ALLIANCE WORLD DOLLAR GOVERNMENT FUND
ANNUAL REPORT
OCTOBER 31, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
November 18, 1997
Dear Shareholder:
The World Dollar Government Fund's annual reporting period closed on October
31, 1997. After posting strong returns throughout most of the past six months,
the emerging market bond sector retreated sharply in October and ended the
period with modest gains. Financial market turmoil, which started in Southeast
Asia and quickly spread to other developing country bond markets, unsettled
investors and caused emerging market yield spreads to widen dramatically.
Meanwhile, the U.S. bond market posted strong returns over the past six months
as the prospects of slower U.S. growth coupled with increased investor demand
for "safe," liquid securities drove bond prices higher in the U.S.
INVESTMENT RESULTS
In spite of the recent slowdown in the emerging market sector, we are pleased
to report that Alliance World Dollar Government Fund posted positive returns
over the most recent period and outperformed its benchmark. For the six months
ended October 31, 1997, the Fund returned 3.60% on a net asset value basis.
This compares with a return of 1.88% for the benchmark, the J.P. Morgan
Emerging Market Bond Index. This outperformance can be attributed to strong
performance of the Fund's holdings of U.S. Treasury bonds. The Fund's relative
underweighting in Southeast Asian securities also positively impacted portfolio
performance. For the twelve months ended October 31, 1997, the Fund achieved a
total return of 14.24%, versus a total return of 14.00% for the benchmark.
ECONOMIC AND MARKET REVIEW
Economic growth continued at a healthy pace and inflation remained at low
absolute levels worldwide over the past six months. Although U.S. growth showed
some signs of slowing, the economy remained strong, once again led by
persistent strength in the labor market. Employment growth continued at a brisk
pace and the unemployment rate dropped to 4.7% in October, a 24-year low.
Consumer confidence remained at its recent highs and real income grew solidly.
Overall, growth in aggregate output (GDP) reached 3.5% in the third quarter, up
slightly from the second quarter's 3.3% pace.
In spite of an increase in wage pressures, inflation remained very well behaved
during the period. Wholesale inflation, as measured by the producer price
index, fell for an unprecedented seven months in a row before finally showing
increases the past three months. Overall, producer prices are down 0.2% on a
year-over-year basis through October. Consumer prices are up 2.1% from the same
period last year.
The U.S. bond market rallied with little interruption since our last letter to
you. The market was buoyed by tentative evidence of slowing domestic growth,
better-than-expected inflation news, the smallest federal budget deficit in
more than 20 years, and the diminishing likelihood of another Fed tightening.
The prospect of a major slowdown in Southeast Asia, and investors' desire for a
"safe haven" for their investments also added to the rally in the government
bond sector late in the period. Interest rates on all maturities ended the
period lower; the 30-year Treasury bond yield declined by 80 basis points to
6.15% and the 10-year Treasury bond yield dropped to 5.83%, down 88 basis
points from its April level.
In the developing markets, strong gains throughout most of the period were
erased as economic problems which began in Thailand quickly spread to other
Southeast Asian countries. Early policy responses in the affected countries
were widely viewed as inadequate and/or inappropriate and resulted in a ripple
effect that subsequently spread to other global bond markets including the U.S.
Fundamental analysis took a back seat to market psychology in many cases and
investors sold bonds of all countries, including U.S. corporate bonds. Overall,
yield spreads on the J.P. Morgan Emerging Market Bond Index (the Fund's
benchmark), which had narrowed to 475 basis points as of April 30, widened to
606 basis points at the end of the period.
INVESTMENT OUTLOOK
Recent slowing in employment gains and soft retail sales suggest slower growth
as we move into 1998. We believe that the currency devaluations and economic
slowing in Southeast Asia will further temper U.S. growth in the upcoming year
as exports to that region decline. We expect interest rates to remain within
their recent range (between 5.75% and 6.50% on the 30-year Treasury) and the
healthy U.S. economy to cycle between stronger and weaker periods of growth.
