ALLIANCE WORLD DOLLAR GOVERNMENT FUND
SEMI-ANNUAL REPORT
APRIL 30, 1999
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
June 18, 1999
Dear Shareholder:
We are pleased to report to you on the performance, strategy and outlook of the
Alliance World Dollar Government Fund (the "Fund"), for the semi-annual
reporting period ended April 30, 1999. The Fund is designed for investors who
seek high current income and capital appreciation. To achieve this objective,
the Fund invests primarily in high yielding, high risk debt obligations of
developing countries that we expect to benefit from improving economic and
credit fundamentals.
INVESTMENT RESULTS
The following table provides performance for the Fund over the six- and twelve-
month periods ended April 30, 1999. For comparison, we have also included
performance for the Fund's benchmark index, the JP Morgan Emerging Markets Bond
Index ("JPM EMBI"), which is a standard measure of the performance of a basket
of unmanaged emerging market debt securities.
Over the six- and twelve-month periods, your Fund underperformed its benchmark.
During the six months ended April 30, 1999, our emerging market security
selection helped performance; however, our U.S. allocation in Treasury strips
dampened performance. During the twelve-month period, the Fund underperformed
the benchmark as a result of our overweight position in Russia, which posted
the worst return among the emerging markets. This weak performance posted by
the Russian market was the result of a financial and economic collapse that
culminated in the ruble devaluation and the government's domestic debt default.
INVESTMENT RESULTS*
Periods Ended April 30, 1999
TOTAL RETURNS
6 MONTHS 12 MONTHS
---------- -----------
ALLIANCE WORLD DOLLAR GOVERNMENT FUND 11.50% -20.22%
JP MORGAN EMERGING MARKETS BOND INDEX 14.66% -6.12%
* THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON THE
NET ASSET VALUE AS OF APRIL 30, 1999. ALL FEES AND EXPENSES RELATED TO THE
OPERATION OF THE FUND HAVE BEEN DEDUCTED. RETURNS FOR THE FUND INCLUDE THE
REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS.
THE JP MORGAN EMERGING MARKETS BOND INDEX IS COMPOSED OF
DOLLAR-DENOMINATED RESTRUCTURED SOVEREIGN BONDS; A LARGE PERCENTAGE OF THE
INDEX IS MADE UP OF BRADY BONDS. AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
MARKET OVERVIEW
During the six-month period ended April 30, 1999, financial markets stabilized
and recovered from the turmoil experienced in the third quarter of 1998. The
combination of the strong U.S. economy and interest rate cuts around the world
helped to restore prospects for the global economy. Equity markets reached new
highs while credit markets stabilized as investors moved out of traditional
safe-haven government bond markets and into higher yielding asset classes.
The emerging market debt sector outperformed all sectors of the global bond
market. However, despite this strong performance, emerging markets have not
fully recovered to the levels prior to the Russian crisis. During the early
part of 1999, market focus was on Brazil, and the devaluation of the Brazilian
real in January once again raised the risk premium demanded from this asset
class. It was only after needed fiscal policy measures were implemented, and a
standby financing package was negotiated with the International Monetary Fund
("IMF"), that the situation stabilized enough to boost investors' confidence
that the global economic environment was improving. Throughout the period,
evidence grew that economic activity in Asia had bottomed and growth in certain
areas had returned. Korea has led the
1
ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
rebound and has regained its investment grade rating. Commodity prices, viewed
as a leading indicator of economic activity, stabilized, and in the case of
oil, rebounded sharply, thus providing further emphasis that the global
economic outlook has improved.
During the six-month period ended April 30, 1999, all emerging markets
fixed-income sectors within the JPM EMBI posted healthy positive returns, with
most non-Latin countries leading the way. Within the JPM EMBI, top performers
included Venezuela (+32.68%), Russia (+29.03%) and South Korea (+21.08%).
Venezuela was aided by waning fears of both a debt moratorium and the
devaluation of its currency, the bolivar. Market-friendly statements made by
the newly elected president regarding Venezuela's economic policies also
provided further confidence. Russia benefited from continuing progress with the
IMF for an economic program with the support of the United States. South Korea
benefited from an upgrade in its credit rating to investment grade.
During the period, Ecuador (+2.39%) and Poland (+3.64%) lagged the double-digit
returns posted by other emerging market bond sectors within the JPM EMBI.
