ALLIANCE WORLD DOLLAR GOVERNMENT FUND
ANNUAL REPORT
OCTOBER 31, 1999
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
November 10, 1999
Dear Shareholder:
This report reviews the performance, investment strategy and outlook of the
Alliance World Dollar Government Fund (the "Fund"), for the six-month period
ended October 31, 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 October 31, 1999. For comparison, we have also
included performance for the Fund's benchmark index, the JP Morgan Emerging
Markets Bond Index-Plus (the "JPM EMBI-Plus"), which is a standard measure of
the performance of a basket of unmanaged emerging market debt securities.
Over the six- and twelve-month periods ended October 31, 1999, your Fund
underperformed its benchmark index. During both periods, our emerging market
security selection enhanced performance of the Fund, however, the Fund's U.S.
Treasury position dampened its performance relative to its benchmark. In
general, U.S. Treasury securities performed poorly as interest rates rose, and
the JPM EMBI-Plus does not have U.S. Treasury exposure.
INVESTMENT RESULTS*
Periods Ended October 31, 1999
TOTAL RETURNS
6 MONTHS 12 MONTHS
-------- ---------
ALLIANCE WORLD DOLLAR GOVERNMENT FUND 1.61% 13.30%
JP MORGAN EMERGING MARKETS
BOND INDEX-PLUS 3.54% 19.98%
* THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON THE
NET ASSET VALUE AS OF OCTOBER 31, 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-PLUS 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 October 31, 1999, global economic growth
improved and continued to broaden as Europe, Japan and Asia showed further
signs of strengthening. U.S. economic growth remained strong, while inflation
and unemployment stayed low. With economic activity remaining strong, the U.S.
Federal Reserve adopted a monetary policy tightening bias in May and increased
the Federal Funds rate by 25 basis points in June followed by another 25 basis
points in August. (A third increase in interest rates was announced on November
15, 1999, which was after the close of the Fund's reporting period.)
In aggregate, the U.S. bond market, as represented by the Lehman Brothers U.S.
Aggregate Bond Index, posted a modest negative return of 0.15% for the
six-month period ended October 31, 1999.
Emerging market debt performed relatively well over the reporting period as
global economic growth improved and commodity prices firmed. The emerging
market debt sector, as represented by the JPM EMBI-Plus, gained 3.54%,
outperforming all other bond market sectors during the six-month period ended
October 31, 1999. Most individual country returns within the JPM EMBI-Plus were
positive during the period, with Russia posting the largest gains (+64%) and
Bulgaria (+18%) and Venezuela (+11%) also outperforming. Rising oil prices
boosted the performance of Russian and Venezuelan debt as both countries are
heavily dependent on oil exports. Russian bond prices were also helped by
indications that the government will restructure its Soviet Union-era debt.
Ecuador's debt posted the worst performance, declining by 37% after the
government delayed interest payments on its debt.
1
ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT STRATEGY
Over the six-month period ended October 31, 1999, the Fund's holdings of U.S.
Treasuries were decreased as the risk of tighter monetary policy by the U.S.
Federal Reserve dampened valuations. We maintained our allocation in Latin
America, however, we refined the focus of our holdings there. We eliminated the
Fund's exposure to Ecuador as the prospects of a delay on their Brady bond debt
payments increased. Alternatively, we added to our oil-sensitive Venezuelan
holdings as oil prices improved. We maintained our investments in Argentina and
Brazil as reforms progressed and economic fundamentals continued to improve. We
continued to favor Mexico in the Fund on expectations that investment-grade
status will be achieved within the next twelve months. Additionally, we added
to our Russian holdings as debt valuations continued to rebound from last years
sell-off.
OUTLOOK
The global economy continues to gather momentum. We expect the U.S. economy to
remain strong through year-end and into the millennium. The risk of tighter
monetary policy in the U.S. remains. Positive inflation fundamentals, however,
should keep long-term interest rates trading in a range between 6.0% and 6.50%.
While we believe there are structural forces in the marketplace rendering
credit markets less liquid, the passing of Y2K should alleviate some liquidity
pressures, causing non-Treasury spreads to narrow somewhat from current levels.
Stronger global growth coupled with the recent firming in commodity prices will
continue to provide the environment necessary for emerging countries to
gradually improve their credit profiles. Country selection within the sector
remains critical, however. In Latin America, Brazil continues to exceed
expectations for fiscal reform, while Mexico could move to investment-grade
status in the year 2000. In Asia, the macroeconomic picture continues to
surprise on the upside but progress on corporate restructuring remains slow.