Given the prolonged period of strong capacity utilization and employment gains
and the difficulty of forecasting U.S. inflation in an increasingly global
economy, there is some risk that the Federal Reserve will modestly raise rates
as a precautionary measure.
1
ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
In the developing markets, commitment to economic integration remains high and
the global environment of relatively stable growth and inflation will support
the integration process. Nonetheless, in the period ahead growth and inflation
prospects will diverge. Latin America, Eastern Europe and Russia will generally
enhance global growth as their economic and inflation trends improve.
Meanwhile, much of Southeast Asia will detract from global growth as their
economies slow and inflation increases. Country selection will remain critical
in the emerging markets.
The picture in Latin America continues to be one of growth, albeit slower than
in past years, and low inflation. In Brazil, inflation fell in August and is
expected to register 4.5%-5% for all of 1997. The government's recent decision
to vigorously defend the Brazilian real will likely produce temporary weakness
but will presumably provide a sound foundation to ensure continued economic
growth. Although the Mexican peso fell victim to the currency crisis plaguing
Southeast Asia, economic fundamentals remain strong. The Mexican economy grew
at a 7.0% rate during the first half of 1997 and industrial production surged
8.2% year-over-year in August, following July's jump of 10.3%. These figures
bode well for third quarter growth and are consistent with our belief that
Mexico will grow 5%-6% annually through 2000. Despite excellent fundamentals,
Argentina will continue to be hit by the spillover from Asia. Although there is
no question about the government's resolve to protect the currency, the fact
that Argentina has a fixed exchange rate leaves it vulnerable to investor
concerns about a devaluation and/or loss in liquidity. However, longer-term, we
remain very positive on Argentina's economic prospects.
In Russia, the economy appears to be expanding. The GDP in August showed a 0.7%
increase over year earlier levels. Industrial production shows a similar
pattern, increasing 3.0% year-over-year in August following a 3.4%
year-over-year increase in July. The recently completed restructuring of
Russia's commercial bank debt should also support continued gains in the prices
of Russian bonds. However, a recent downturn in revenue generation--the
Achilles heel of the Russian reform program--threatens the excellent reform
momentum and bears close scrutiny.
In Southeast Asia, the near-term outlook is bleak. The unfolding adjustments
for these countries involve much weaker currencies, higher interest rates,
lower stock prices, numerous bankruptcies, banking-sector consolidation and
slower growth. Financial markets in this region will remain under intense
pressure as policy makers grapple with appropriate responses to the economic
crisis. The International Monetary Fund's decision to step in and provide funds
to shore up the shaky Thai and Indonesian financial sectors should eventually
help to provide needed stability to this region. Long-term, we are optimistic
about the investment value in Asia since favorable fundamentals are still in
place. We will be monitoring developments in this region closely in the
upcoming periods.
CHANGE IN INVESTMENT POLICY
On August 6, 1997, your Fund's board of directors announced a modification of
the Fund's investment policy with respect to Brady Bonds. Previously, the Fund
had been required to invest at least 50% of its aggregate sovereign debt
positions in Brady Bonds collateralized as to the payment of principal at
maturity by U.S. Treasury zero coupon obligations. The Fund's board has acted
to broaden and update the Fund's investment policies by eliminating the
requirement that a minimum portion of sovereign debt obligations consist of
collateralized Brady Bonds.
Thank you for your continued interest and investment in Alliance World Dollar
Government Fund. We look forward to reporting its progress to you in the coming
months.