Ecuador wrestled with concerns regarding the progress of an IMF package and the
depreciation of its currency. The issue of an IMF package presents an important
test for Ecuador since the IMF funds are needed to meet their current debt. The
relative underperformance in Poland occurred after it was the best performing
emerging market country during 1998.
Overall, with increasing positive sentiment and inflows to emerging market
assets, in aggregate, the JP Morgan Emerging Markets Bond Index posted a strong
14.66% return.
INVESTMENT STRATEGY
Over the six-month period ended April 30, 1999, we decreased our U.S. interest
rate risk and increased our holdings in Latin America as financial markets
began to stabilize. Specifically, we increased our holdings in Brazil and
Mexico. Brazil has dealt effectively with their economic problems implementing
decisive, sound policy initiatives. Mexico is our favorite Latin American
country as Mexico's increasing integration with the U.S. is providing a stable
platform for economic growth. With about 90% of its trade with the U.S., Mexico
benefits from U.S. growth much more than any other Latin American country. In
addition, conservative fiscal policies and a free-floating exchange rate that
has allowed the economy to recover more quickly from external shocks have
distinguished Mexico from its regional peers.
OUTLOOK
We believe the environment for global growth will improve, however, some
regions of the global economy will continue to struggle with weakness. In
Japan, policymakers have achieved a greater degree of coordination in their
efforts to stimulate the economy, there is evidence that Asian economies are
bottoming, and the Brazilian government is meeting our most optimistic
expectations after devaluating the real earlier this year. As the one-sided
risk of a global meltdown declines with broadening evidence of a global
recovery and improved market stability, our forecasting discipline naturally
pushes us toward a less biased view. Accordingly, we have eliminated our
long-standing tilt in favor of additional Fed easing as the continued strength
of the U.S. economy increases the likelihood of Fed tightening.
In the emerging markets, rising oil prices, a strong U.S. economy, improved
sentiment regarding Brazil and evidence that Asian economies are bottoming have
improved prospects for growth. Furthermore, economic weakness in Latin America
appears to be less severe than originally expected. We expect that the doubts
regarding Argentina's commitment to its convertibility policy of pegging the
Argentine dollar to the U.S. dollar will continue to decline. Linkages to the
U.S. economy and proactive fiscal policies will continue to provide
opportunities in Mexico. This environment supports gradually improving economic
prospects for emerging market countries, although there may well be short-term
market volatility as sentiment shifts with events. Country selection will
remain important.
Though these positive developments have caused a significant rebound in
emerging market debt prices recently, in our view, emerging market economies
continue to be very sensitive to global economic growth and financial market
liquidity.
2
ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
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 the Fund's investment results in the coming periods.
Sincerely,
John D. Carifa
Chairman
Wayne D. Lyski
President
3
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-97.5%
OTHER SOVEREIGN DEBT OBLIGATIONS-60.4%
ARGENTINA-15.4%
Republic of Argentina
Series XW
11.00%, 12/04/05 $ 5,200 $ 5,171,400
Warrants, expiring
12/03/99 (a)(b) 7,200 18,000
Republic of Argentina
12.125%, 2/25/19 7,200 7,515,000
Warrants, expiring
2/25/00 (a) 7,200 23,580
------------
12,727,980
BRAZIL-3.7%
Republic of Brazil Global Bonds
10.125%, 5/15/27 2,000 1,590,000
11.625%, 4/15/04 1,500 1,455,000
------------
3,045,000
COSTA RICA-1.2%
Republic of Costa Rica
9.335%, 5/15/09 (c) 1,000 1,000,000
MEXICO -23.5%
United Mexican States
9.75%, 4/06/05 18,700 19,429,300
PANAMA-4.4%
Republic of Panama
9.375%, 4/01/29 3,500 3,606,750
