ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
ANNUAL REPORT
OCTOBER 31, 1996
LETTER TO SHAREHOLDERS
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
December 12, 1996
Dear Shareholder:
Throughout most of 1996, U.S. bond market returns have been subdued. The market
has reacted negatively to stronger-than-expected job growth and uncertainty
about whether the Federal Reserve would raise rates to slow economic growth.
Across all major sectors of the bond market, shorter-duration securities have
outperformed longer-term securities as interest rates for all maturities have
increased. Outside of the U.S., many governments continued to pursue policies
of economic reform which supported higher bond prices.
INVESTMENT RESULTS
In spite of sluggish domestic bond market returns, non-U.S. bond markets
continued their strong performance over the past six months. We are pleased to
report that Alliance World Dollar Government Fund was well positioned to
capitalize on these gains and posted strong positive returns. For the six and
twelve months ended October 31, 1996, the Fund returned 23.28% and 44.57%,
respectively, on a net asset value basis, which compares favorably with returns
for the Fund's benchmark, the J.P. Morgan Emerging Market Bond Index.
TOTAL RETURN FOR THE
PERIODS ENDED OCTOBER 31, 1996
6 MONTHS 12 MONTHS
-------------- --------------
ALLIANCE WORLD DOLLAR GOVERNMENT FUND 23.28% 44.57%
J.P. MORGAN EMERGING MARKET BOND INDEX 15.30% 39.90%
THE J.P. MORGAN INDEX IS UNMANAGED AND ITS PERFORMANCE DOES NOT INCLUDE
MANAGEMENT CHARGES OR EXPENSES.
ECONOMIC REVIEW
Rebounding from a slowdown at the end of 1995, the U.S. economy gathered steam
as 1996 progressed. Following first quarter GDP growth of 2.0%, the economy
gained strength in the second quarter, led by a rapidly improving labor market.
Employment gains averaged 272,000 per month and total hours worked climbed by
an annualized 5.7%. Consumer confidence remained elevated and real household
spending continued to grow at a healthy clip. These factors combined to produce
"overheated" GDP growth for the second quarter of 4.7%.
Recent economic data depicts an economy that has slowed sharply. Overall GDP
growth has declined to a modest 2.0%, dragged down by a deceleration in
consumer spending. The annualized gain in retail sales of merchandise measured
only 0.4% during the third quarter, while construction spending dropped 5.8%
from second quarter levels. On the production side, industrial production
growth slowed to an annualized 4.3%, from 6.6% in the second quarter.
On the inflation front, the Commerce Department's price index decelerated for
the second quarter in a row, rising at a seasonally adjusted rate of only 1.8%
in the third quarter. This compares with growth of 2.3% and 2.1%, respectively,
in the first and second quarters. Thus, it appears that inflation remains
restrained, despite the pressures of relatively high employment. As a result,
the Federal Reserve has been in a holding pattern and is expected to remain so
for the foreseeable future.
INVESTMENT OUTLOOK
Our outlook for the U.S. economy assumes that, while economic growth may
temporarily bounce higher during the fourth quarter of 1996, it will moderate
again during the first half of 1997. As this occurs, recent upward pressure on
inflation, caused by a tight labor market, should dissipate. Until clear signs
of a slowing economy emerge, concerns about inflation will keep U.S. interest
rates within their recent ranges, with a tendency to move toward the lower end
of the yield range.
Outside of the U.S., we continue to have a favorable outlook for emerging
market debt. However, as risk premiums for this asset class have narrowed, we
expect the pace of price appreciation of these securities to slow.
In Mexico and Argentina, the success of economic programs undertaken since the
peso devaluation two years ago has led to lower inflation, improving current
account deficits and growing investor confidence. We believe these factors
should support higher bond prices in these markets in the future.
In Russia, current economic indicators are encouraging. Reserves have increased
considerably in the past two years and the current account surplus continues to
grow.
1
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
We expect the impact of market-oriented reforms to be more noticeable in 1997
and to produce further price appreciation for Russian securities.
Investment in emerging market securities is always speculative, and the risk
elements in the current Russian situation have been well publicized. However,
we believe Russian sovereign debt obligations are a compelling long-term
investment opportunity. Numerous factors lead us to this opinion, including the
recent ratings of Russian debt by both Moody's and Standard & Poor's,
successful steps toward restructuring Russia's external debt, the receding
likelihood of reactionary economic policies, and the growing representation of
Russia in the emerging market bond indices.