Sincerely,
John D. Carifa
Chairman
Wayne D. Lyski
President
2
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-106.5%
COLLATERALIZED BRADY BONDS(A)-85.9%
ARGENTINA-15.7%
Republic of Argentina
Euro Par Bonds
5.50%, 3/31/23 (b) $32,000 $ 21,800,000
BRAZIL-16.3%
Republic of Brazil
Discount Bonds FRN Series Z-L
6.6875%, 4/15/24 19,160 14,370,000
Par Bonds Series Z-L
5.25%, 4/15/24(b) 12,700 8,278,812
------------
22,648,812
BULGARIA-6.3%
Republic of Bulgaria
Discount Bonds FRN
6.6875%, 7/28/24 12,500 8,656,250
ECUADOR-3.6%
Republic of Ecuador
Discount Bonds FRN
6.6875%, 2/28/25(b) 7,400 4,995,000
JORDAN-5.4%
Republic of Jordan
Par Bonds
4.00%, 12/23/23(b) 11,200 7,448,000
MEXICO-18.4%
United Mexican States
Discount Bonds FRN Series B
6.83594%, 12/31/19(c) 10,240 9,152,000
Discount Bonds FRN Series D
6.8125%, 12/31/19(c) 6,000 5,362,500
Euro Par Bonds Series A
6.25%, 12/31/19(c) 8,600 6,740,250
Euro Par Bonds Series B
6.25%, 12/31/19(c) 5,500 4,310,625
------------
25,565,375
NIGERIA-5.7%
Central Bank of Nigeria Par Bonds
6.25%, 11/15/20(d) 12,000 7,920,000
POLAND-3.4%
Republic of Poland Discount Bonds FRN
6.6875%, 10/27/24 5,000 4,693,750
VENEZUELA-11.1%
Republic of Venezuela
Discount Bonds FRN Series A
6.75%, 3/31/20(e) 13,000 11,342,500
Par Bonds Series W-A
6.75%, 3/31/20(e) 4,900 4,097,625
------------
15,440,125
Total Collateralized Brady Bonds
(cost $119,601,124) 119,167,312
LOAN PARTICIPATION & ASSIGNMENT-7.7%
ALGERIA-1.9%
Algeria Refinancing Trust FRN
Loan Assignment Tranche B
6.6875%, 9/05/05 3,000 2,550,000
MOROCCO-5.8%
Kingdom of Morocco
Loan Participation FRN Series A
6.8125%, 1/01/09 10,000 8,062,500
Total Loan Participation & Assignment
(cost $7,129,070) 10,612,500
3
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
OTHER SOVEREIGN DEBT OBLIGATIONS-6.7%
RUSSIA-6.7%
Russia Principal Loans - WI
FRN 12/15/20(f)(g)
(cost $10,882,500) $15,800 $ 9,322,000
NON-COLLATERALIZED BRADY BONDS-6.2%
BRAZIL-2.3%
Republic of Brazil C-Bonds
8.00%, 4/15/14(h) 4,675 3,154,209
PANAMA-2.5%
Republic of Panama IRB
3.75%, 7/17/14(b) 5,000 3,525,000
PERU-1.4%
Republic of Peru FLIRB
3.25%, 3/07/17 (b)(f) 1,500 750,000
Republic of Peru PDI
4.00%, 3/07/17(b)(f) 2,000 1,130,000
------------
1,880,000
Total Non-Collateralized Brady Bonds
(cost $9,049,726) 8,559,209
Total Sovereign Debt Obligations
(cost $146,662,420) 147,661,021
U.S. GOVERNMENT OBLIGATION-34.1%
U.S. Treasury Strip
Zero coupon, 2/15/03
(cost $47,646,006) 64,000 47,340,160
TIME DEPOSIT-0.3%
Bank of New York
5.1875%, 11/03/97
(cost $377,000) 377 377,000
TOTAL INVESTMENTS-140.9%
(cost $194,685,426) 195,378,181
Other assets less liabilities-(40.9%) (56,669,199)
NET ASSETS-100% $138,708,982
(a) 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.
(b) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at October 31, 1997.
(c) Security trades with value recovery rights expiring June 30, 2003.
(d) Security trades with oil warrants expiring November 15, 2020.