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
2
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999 ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-94.5%
OTHER SOVEREIGN DEBT OBLIGATIONS-67.8%
ARGENTINA-16.2%
Republic of Argentina
11.75%, 4/07/09 $5,450 $ 5,341,000
12.125%, 2/25/19 7,200 7,407,000
Warrants expiring
2/25/00 (a) (b) 7,200 185,400
------------
12,933,400
BRAZIL-7.3%
Republic of Brazil Global Bonds
10.125%, 5/15/27 3,500 2,738,750
14.50%, 10/15/09 3,000 3,111,000
------------
5,849,750
COLOMBIA-1.7%
Republic of Colombia
9.75%, 4/23/09 1,450 1,315,875
KAZAKHSTAN-1.9%
Republic of Kazakhstan
13.625%, 10/18/04 (c) 1,500 1,485,000
MEXICO -14.4%
United Mexican States
10.375%, 2/17/09 9,000 9,168,750
11.50%, 5/15/26 2,050 2,297,538
------------
11,466,288
PANAMA-3.1%
Republic of Panama
9.375%, 4/01/29 2,600 2,447,380
PHILIPPINES-0.6%
Republic of Philippines
8.875%, 4/15/08 500 486,900
RUSSIA-18.2%
Russian Federation
11.00%, 7/24/18 (c) 3,400 1,657,500
12.75%, 6/24/28 (c) 13,100 7,139,500
Russian IAN FRN
6.0625%, 12/15/15 (a)(d) 4,046 455,139
Russian Ministry of Finance
3.00%, 5/14/03 10,000 2,213,000
Russian Principal Loans FRN
6.0625%, 12/15/20 (a)(d) 33,500 3,058,550
------------
14,523,689
TURKEY-1.1%
Republic of Turkey
12.00%, 12/15/08 900 911,250
VENEZUELA-3.3%
Republic of Venezuela
9.25%, 9/15/27 2,600 1,748,500
13.625%, 8/15/18 1,000 910,000
------------
2,658,500
Total Other Sovereign Debt Obligations
(cost $53,497,114) 54,078,032
NON-COLLATERALIZED BRADY BONDS-19.1%
BRAZIL-14.5%
Republic of Brazil C-Bonds
8.00%, 4/15/14 (e) 3,033 2,024,544
Republic of Brazil FRN
Series L Bearer Bond
7.00%, 4/15/12 11,000 7,164,300
Series L Registered Bond
7.00%, 4/15/12 3,600 2,344,680
------------
11,533,524
BULGARIA-3.1%
Republic of Bulgaria
IAB FRN PDI
6.50%, 7/28/11 3,200 2,440,000
3
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
PERU-1.5%
Republic of Peru PDI
4.50%, 3/07/17 (c)(f) $2,000 $ 1,240,000
Total Non-Collateralized Brady Bonds
(cost $16,216,519) 15,213,524
LOAN PARTICIPATION-4.9%
MOROCCO-4.9%
Kingdom of Morocco Loan Participation FRN
Series A
5.906%, 1/01/09
(cost $2,488,120) 4,524 3,913,095
COLLATERALIZED BRADY BONDS (G)-2.7%
BULGARIA-1.8%
Republic of Bulgaria Discount Bonds FRN
Series A
6.50%, 7/28/24 2,000 1,482,600
VENEZUELA-0.9%
Republic of Venezuela Par Bonds
Series W-B
6.75%, 3/31/20 (h) 1,000 690,000
Total Collateralized Brady Bonds
(cost $1,942,733) 2,172,600
Total Sovereign Debt Obligations
(cost $74,144,486) 75,377,251
U.S. GOVERNMENT OBLIGATION-31.1%
U.S. Treasury Strip
Zero coupon, 2/15/03
(cost $25,018,018) 30,100 24,782,594
TOTAL INVESTMENTS-125.6%
(cost $99,162,504) 100,159,845
Other assets less liabilities-(25.6%) (20,416,300)
NET ASSETS-100% $ 79,743,545
(a) Non-income producing security.
(b) Each warrant entitles the holder to purchase U.S. $500 Republic of
Argentina 12.125% bonds, due 2/25/19 at 103.113%.
(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 October 31, 1999,
these securities amounted to $11,522,000 representing 14.4% of net assets.
(d) Security is in default.
(e) Coupon consists of 5.00% cash payment and 3.00% paid-in-kind.
(f) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at October 31, 1999.
(g) 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.
(h) Security trades with oil warrants expiring March 31, 2020.
Glossary of Terms:
FRN - Floating Rate Note.
IAB - Interest Arrears Bond.
IAN - Interest Arrears Note.
PDI - Past Due Interest.
See notes to financial statements.