As a result, the Fund's Board of Directors recently approved an increase in the
amount of Fund assets that may be invested in U.S. dollar-denominated Russian
sovereign debt obligations. Going forward, the Fund may invest up to 25% of
total assets in such debt, thus positioning the Fund to better capitalize on
Russian economic reform. This puts Russia on a par, in terms of the Fund's
investment limitations, with other significant emerging market sovereign debt
issuers, including Argentina, Brazil, Mexico, Morocco, the Philippines, and
Venezuela.
Polish bonds have experienced substantial price appreciation since receiving an
investment-grade rating earlier in 1996. As these securities appear to be near
their peak, we have begun reducing the portfolio's exposure to this market.
In the months ahead, factors which could potentially impact emerging market
bond prices will be:
. the anticipated resumption of the Mexican privatization program;
. International Monetary Fund negotiations with the new coalition government
in Turkey;
. continued market reforms in Russia; and
. first-time credit ratings for the emerging market debt of six to eight
countries.
Thank you for your continued interest and investment in Alliance World Dollar
Government Fund. We look forward to reporting to you again on market activity
and investment results.
Sincerely,
John D. Carifa
Chairman
Wayne D. Lyski
President
2
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-105.8%
COLLATERALIZED BRADY BONDS*-73.0%
ARGENTINA-10.8%
Republic of Argentina
Discount Bonds FRN
6.4375%, 3/31/23 $10,250 $ 7,392,812
Euro Par Bonds
5.25%, 3/31/23(a) 12,000 7,113,750
Total Argentinean Securities 14,506,562
BRAZIL-12.4%
Republic of Brazil
Discount Bonds FRN
Series Z-L
6.50%, 4/15/24 10,600 7,771,125
Par Bonds
Series Z-L
5.00%, 4/15/24(a) 14,750 8,822,344
Total Brazilian Securities 16,593,469
BULGARIA-7.2%
Republic of Bulgaria Discount Bonds FRN
6.6875%, 7/28/24 19,000 9,612,812
ECUADOR-5.4%
Republic of Ecuador Discount Bonds FRN
6.50%, 2/28/25 11,000 7,290,938
MEXICO-17.7%
United Mexican States Euro Par Bonds
6.25%, 12/31/19(b)
Series A 18,300 12,855,750
Series B 15,500 10,888,750
Total Mexican Securities 23,744,500
NIGERIA-4.7%
Central Bank of Nigeria Par Bonds
6.25%, 11/15/20(c) 10,000 6,256,250
VENEZUELA-14.8%
Republic of Venezuela Par Bonds
6.75%, 3/31/20(d)
Series W-A 21,500 15,265,000
Series W-B 6,500 4,615,000
Total Venezuelan Securities 19,880,000
Total Collateralized Brady Bonds
(cost $87,582,573) 97,884,531
NON-COLLATERALIZED BRADY BONDS-18.0%
PANAMA-9.8%
Republic of Panama IRB
3.50%, 7/17/14(a)(e) 20,000 13,150,000
PERU-6.2%
Republic of Peru FLIRB
3.25%, 3/15/16(a)(e)(f) 15,000 8,287,500
RUSSIA-2.0%
Russia Principal Loans FRN
12/29/20(e)(f) 5,000 2,678,125
Total Non-Collateralized Brady Bonds
(cost $19,728,923) 24,115,625
LOAN PARTICIPATIONS & ASSIGNMENTS-8.5%
ALGERIA-1.4%
Algeria Refinancing Trust FRN
Loan Assignment Tranche B
7.1875%, 9/05/05 3,000 1,980,000
MOROCCO-7.1%
Kingdom of Morocco
Loan Participation FRN
6.4375%, 1/01/09 12,000 9,525,000
Total Loan Participations & Assignments
(cost $7,889,035) 11,505,000
3
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
SOVEREIGN DEBT-RELATED-6.3%
Morgan Guaranty Trust Co.
Indexed Note Linked Russian US$
Vneshekonombank Loan Assignment
14.00%, 2/28/97(g)
(cost $7,260,000) $ 7,260 $ 8,462,982
Total Sovereign Debt Obligations
(cost $122,460,531) 141,968,138
U.S. GOVERNMENT OBLIGATION-32.5%
U.S. Treasury Strip Zero coupon, 2/15/03
(cost $43,074,478) 64,000 43,594,873
TOTAL INVESTMENTS-138.3%
(cost $165,535,009) 185,563,011
Other assets less liabilities-(38.3%) (51,422,542)
NET ASSETS-100% $134,140,469
* 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, 1996.