(e) Security trades with oil warrants expiring April 15, 2020.
(f) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31, 1997
these securities amounted to $11,202,000 or 8.1% of net assets.
(g) An interest rate based on the six-month Libor Rate plus 81.25 basis points
will take effect upon issuance of bonds.
(h) Coupon consists of 4.50% cash payment and 3.50% paid-in-kind.
Glossary of Terms:
FLIRB - Front Loaded Interest Reduction Bond.
FRN - Floating Rate Note.
IRB - Interest Reduction Bond.
PDI - Past Due Interest.
WI - When Issued.
See notes to financial statements.
4
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997 ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $194,685,426) $ 195,378,181
Cash 23,178
Receivable for investment securities sold 33,229,138
Interest receivable 2,683,550
Deferred organization expenses and other assets 4,098
Total assets 231,318,145
LIABILITIES
Payable for investment securities purchased 91,632,890
Unrealized depreciation on interest rate swap contract 674,196
Advisory fee payable 130,440
Administrative fee payable 19,566
Accrued expenses 152,071
Total liabilities 92,609,163
NET ASSETS $ 138,708,982
COMPOSITION OF NET ASSETS
Capital stock, at par $ 86,527
Additional paid-in capital 119,218,745
Undistributed net investment income 2,761,040
Accumulated net realized gain on investment transactions 16,624,111
Net unrealized appreciation of investments and other assets 18,559
$ 138,708,982
NET ASSET VALUE PER SHARE (based on 8,652,707 shares outstanding) $16.03
See notes to financial statements.
5
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997 ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 15,982,991
EXPENSES
Advisory fee $ 1,462,820
Administrative fee 219,424
Audit & legal 107,556
Custodian 103,406
Transfer agency 77,140
Directors' fees 36,112
Printing 24,965
Amortization of organization expenses 17,885
Registration 16,207
Taxes 10,800
Miscellaneous 10,253
Total expenses 2,086,568
Net investment income 13,896,423
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions 23,952,946
Net change in unrealized appreciation of
investments and other assets (19,652,839)
Net gain on investments 4,300,107
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 18,196,530
See notes to financial statements.
6
STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 13,896,423 $ 12,618,227
Net realized gain on investment transactions 23,952,946 13,908,106
Net change in unrealized appreciation of
investments and other assets (19,652,839) 16,452,008
Net increase in net assets from operations 18,196,530 42,978,341
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (13,628,017) (11,594,630)
Total increase 4,568,513 31,383,711
NET ASSETS
Beginning of year 134,140,469 102,756,758
End of year (including undistributed net
investment income of $2,761,040 and
$2,492,634, respectively) $138,708,982 $134,140,469
See notes to financial statements.
7
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997 ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
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. Due to 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 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 any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. 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 discount as an
adjustment to interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences, do not require such
reclassification.
NOTE B: ADVISORY AND ADMINISTRATIVE FEES
Under the terms of an Investment Advisory Agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser") an advisory fee equal to the annualized
rate of 1% of the Fund's average weekly net assets.
Under the terms of an Administration 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 as well as other clerical services to the
Fund and prepares financial and regulatory reports.
The Fund entered into a Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Adviser, whereby the Fund
reimburses AFS for costs relating to servicing phone inquiries for the Fund.
During the year ended October 31, 1997, the Fund reimbursed AFS $5,500,
relating to shareholder servicing costs.
8
ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $261,334,018 and $252,431,972,
respectively, for the year ended October 31, 1997. There were purchases of
$271,478,845 and sales of $268,486,865 of U.S. government obligations for the
year ended October 31, 1997.
At October 31, 1997, the cost of investments for federal income tax purposes
was $195,890,985. Accordingly, gross unrealized appreciation of investments was
$8,111,959 and gross unrealized depreciation of investments was $8,624,763
resulting in net unrealized depreciation of $512,804 (excluding swap contracts).