PHILIPPINES-1.8%
Republic of Philippines
8.875%, 4/15/08 1,500 1,528,125
RUSSIA-6.1%
Russian Federation
11.00%, 7/24/18 (c) 7,000 2,791,600
Russian IAN FRN
5.969%, 12/15/15 6,996 524,676
Russian Ministry of Finance
12.75%, 6/24/28 4,000 1,695,200
------------
5,011,476
TURKEY-1.6%
Republic of Turkey
12.00%, 12/15/08 1,300 1,314,625
VENEZUELA-2.7%
Republic of Venezuela
9.25%, 9/15/27 3,100 2,239,750
Total Other Sovereign Debt Obligations
(cost $49,656,485) 49,903,006
NON-COLLATERALIZED BRADY BONDS-26.4%
BRAZIL-20.6%
Republic of Brazil DCB FRN
Series L Bearer Bond
5.938%, 4/15/12 15,000 9,469,500
Republic of Brazil DCB FRN
Series L Registered Bond
5.938%, 4/15/12 12,000 7,575,600
------------
17,045,100
BULGARIA-3.3%
Republic of Bulgaria
IAB FRN
5.875%, 7/28/11 4,000 2,700,000
PERU-1.6%
Republic of Peru PDI
4.50%, 3/07/17 (c)(d) 2,000 1,350,000
VENEZUELA-0.9%
Republic of Venezuela
DCB FRN
Series DL
5.938%, 12/18/07 857 694,283
Total Non-Collateralized Brady Bonds
(cost $23,140,321) 21,789,383
4
ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
COLLATERALIZED BRADY BONDS (E)-6.0%
BULGARIA-1.7%
Republic of Bulgaria
Discount Bonds FRN
Series A
5.875%, 7/28/24 $ 2,000 $ 1,370,000
ECUADOR-3.4%
Republic of Ecuador
Discount Bonds FRN
6.00%, 2/28/25 2,700 1,377,000
Global Bonds
4.00%, 2/28/25 (d) 3,500 1,483,300
------------
2,860,300
VENEZUELA-0.9%
Republic of Venezuela
Par Bonds
Series W-B
6.75%, 3/31/20 (f) 1,000 737,500
Total Collateralized Brady Bonds
(cost $5,182,627) 4,967,800
LOAN PARTICIPATION-4.7%
MOROCCO-4.7%
Kingdom of Morocco
Loan Participation FRN
Series A
6.063%, 1/01/09
(cost $2,564,262) 4,762 3,887,143
Total Sovereign Debt Obligations
(cost $80,543,695) 80,547,332
U.S. GOVERNMENT OBLIGATION-29.9%
U.S. Treasury Strip
Zero coupon, 2/15/03
(cost $24,931,496) 30,100 24,735,969
TIME DEPOSIT-0.7%
Bank of New York
4.50%, 5/03/99
(cost $571,000) 571 571,000
TOTAL INVESTMENTS-128.1%
(cost $106,046,191) 105,854,301
Other assets less liabilities-(28.1%) (23,206,153)
NET ASSETS-100% $ 82,648,148
(a) Non-income producing security.
(b) Each warrant entitles the holder to purchase U.S. $1,000 Republic of
Argentina 9.75% bonds, due 9/19/27 at 93.3%.
(c) 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 April 30, 1999,
these securities amounted to $5,141,600 representing 6.2% of net assets.
(d) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at April 30, 1999.
(e) 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.
(f) Security trade with oil warrants expiring April 15, 2020.
Glossary of Terms:
DCB - Debt Conversion Bond.
FRN - Floating Rate Note.
IAB - Interest Arrears Bond.
IAN - Interest Arrears Note.
PDI - Past Due Interest.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $106,046,191) $ 105,854,301
Cash 157
Receivable for investment securities sold 4,463,155
Interest receivable 1,775,586
Total assets 112,093,199
LIABILITIES
Payable for investment securities purchased 29,208,622
Advisory fee payable 71,892
Unrealized depreciation on interest rate swap contract 42,456
Administrative fee payable 10,784
Accrued expenses 111,297
Total liabilities 29,445,051
NET ASSETS $ 82,648,148
COMPOSITION OF NET ASSETS
Capital stock, at par $83,903
Additional paid-in capital 113,575,862
Undistributed net investment income 396,417
Accumulated net realized loss on investment transactions (31,173,688)
Net unrealized depreciation on investments and other assets (234,346)
$ 82,648,148
NET ASSET VALUE PER SHARE
(based on 8,390,339 shares outstanding) $9.85
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 6,170,759
EXPENSES
Advisory fee $ 396,537
Custodian 70,960
Administrative fee 59,481
Audit and legal 46,170
Printing 40,634
Transfer agency 17,563
Directors' fees 15,207
Miscellaneous 11,230
Total expenses 657,782
Net investment income 5,512,977
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions (28,108,315)
Net change in unrealized depreciation of
investments and other assets 31,867,402
Net gain on investment transactions 3,759,087
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 9,272,064
See notes to financial statements.