4
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999 ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value
(cost $99,162,504) $100,159,845
Receivable for investment securities sold 5,372,863
Interest receivable 1,999,584
Total assets 107,532,292
LIABILITIES
Due to custodian 1,801,721
Payable for investment securities purchased 24,949,288
Unrealized depreciation on interest rate swap
contract 689,903
Advisory fee payable 59,923
Administrative fee payable 19,086
Accrued expenses 268,826
Total liabilities 27,788,747
NET ASSETS $ 79,743,545
COMPOSITION OF NET ASSETS
Capital stock, at par $ 85,226
Additional paid-in capital 114,585,188
Distributions in excess of net investment income (139,384)
Accumulated net realized loss on investment
transactions (35,094,923)
Net unrealized appreciation on investments and other
assets 307,438
$ 79,743,545
NET ASSET VALUE PER SHARE
(based on 8,522,580 shares outstanding) $ 9.36
See notes to financial statements.
5
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999 ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $11,889,457
EXPENSES
Advisory fee $781,091
Printing 165,720
Administrative fee 117,164
Custodian 113,228
Audit and legal 101,047
Directors' fees 35,239
Transfer agency 33,201
Miscellaneous 31,067
Total expenses 1,377,757
Net investment income 10,511,700
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized loss on investment
transactions (32,050,605)
Net change in unrealized depreciation of
investments and other assets 32,409,186
Net gain on investment transactions 358,581
NET INCREASE IN NET ASSETS FROM OPERATIONS $10,870,281
See notes to financial statements.
6
STATEMENTS OF CHANGES
IN NET ASSETS ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1999 1998
----------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 10,511,700 $ 11,973,315
Net realized gain (loss) on investment
transactions (32,050,605) 4,177,541
Net change in unrealized appreciation/
depreciation of investments and
other assets 32,409,186 (32,120,307)
Net increase (decrease) in net assets
from operations 10,870,281 (15,969,451)
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (10,511,700) (13,546,094)
Distributions in excess of net
investment income (1,326,448) -0-
Tax return of capital (353,706) -0-
Net realized gain on investments -0- (17,841,882)
Distributions in excess of net realized
gains on investments (6,004,088) -0-
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in
issuance of Common Stock 4,119,075 7,109,405
Tender offer resulting in the redemption
of 1,034,042 shares of
Common Stock -0- (15,510,829)
Total decrease (3,206,586) (55,758,851)
NET ASSETS
Beginning of year 82,950,131 138,708,982
End of year (including undistributed
net investment income of $1,187,064
at October 31, 1998) $ 79,743,545 $ 82,950,131
See notes to financial statements.
7
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 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.
During the current fiscal year, permanent differences primarily due to tax
return of capital, resulted in a net decrease in accumulated net realized loss
on investments, a decrease to accumulated distributions in excess of net
investment income and a corresponding decrease in additional paid-in capital.
This reclassification had no effect on net assets.
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.
8
ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
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, 1999, the Fund reimbursed AFS $2,270,
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 $152,480,632 and $162,056,339,
respectively, for the year ended October 31, 1999. There were purchases of
$303,954,209 and sales of $310,487,025 of U.S. government obligations for the
year ended October 31, 1999.
At October 31, 1999, the cost of investments for federal income tax purposes
was $102,921,306. Accordingly, gross unrealized appreciation of investments was
$4,736,889 and gross unrealized depreciation of investments was $7,498,350
resulting in net unrealized depreciation of $2,761,461 (excluding swap
contract).
At October 31, 1999, the Fund had a capital loss carryforward of $31,336,121
which expires in the year 2007.
1. INTEREST RATE SWAP AGREEMENT
The Fund enters into interest rate swaps to protect itself from interest rate
fluctuations on certain 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 October 31, 1999, 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$ 1/01/09 LIBOR# 6.8526% $689,903
Guaranty 10,749,208
</TABLE>
# LIBOR (London Interbank Offered Rate).
9
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
NOTE D: CAPITAL STOCK
There are 100,000,000 shares of $0.01 par value Common Stock authorized. Of the
8,522,580 shares outstanding at October 31, 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 year ended October 31, 1999, the Fund
issued 406,076 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
FINANCIAL HIGHLIGHTS ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.22 $16.03 $15.50 $11.88 $11.08
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.26(a) 1.47(a) 1.61 1.46 1.51(a)
Net realized and unrealized gain (loss)
on investment transactions .08 (3.57) .50 3.50 .71
Net increase (decrease) in net asset
value from operations 1.34 (2.10) 2.11 4.96 2.22
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (1.26) (1.65) (1.58) (1.34) (1.42)
Distributions in excess of net investment
income (.16) -0- -0- -0- -0-
Tax return of capital (.04) -0- -0- -0- -0-
Distributions from net realized gains -0- (2.06) -0- -0- -0-
Distributions in excess of net realized
gains on investments (.74) -0- -0- -0- -0-
Total dividends and distributions (2.20) (3.71) (1.58) (1.34) (1.42)
Net asset value, end of year $9.36 $10.22 $16.03 $15.50 $11.88
Market value, end of year $9.625 $12.625 $15.875 $13.625 $11.75
TOTAL RETURN
Total investment return based on: (b)
Market value (5.64)% 1.91% 28.74% 28.49% 2.78%
Net asset value 13.30% (18.32)% 14.24% 44.57% 21.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $79,744 $82,950 $138,709 $134,140 $102,757
Ratio of expenses to average net assets 1.76% 1.52% 1.43% 1.70% 1.55%
Ratio of net investment income to average
net assets 13.46% 10.54% 9.50% 10.84% 14.12%
Portfolio turnover rate 435% 264% 281% 352% 441%
</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.