1. 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 and for investment purposes. A swap is an agreement that
obligates two parties to exchange a series of cash flows at specified intervals
based upon or calculated by reference to changes in specified prices or rates
for a specified amount of an underlying asset. The payment flows are usually
netted against each other, with the difference being paid by one party to the
other.
Risks may arise as a result of the failure of another party to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of a counterparty is generally limited to the net interest payment
to be received by the Fund, and/or the termination value at the end of the
contract. Therefore, the Fund considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.
The Fund records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid in the interest
period. Net interest received or paid on these contracts is recorded as
interest income (or as an offset to interest income). Fluctuations in the value
of swap contracts are recorded for financial statement purposes as unrealized
appreciation or depreciation of investments.
At October 31, 1997, the Fund had an outstanding interest rate swap contract
with the following terms:
<TABLE>
<CAPTION>
RATE TYPE
--------------------------------
SWAP NOTIONAL TERMINATION PAYMENTS MADE PAYMENTS RECEIVED UNREALIZED
COUNTERPARTY AMOUNT DATE BY THE FUND BY THE FUND DEPRECIATION
- ------------ -------------- ----------- ------------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Morgan US$ 12,000,000 1/01/09 LIBOR# 6.8526% $674,196
Guaranty
</TABLE>
# LIBOR (London Interbank Offered Rate).
NOTE D: 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, 1997, the Adviser owned
7,200 shares. During the years ended October 31, 1997 and 1996, the Fund did
not issue shares in connection with the dividend reinvestment plan.
9
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
NOTE E: CONCENTRATION OF RISK
Investing in securities of foreign governments involves special risks which
include revaluation of currencies and the possibility of 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.
10
FINANCIAL HIGHLIGHTS ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NOVEMBER 2,
YEAR ENDED OCTOBER 31, 1992(A) TO
-------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.50 $11.88 $11.08 $22.09 $13.82(b)
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.61 1.46 1.51(c) 1.32 1.54
Net realized and unrealized gain (loss)
on investments .50 3.50 .71 (5.66) 8.19
Net increase (decrease) in net asset
value from operations 2.11 4.96 2.22 (4.34) 9.73
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (1.58) (1.34) (1.42) (1.39) (1.46)
Distributions from net realized gains -0- -0- -0- (4.96) -0-
Distributions in excess of net
realized gains -0- -0- -0- (.09) -0-
Tax return of capital distribution -0- -0- -0- (.23) -0-
Total dividends and distributions (1.58) (1.34) (1.42) (6.67) (1.46)
Net asset value, end of period $16.03 $15.50 $11.88 $11.08 $22.09
Market value, end of period $15.875 $13.625 $11.75 $13.00 $20.375
TOTAL RETURN
Total investment return based on: (d)
Market value 28.74% 28.49% 2.78% (7.52)% 59.14%
Net asset value 14.24% 44.57% 21.92% (27.29)% 72.53%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $138,709 $134,140 $102,757 $93,528 $164,622
Ratio of expenses to average net assets 1.43% 1.70% 1.55% 1.43% 1.44%(e)
Ratio of net investment income to
average net assets 9.50% 10.84% 14.12% 9.08% 9.79%(e)
Portfolio turnover rate 281% 352% 441% 395% 417%
</TABLE>
(a) Commencement of operations.
(b) Net of offering costs of $.13.
(c) Based on average shares outstanding.
(d) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day of
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.
(e) Annualized.
11
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
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, 1997, 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, 1997, 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, 1997, 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
each of the indicated periods, in conformity with generally accepted accounting
principles.
New York, New York
November 21, 1997
12
ADDITIONAL INFORMATION ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
Shareholders whose shares are registered in their own names will automatically
be participants in the Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), pursuant to which dividends and capital gain distributions to
shareholders will be paid in or reinvested in additional shares of the Fund.