7
STATEMENTS OF CHANGES
IN NET ASSETS ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1999 OCTOBER 31,
(UNAUDITED) 1998
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 5,512,977 $ 11,973,315
Net realized gain (loss) on investment
transactions (28,108,315) 4,177,541
Net change in unrealized depreciation of
investments and other assets 31,867,402 (32,120,307)
Net increase (decrease) in net assets from
operations 9,272,064 (15,969,451)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (6,303,624) (13,546,094)
Net realized gain on investments (6,025,143) (17,841,882)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in
issuance of Common Stock 2,754,720 7,109,405
Tender offer resulting in the redemption of
1,034,042 shares of Common Stock -0- (15,510,829)
Total decrease (301,983) (55,758,851)
NET ASSETS
Beginning of year 82,950,131 138,708,982
End of period (including undistributed net
investment income of $396,417 and
$1,187,064, respectively) $ 82,648,148 $ 82,950,131
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999 (UNAUDITED) 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 financial statements have been prepared in conformity
with generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets
and liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sale price or, if there was no sale on
such day, the last bid price quoted on such day. If no bid prices are quoted,
then the security is valued at the mean of the bid and asked prices as obtained
on that day from one or more dealers regularly making a market in that
security. Securities traded on the over-the-counter market, securities listed
on a foreign securities exchange whose operations are similar to the United
States over-the-counter market, securities listed on a national securities
exchange whose primary market is believed to be over-the-counter are valued at
the mean of the closing bid and asked price provided by two or more dealers
regularly making a market in such securities. U.S. government securities and
other debt securities which mature in 60 days or less are valued at amortized
cost unless this method does not represent fair value. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by, or in accordance with procedures approved by, the
Board of Directors. Fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities.
2. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute 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.
3. 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.
4. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
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, ADMINISTRATIVE FEES AND OTHER AFFILIATED TRANSACTIONS
Under the terms of an Investment Advisory Agreement, the Fund pays Alliance
Capital Management L.P. ("Alliance") 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 a
monthly fee equal to the annualized rate of .15 of 1% of the Fund's average
weekly net assets. Alliance 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 six months ended April 30, 1999, the Fund reimbursed AFS $2,270,
relating to shareholder servicing costs.
9
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) 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 $87,493,112 and $92,610,163,
respectively, for the six months ended April 30, 1999. There were purchases of
$155,881,774 and sales of $163,231,203 of U.S. government obligations for the
six months ended April 30, 1999.
At April 30, 1999, the cost of investments for federal income tax purposes was
$109,020,760. Accordingly, gross unrealized appreciation of investments was
$5,101,188 and gross unrealized depreciation of investments was $8,267,647
resulting in net unrealized depreciation of $3,166,459 (excluding swap
contract).
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 the counterparty 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 April 30, 1999, the Fund had an outstanding interest rate swap contract with
the following terms:
<TABLE>
<CAPTION>
RATE TYPE
---------------------------------
SWAP TERMINATION PAYMENTS MADE PAYMENTS RECEIVED UNREALIZED
COUNTERPARTY NOTIONAL AMOUNT DATE BY THE FUND BY THE FUND DEPRECIATION
- --------------- --------------- ----------- ------------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Morgan Guaranty US$ 11,320,636 1/01/09 LIBOR# 6.8526% $(42,456)
</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
8,390,339 shares outstanding at April 30, 1999, Alliance owned 7,200 shares.
During the year ended October 31, 1998, the Fund purchased 1,034,042 shares of
its outstanding Common Stock for $14.80 per share pursuant to a tender offer.
The Fund incurred tender offer costs of $207,000 which were charged to
additional paid-in capital. During the six months ended April 30, 1999, the
Fund issued 273,835 shares in connection with the Fund's dividend reinvestment
plan. During the year ended October 31, 1998, the Fund issued 497,839 shares in
connection with the dividend reinvestment plan.