(b) Security trades with value recovery rights expiring June 30, 2003.
(c) Security trades with oil warrants expiring November 15, 2020.
(d) Security trades with oil warrants expiring April 15, 2020.
(e) 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, 1996,
these securities amounted to $24,115,625, or 18.0% of net assets.
(f) When issued.
(g) Principal amount represents par value at purchase date. The redemption
value of this security is linked to the change in the bid price of the
referenced emerging market debt.
Glossary of Terms:
FLIRB Front loaded interest reduction bonds.
FRN Floating rate note. Coupon will fluctuate based upon an interest
rate index. Stated interest rate in effect at October 31, 1996.
IRB Interest reduction bonds.
See notes to financial statements.
4
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $165,535,009) $185,563,011
Receivable for investment securities sold 42,932,000
Interest receivable 2,453,252
Deferred organization expenses and other assets 22,020
Total assets 230,970,283
LIABILITIES
Due to custodian 745,420
Payable for investment securities purchased 95,260,280
Unrealized depreciation on interest rate swap contract 356,604
Advisory fee payable 111,235
Administrative fee payable 16,685
Accrued expenses and other liabilities 339,590
Total liabilities 96,829,814
NET ASSETS $134,140,469
COMPOSITION OF NET ASSETS
Capital stock, at par $ 86,527
Additional paid-in capital 119,218,745
Undistributed net investment income 2,492,634
Accumulated net realized loss on investments (7,328,835)
Net unrealized appreciation of investments and other assets 19,671,398
$134,140,469
NET ASSET VALUE PER SHARE (based on 8,652,707 shares outstanding) $15.50
See notes to financial statements.
5
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1996
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Interest $14,602,824
EXPENSES
Advisory fee $1,166,831
Audit and legal 189,062
Administrative fee 175,024
Custodian 111,803
Printing 103,336
Transfer agency 95,866
Directors' fees 41,297
Registration 37,112
Amortization of organization expenses 17,033
Miscellaneous 47,233
Total expenses 1,984,597
Net investment income 12,618,227
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 13,908,106
Net change in unrealized appreciation of investments
and other assets 16,452,008
Net gain on investments 30,360,114
NET INCREASE IN NET ASSETS FROM OPERATIONS $42,978,341
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,
1996 1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 12,618,227 $ 12,920,751
Net realized gain (loss) on investment
transactions 13,908,106 (10,415,111)
Net change in unrealized appreciation of
investments and other assets 16,452,008 16,574,731
Net increase in net assets from operations 42,978,341 19,080,371
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (11,594,630) (12,156,022)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in issuance
of common stock -0- 2,304,564
Total increase 31,383,711 9,228,913
NET ASSETS
Beginning of year 102,756,758 93,527,845
End of year (including undistributed net
investment income of $2,492,634 and $764,729
at October 31, 1996 and October 31, 1995,
respectively) $134,140,469 $102,756,758
See notes to financial statements.
7
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
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.
6. RECLASSIFICATION OF COMPONENTS OF NET ASSETS
During the year, the Fund reclassified certain components of net assets. The
reclassification resulted in a net increase to undistributed net investment
income and a corresponding increase to accumulated net realized loss on
investments of $704,308. This reclassification was the result of permanent book
to tax differences in the classification of short term capital gains as
ordinary income. Net assets were not affected by the 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") a monthly fee equal to the annualized
rate of 1% of the Fund's average weekly net assets.
Under the terms of an Administrative Agreement, the Fund pays Alliance Capital
Management L.P., (the "Administrator") a monthly fee equal to the annualized
rate of .15 of 1% of the Fund's average weekly net assets. The Administrator
provides administrative functions to the Fund as well as other clerical
services. The Administrator also prepares financial and regulatory reports for
the Fund.
On November 28, 1995, the Fund entered into a Shareholder Inquiry Agency
Agreement with Alliance Fund Services, Inc. ("AFS"), an affiliate of the
Investment
8
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
Adviser whereby the Fund reimburses AFS for costs relating to servicing phone
inquiries for the Fund. The Fund reimbursed AFS $3,995 during the year ended
October 31, 1996, relating to shareholder servicing costs.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. Government securities) aggregated $105,390,078 and $137,552,931,
respectively, for the year ended October 31, 1996.
At October 31, 1996, the cost of investments for federal income tax purposes
was $165,684,739. Accordingly, gross unrealized appreciation of investments was
$20,058,005 and gross unrealized depreciation of investments was $179,733
resulting in net unrealized appreciation of $19,878,272 (excluding swap
contracts). At October 31, 1996, the Fund had a capital loss carryforward of
$7,179,105 which expires in the year 2003.
