to the extent inconsistent herewith and
constitutes and appoints John D. Carifa and Edmund P. Bergan,
Jr., and each of them, to act severally as attorneys-in-fact and
agents, with power of substitution and resubstitution, for the
undersigned, solely for the purpose of signing on such person's
behalf any Registration Statement on Form N-2, and any amendments
thereto, of Alliance World Dollar Government Fund, Inc. and
filing the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/S/ David H. Dievler
__________________________
David H. Dievler
Dated: May 17, 1996
00250230.AD4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below hereby revokes all prior powers granted
by the undersigned to the extent inconsistent herewith and
constitutes and appoints John D. Carifa and Edmund P. Bergan,
Jr., and each of them, to act severally as attorneys-in-fact and
agents, with power of substitution and resubstitution, for the
undersigned, solely for the purpose of signing on such person's
behalf any Registration Statement on Form N-2, and any amendments
thereto, of Alliance World Dollar Government Fund, Inc. and
filing the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/S/ John H. Dobkin
__________________________
John H. Dobkin
Dated: May 17, 1996
00250230.AD5
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below hereby revokes all prior powers granted
by the undersigned to the extent inconsistent herewith and
constitutes and appoints John D. Carifa and Edmund P. Bergan,
Jr., and each of them, to act severally as attorneys-in-fact and
agents, with power of substitution and resubstitution, for the
undersigned, solely for the purpose of signing on such person's
behalf any Registration Statement on Form N-2, and any amendments
thereto, of Alliance World Dollar Government Fund, Inc. and
filing the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/S/ William H. Foulk, Jr.
__________________________
William H. Foulk, Jr.
Dated: May 17, 1996
00250230.AD6
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below hereby revokes all prior powers granted
by the undersigned to the extent inconsistent herewith and
constitutes and appoints John D. Carifa and Edmund P. Bergan,
Jr., and each of them, to act severally as attorneys-in-fact and
agents, with power of substitution and resubstitution, for the
undersigned, solely for the purpose of signing on such person's
behalf any Registration Statement on Form N-2, and any amendments
thereto, of Alliance World Dollar Government Fund, Inc. and
filing the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/S/ Dr. James M. Hester
__________________________
Dr. James M. Hester
Dated: May 17, 1996
00250230.AD7
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below hereby revokes all prior powers granted
by the undersigned to the extent inconsistent herewith and
constitutes and appoints John D. Carifa and Edmund P. Bergan,
Jr., and each of them, to act severally as attorneys-in-fact and
agents, with power of substitution and resubstitution, for the
undersigned, solely for the purpose of signing on such person's
behalf any Registration Statement on Form N-2, and any amendments
thereto, of Alliance World Dollar Government Fund, Inc. and
filing the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/S/ Clifford L. Michel
__________________________
Clifford L. Michel
Dated: May 17, 1996
00250230.AD8
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below hereby revokes all prior powers granted
by the undersigned to the extent inconsistent herewith and
constitutes and appoints John D. Carifa and Edmund P. Bergan,
Jr., and each of them, to act severally as attorneys-in-fact and
agents, with power of substitution and resubstitution, for the
undersigned, solely for the purpose of signing on such person's
behalf any Registration Statement on Form N-2, and any amendments
thereto, of Alliance World Dollar Government Fund, Inc. and
filing the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/S/ Robert C. White
__________________________
Robert C. White
Dated: May 17, 1996
00250230.AD9
<TABLE> <S> <C>
<PAGE>
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<PAGE>
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