NOTE E: CONCENTRATION OF RISK
Investing in securities of foreign governments involves special risks which
include the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign governments and their markets may be less liquid and their prices
more volatile than those of the United States government.
10
ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
NOTE F: YEAR 2000
Many computer systems and applications in use today process transactions using
two-digit date fields for the year of the transaction, rather than the full
four digits. If these systems are not modified or replaced, transactions
occurring after 1999 could be processed as year "1900," which could result in
processing inaccuracies and computer system failures at or after the Year 2000.
This is commonly known as the Year 2000 problem. The Fund and its major service
providers, including Alliance, utilize a number of computer systems and
applications that have been either developed internally or licensed from third
party suppliers. In addition, the Fund and its major service providers,
including Alliance, are dependent on third party suppliers for certain systems
applications and for electronic receipt of information. Should any of computer
systems employed by the Fund or its major service providers fail to process
year 2000 related information properly, that could have a significant negative
impact on the Fund's operations and the services that are provided to the
Fund's stockholders. To the extent that the operations of issuers of securities
held by the Fund are impaired by the Year 2000 problem, or prices of securities
held by the Fund decline as a result of real or perceived problems relating to
the Year 2000, the value of the Fund's shares may be materially affected. In
addition, for the Fund's investments in foreign markets, it is possible that
foreign companies and markets will not be as prepared for Year 2000 as domestic
companies and markets.
The Year 2000 issue is a high priority for the Fund and Alliance. The Fund has
been advised that, during 1997, Alliance began a formal Year 2000 initiative
which established a structured and coordinated process to deal with the Year
2000 issue. As part of its initiative, Alliance established a Year 2000 project
office to manage the Year 2000 initiative, focusing on both information
technology and non-information technology systems. Alliance has also retained
the services of a number of consulting firms which have expertise in advising
and assisting with regard to Year 2000 issues. Alliance reports that by June
30, 1998 it had completed its inventory and assessment of its domestic and
international computer systems and applications, identified mission critical
systems and non-mission critical systems and determined which of these systems
are not Year 2000 compliant. All third party suppliers of mission critical
computer systems and applications have been contacted to verify whether their
systems and applications will be Year 2000 compliant and their responses are
being evaluated. Substantially all of those contacted have responded and
approximately 90% have informed Alliance that their systems and applications
are or will be Year 2000 compliant. Alliance will seek alternative solutions or
third party suppliers for all suppliers who do not furnish a satisfactory
response by June 30, 1999. The same process is being performed for non-mission
critical systems with estimated completion by June 30, 1999. Alliance had
remediated, replaced or retired all of its non-compliant mission critical
systems and applications which can impact the Fund. The same process is being
performed for non-mission critical systems and is estimated to be completed by
June 30, 1999. After each system has been remediated, it is tested with 1900
dates to determine if it still performs its intended business function
correctly. Next, each system undergoes a simulation test using dates occurring
after December 31, 1999. Inclusive of the replacement and retirement of some of
its systems, Alliance has completed these testing phases for approximately 98%
of mission critical systems and approximately 89% of non-mission critical
systems. Integrated systems tests will then be conducted to verify that the
systems will continue to work together. Full integration testing of all mission
critical and nonmission critical systems is estimated to be completed by June
30, 1999. Testing of interfaces with third-party suppliers has begun and will
continue throughout 1999. Alliance reports that it has completed an inventory
of its facilities and related technology applications and has begun to evaluate
and test these systems. Alliance reports that it anticipates that these systems
will be fully operable in the year 2000. Alliance, with the assistance of a
consulting firm, is developing Year 2000 specific contingency plans with
emphasis on mission critical functions. These plans seek to provide alternative
methods of processing in the event of a failure that is outside Alliance's
control. The estimated date for the completion of these plans is June 30, 1999.
There are many risks associated with Year 2000 issues, including the risks that
the computer systems and applications used by the Fund and its major service
providers,
11
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
including Alliance, will not operate as intended and that the systems and
applications of third party providers to the Fund and its service providers
will not be Year 2000 compliant. Likewise there can be no assurance the
compliance schedules outlined above will be met or that the actual cost
incurred will not exceed current cost estimates. Should the significant
computer systems and applications used by the Fund and its major service
providers or the systems of its important third party suppliers be unable to
process date sensitive information accurately after 1999, the Fund and Alliance
or its other service providers may be unable to conduct its normal business
operations and to provide shareholders with the required services. In addition,
the Fund and its service providers may incur unanticipated expenses, regulatory
actions and legal liabilities. The Fund and Alliance cannot determine which
risks, if any, are most reasonably likely to occur or the effects of any
particular failure to be Year 2000 compliant.