NOTE D: INTEREST RATE SWAP AGREEMENT
The Fund enters into swaps on sovereign debt obligations to protect itself from
interest rate fluctuations on the underlying floating rate debt instruments and
for investment purposes. A swap is an agreement that obligates two parties to
exchange a series of cash flows at specified intervals based upon or calculated
by reference to changes in specified prices or rates for a specified amount of
an underlying asset. The payment flows are usually netted against each other,
with the difference being paid by one party to the other.
Risks may arise as a result of the failure of another party to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of a counterparty is generally limited to the net interest payment
to be received by the Fund, and/or the termination value at the end of the
contract. Therefore, the Fund considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value 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 swap contracts.
At October 31, 1996, the Fund had an outstanding interest rate swap contract
with the following terms:
<TABLE>
<CAPTION>
RATE TYPE
--------------------------------
SWAP NOTIONAL TERMINATION PAYMENTS MADE PAYMENTS RECEIVED UNREALIZED
COUNTERPARTY AMOUNT DATE BY THE FUND BY THE FUND DEPRECIATION
- ------------ -------------- ----------- ------------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Morgan US$ 12,000,000 1/01/09 LIBOR+ 6.8526% $356,604
Guaranty
</TABLE>
+ LIBOR (London Interbank Offered Rate).
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, 1996, the Adviser owned
7,200 shares. During the year ended October 31, 1996, the Fund did not issue
shares in connection with the dividend reinvestment plan. During the year ended
October 31, 1995 the Fund issued 212,897 shares in connection with the Fund's
dividend reinvestment plan.
During the year ended October 31, 1996, the Fund incurred legal, printing and
auditing fees associated with a proposed rights offering of approximately
$216,000. The proposed rights offering was cancelled prior to issuance.
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 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, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, NOV. 2,1992(A)
--------------------------------- TO
1996 1995 1994 OCT. 31,1993
--------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.88 $11.08 $22.09 $13.82(b)
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.46 1.51(c) 1.32 1.54
Net realized and unrealized gain (loss)
on investments 3.50 .71 (5.66) 8.19
Net increase (decrease) in net asset
value from operations 4.96 2.22 (4.34) 9.73
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (1.34) (1.42) (1.39) (1.46)
Distributions from net realized gains -0- -0- (4.96) -0-
Distributions in excess of net realized
gains -0- -0- (.09) -0-
Tax return of capital distribution -0- -0- (.23) -0-
Total dividends and distributions (1.34) (1.42) (6.67) (1.46)
Net asset value, end of period $15.50 $11.88 $11.08 $22.09
Market value, end of period $13.625 $11.75 $13.00 $20.375
TOTAL RETURN
Total investment return based on: (d)
Market value 28.49% 2.78% (7.52)% 59.14%
Net asset value 44.57% 21.92% (27.29)% 72.53%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $134,140 $102,757 $93,528 $164,622
Ratio of expenses to average net assets 1.70% 1.55% 1.43% 1.44%(e)
Ratio of net investment income to
average net assets 10.84% 14.12% 9.08% 9.79%(e)
Portfolio turnover rate 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, 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, 1996, 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, 1996, 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, 1996, 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
December 3, 1996
12
ADDITIONAL INFORMATION
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
_______________________________________________________________________________
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, INC.
_______________________________________________________________________________
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.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its Common Stock in the open market.
This report, including the financial statements herein, is transmitted to the
shareholders of Alliance World Dollar Government Fund, Inc. for their
information. The financial information included herein is taken from the
records of the Fund. This is not a prospectus, circular or representation
intended for use in the purchase of shares of the Fund or any securities
mentioned in this report.
14
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
Summary of General Information
THE FUND
Alliance World Dollar Government Fund, Inc. 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." Additional information about the Fund is available by
calling 1-800-247-4154.
DIVIDEND REINVESTMENT PLAN
A Dividend Reinvestment Plan provides automatic reinvestment of dividends and
capital gains distributions in additional Fund shares. For a copy of the Plan
Brochure, please write to the Plan Agent, First Data Investor Services Group,
Inc., P.O. Box 1376, Boston, MA 02104.
ALLIANCE WORLD DOLLAR GOVERNMENT FUND, INC.
1345 Avenue of the Americas
New York, New York 10105
ALLIANCE CAPITAL
INVESTING WITHOUT THE MYSTERY
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE
CAPITAL MANAGEMENT L.P.
WDGAR