First Data Investor Services Group, Inc. (the "Agent") will act as agent for
participants under the Plan. Shareholders whose shares are held in the name of
a broker or nominee should contact such broker or nominee to determine whether
or how they may participate in the Plan.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will issue new
shares at the greater of net asset value or 95% of the then current market
price.
(ii) If the shares of Common Stock are trading at a discount from net asset
value at the time of valuation, the Agent will receive the dividend or
distribution in cash and apply it to the purchase of the Fund's shares of
Common Stock in the open market on the New York Stock Exchange or elsewhere,
for the participants' accounts. Such purchases will be made on or shortly after
the payment date for such dividend or distribution and in no event more than 30
days after such date except where temporary curtailment or suspension of
purchase is necessary to comply with Federal securities laws. If, before the
Agent has completed its purchases, the market price exceeds the net asset value
of a share of Common Stock, the average purchase price per share paid by the
Agent may exceed the net asset value of the Fund's shares of Common Stock,
resulting in the acquisition of fewer shares than if the dividend or
distribution had been paid in shares issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of
the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average cost,
including brokerage commissions, of any shares purchased in the open market
plus the cost of any shares issued by the Fund.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent
to written notice of the change sent to participants in the Plan at least 90
days before the record date for such dividend or distribution. The Plan may
also be amended or terminated by the Agent on at least 90 days' written notice
to participants in the Plan. All correspondence concerning the Plan should be
directed to the Agent at First Data Investor Services Group, Inc., P.O. Box
1376, Boston, Massachusetts 02104.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change
of control of the Fund, (iii) no material changes in the principal risk factors
associated with investment in the Fund, and (iv) no change in the person
primarily responsible for the day-to-day management of the Fund's portfolio,
who is Wayne D. Lyski, the President of the Fund.
13
ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (1)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
DONALD J. ROBINSON (1)
ROBERT C. WHITE (1)
OFFICERS
WAYNE D. LYSKI, PRESIDENT
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
PAUL J. DENOON, VICE PRESIDENT
VICKI L. FULLER, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
JOSEPH J. MANTINEO, CONTROLLER
ADMINISTRATOR
ALLIANCE CAPITAL MANAGEMENT, L.P.
1345 Avenue of the Americas
New York, NY 10105
CUSTODIAN
THE BANK OF NEW YORK
48 Wall Street
New York, NY 10286
DIVIDEND PAYING AGENT,
TRANSFER AGENT AND REGISTRAR
FIRST DATA INVESTOR SERVICES GROUP, INC.
(FORMERLY THE SHAREHOLDER SERVICES GROUP, INC.)
53 State Street
Boston, MA 02109
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
LEGALCOUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY10004
(1) Member of the Audit Committee.
14
ALLIANCE WORLD DOLLAR GOVERNMENT FUND
Summary of General Information
THE FUND
Alliance World Dollar Government Fund is a closed-end management investment
company which seeks high current income from investment in debt obligations of
countries with emerging economies whose recent interest rates are higher than
those of the United States.
SHAREHOLDER INFORMATION
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transactions Section of newspapers each day, under the
designation "Alliance Wrld". The Fund's NYSE trading symbol is "AWG". Weekly
comparative net asset value (NAV) and market price information about the Fund
is published each Monday in THE WALL STREET JOURNAL, each Sunday in the NEW
YORK TIMES and each Saturday in BARRON'S and other newspapers in a table called
"Closed-End Funds."
DIVIDEND REINVESTMENT PLAN
A Dividend Reinvestment Plan provides automatic reinvestment of dividends and
capital gains distributions in additional Fund shares.
For questions concerning shareholder account information, or if you would like
a brochure describing the Dividend Reinvestment Plan, please call First Data
Investor Services Group at 1-800-331-1710.
ALLIANCE WORLD DOLLAR GOVERNMENT FUND
1345 Avenue of the Americas
New York, New York 10105
ALLIANCE CAPITAL
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE
CAPITAL MANAGEMENT L.P.
WDGAR