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. (the "Fund"), including the
portfolio of investments, as of October 31, 1999, 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 and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1999, 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, 1999, 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 2, 1999
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)
except as described below, 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
ADDITIONAL INFORMATION
(CONTINUED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
At the March 1998, Annual meeting of shareholders, the shareholders approved a
change in the Fund's fundamental investment policies. As revised, the Fund,
under normal circumstances must invest at least 75% of its total assets in a
combination of sovereign debt obligations (not solely collateralized Brady
Bonds) and zero coupon obligations.
YEAR 2000
Many computer systems and applications that process transactions use 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 "19XX", which could result in processing
inaccuracies and computer system failures at or after the Year 2000. 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 the electronic receipt of information
critical to their businesses. Should any of the computer systems employed by
the Fund or its major service providers, including Alliance, 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 shareholders. To the extent that the operations of issuers of securities
held by the Fund are impaired by the Year 2000 problem, 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. 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. The Year 2000 project office meets periodically with the
Audit Committee of the Board of Directors of Alliance Capital Management
Corporation, Alliance's general partner, and with Alliance's executive
management to review the status of the Year 2000 efforts. 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, Alliance had completed its inventory and assessment of its
domestic and international computer systems and applications, identified
mission critical systems (those systems where loss of their function would
result in immediate stoppage or significant impairment to core business units)
and nonmission critical systems and determined which of these systems is not
Year 2000 compliant. All third-party suppliers of mission critical computer
systems and applications and nonmission critical systems were contacted to
verify whether their systems and applications will be Year 2000 compliant and
their responses are being evaluated. All of those contacted have responded and
have informed Alliance that their systems and applications are or will be Year
2000 compliant. All mission and nonmission critical systems supplied by third
parties have been tested. Alliance expects all testing will be completed before
the end of 1999.
Alliance has remediated, replaced or retired all of its non-compliant mission
critical systems and nonmission critical systems and applications that can
affect the Fund. After each system has been remediated, it is tested with 19XX
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 all mission
critical systems and nonmission critical systems. Integrated systems tests were
conducted to verify that the systems would continue to work together. Full
integration testing of all mission critical and nonmission critical systems is
complete. Testing of interfaces with third-party suppliers has been completed.
Alliance reports that it has completed an inventory of its facilities and
related technology applications and has substantially completed and tested
these systems. Alliance reports that it anticipates that these systems will be
fully operable in the Year 2000. Alliance has deferred certain other planned
information technology projects
14
ALLIANCE WORLD DOLLAR GOVERNMENT FUND
_______________________________________________________________________________
until after the Year 2000 initiative is completed. Such delay is not expected
to have a material adverse effect on Alliance's financial condition or results
of operations. Alliance, with the assistance of a consulting firm, has
developed 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.
The current cost estimate to Alliance of the Year 2000 initiative is
approximately $45 million. These costs consist principally of modification and
testing and costs to develop formal Year 2000 specific contingency plans. These
costs, which will generally be expensed as incurred, will be funded from
Alliance's operations and the issuance of debt. Through September 30, 1999,
Alliance had incurred approximately $41.0 million of costs related to the Year
2000 initiative. At this time, management of Alliance believes that the costs
associated with resolving the Year 2000 issue will not have a material adverse
effect on Alliance's results of operations, liquidity or capital resources.
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 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 actual costs incurred will not exceed
current cost estimates. Should the significant computer systems and
applications used by the Fund or its major service providers, or the systems of
their important third-party suppliers, be unable to process date-sensitive
information accurately after 1999, the Fund and its service providers may be
unable to conduct their normal business operations and to provide shareholders
with 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. Certain statements provided by Alliance in this section entitled
"Year 2000," as such statements relate to Alliance, are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. To the fullest extent permitted by law, the foregoing Year 2000
discussion is a "Year 2000 Readiness Disclosure" within the meaning of The Year
2000 Information and Readiness Disclosure Act, 15 U.S.C. Sec. 1 (1998).
15
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
LEGAL COUNSEL
SEWARD & KISSEL LLP
One Battery Park Plaza
New York, NY10004
(1) Member of the Audit Committee.
16
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.
WDGAR1099