12
FINANCIAL HIGHLIGHTS ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1999 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.22 $16.03 $15.50 $11.88 $11.08 $22.09
INCOME FROM INVESTMENT OPERATIONS
Net investment income .67(a) 1.47(a) 1.61 1.46 1.51(a) 1.32
Net realized and unrealized gain (loss)
on investment transactions .47 (3.57) .50 3.50 .71 (5.66)
Net increase (decrease) in net asset
value from operations 1.14 (2.10) 2.11 4.96 2.22 (4.34)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.77) (1.65) (1.58) (1.34) (1.42) (1.39)
Distributions from net realized gains (.74) (2.06) -0- -0- -0- (4.96)
Distributions in excess of net realized
gains -0- -0- -0- -0- -0- (.09)
Tax return of capital distribution -0- -0- -0- -0- -0- (.23)
Total dividends and distributions (1.51) (3.71) (1.58) (1.34) (1.42) (6.67)
Net asset value, end of period $ 9.85 $10.22 $16.03 $15.50 $11.88 $11.08
Market value, end of period $12.438 $12.625 $15.875 $13.625 $11.75 $13.00
TOTAL RETURN
Total investment return based on: (b)
Market value 13.98% 1.91% 28.74% 28.49% 2.78% (7.52)%
Net asset value 11.50% (18.32)% 14.24% 44.57% 21.92% (27.29)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $82,648 $82,950 $138,709 $134,140 $102,757 $93,528
Ratio of expenses to average net assets 1.66%(c) 1.52% 1.43% 1.70% 1.55% 1.43%
Ratio of net investment income to average
net assets 13.90%(c) 10.54% 9.50% 10.84% 14.12% 9.08%
Portfolio turnover rate 222% 264% 281% 352% 441% 395%
</TABLE>
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day of
the period reported. Dividends and distributions, if any, are assumed, for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's Dividend Reinvestment Plan. Generally, total investment return based on
net asset value will be higher than total investment return based on market
value in periods where there is an increase in the discount or a decrease in
the premium of the market value to the net asset value from the beginning to
the end of such periods. Conversely, total investment return based on net asset
value will be lower than total investment return based on market value in
periods where there is a decrease in the discount or an increase in the premium
of the market value to the net asset value from the beginning to the end of
such periods. Total investment return calculated for a period of less than one
year is not annualized.
(c) Annualized.
13
ADDITIONAL INFORMATION ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
SUPPLEMENTAL PROXY INFORMATION
The Annual Meeting of Shareholders of The Alliance World Dollar Government Fund
was held on March 9, 1999. The description of each proposal and number of
shares voted at the meeting are as follows:
VOTED
VOTED FOR AGAINST
----------- ---------
1. To elect directors: Class Two Directors
(term expires in 2002)
John H. Dobkin 7,055,361 145,872
William H. Foulk, Jr. 7,062,692 138,542
Dr. James M. Hester 7,055,414 145,820
VOTED
VOTED WITHHELD/
VOTED FOR AGAINST ABSTAIN
----------- ----------- ---------
2. To ratify the selection of
Ernst & Young LLP as the
Fund's independent auditors
for the Fund's fiscal year
ending October 31, 1999: 7,081,344 40,938 78,952
14
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
JUAN J. RODRIGUEZ, CONTROLLER
ADMINISTRATOR
ALLIANCE CAPITAL MANAGEMENT, L.P.
1345 Avenue of the Americas
New York, NY 10105
CUSTODIAN
THE BANK OF NEW YORK
One 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 LLP
One Battery Park Plaza
New York, NY10004
(1) Member of the Audit Committee.
15
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
The daily net asset value of the Fund's shares is available from the Fund's
Transfer Agent by calling 1-800-331-1710. The Fund also distributes its daily
net asset value to various financial publications or independent organizations
such as Lipper, Inc., Morningstar, Inc. and Bloomberg.
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.
WDGSR
