LETTER TO SHAREHOLDERS ALLIANCE WORLD DOLLAR
GOVERNMENT FUND II, INC.
May 9, 1995
Dear Shareholder:
The past year was one of the worst on record for investors in fixed income
markets. Beginning in February of 1994, strong anti-inflationary posturing by
the Federal Reserve led to higher interest rates, which put downward pressure
on bond prices. Since our last report, yields on two-year and 30-year Treasurys
continued their assent, peaking in December and November, respectively.
Beginning in January of this year, however, the markets rebounded sharply.
Unfortunately, emerging market debt suffered widespread selling in the wake of
Mexico's economic crisis. The six- and twelve-month performance of your Fund
was adversely affected by both the rise in interest rates and investor
uncertainty over emerging markets.
For the twelve months ended March 31, 1995, Alliance World Dollar Government
Fund II had a total return of -10.26% on a net asset value basis. Over the same
period, the unmanaged J.P. Morgan Emerging Markets Bond Index returned
- -11.18%.
In the six-month period since we last reported, the Fund returned -18.02% on a
net asset value basis, which compares with the Index's return of -18.53% over
the same period. The Fund paid dividends totaling $0.71 per share during the
previous six months, or $0.1186 per month.
A SOFT LANDING FOR THE ECONOMY?
The long-awaited slowdown in the U.S. economy materialized in the first quarter
of 1995. Gross Domestic Product (GDP) rose 2.8% in the period, down from the
previous quarter's torrid pace of 5.1%. Final sales growth moderated to 1.8%
due to weaker than expected consumer spending and a further deterioration of
the U.S. trade balance. Inventories rose sharply in the first quarter with
particular weakness in the manufacturing sector. Despite this recent slowdown,
the U.S. economy remains fundamentally strong and the economy should continue
to expand in 1995, albeit at a slower pace. Supporting economic growth will
likely be continued high levels of consumer and business spending. Real gains
in personal income, strong corporate earnings and easier access to credit are
expected to keep aggregate U.S. consumption at solid levels in the months ahead.
While an increase in overall price levels is expected this year, the inflation
outlook appears generally favorable. Broad price indices such as the Consumer
Price Index (CPI) and Producer Price Index (PPI) have shown few signs of
acceleration and labor costs remain under control. However, with the U.S.
economy believed to be near full capacity utilization, concern regarding
inflation is still warranted. If the economy continues to moderate, the upward
pressure on prices should ease somewhat due to less demand for resources.
EMERGING MARKETS UPDATE
Emerging market debt suffered steep price declines over the past twelve months.
In December, the Mexican government's decision to float the peso led to a
significant devaluation in its currency versus the U.S. dollar and sparked an
economic crisis that spilled over to other emerging markets. Prices for all
emerging market debt fell in sympathy with Mexican bond markets, in many cases
adding to declines registered earlier in the year. To halt the devaluation of
its currency, the Mexican government implemented an economic recovery plan
designed to rein in the current account deficit and combat inflation. While the
Mexican economic recovery plan is bitter medicine for the country's economic
ills, preliminary results have been encouraging. From March 9 to April 28,
1995, the Mexican peso gained 26% versus the U.S. dollar and volatility
declined. In addition, Brady bonds staged an impressive rally with the J.P.
Morgan Emerging Markets Bond Index increasing 27% over the same period.
Investors also reacted favorably to the Argentine Government's broad economic
reforms and international financing agreements that strengthen the country's
banking system and reaffirmed the Government's commitment to its currency
convertibility system.
BOND MARKET OUTLOOK
The U.S. economic expansion should continue throughout 1995 with GDP
moderating
to 2.5% for the year. While inflation momentum may be building, it is our view
that prices will not spiral ahead dramatically. We expect CPI inflation to rise
to 3.5% by the end of 1995. If
1
inflation or inflationary expectations exceed 3.5%, we expect the Federal
Reserve to raise the Federal Funds rate an additional 0.50%, to 6.50%.
Mexico's recent political and economic stability has encouraged foreign
investors and modestly improved the outlook for emerging markets. We continue
to believe that emerging market debt offers an attractive total return profile
with the ability to diversify into a variety of credits. Since the end of 1993,
the size of the Brady bond market has nearly doubled and the number of
countries issuing Bradys has grown. In the past twelve months, Brazil, Poland,
Bulgaria and Ecuador issued their first Brady bonds, increasing the total
number of issuing countries to fourteen. Alliance World Dollar Government Fund
II reflects this diversity, though our biggest exposure continues to be
Argentina. We believe that the Argentine Government will continue to
effectively address the country's economic problems and maintain its commitment
to the currency convertibility system.
We appreciate your investment in Alliance World Dollar Government Fund II and
look forward to reporting to you again later in the year.
Sincerely,
John D. Carifa
Chairman
Wayne D. Lyski
President
2
PORTFOLIO OF INVESTMENTS
MARCH 31, 1995 ALLIANCE WORLD DOLLAR GOVERNMENT
FUND II, INC.
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -----------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-80.8%
COLLATERALIZED BRADY BONDS*-54.2%
ARGENTINA-11.3%
Republic of Argentina
Euro Par Bonds VRN
5.00%, 3/31/23 $58,750 $24,087,500
Discount Bonds FRN
7.125%, 3/31/23 97,000 51,106,875
Total Argentinian Securities
(cost $90,671,201) 75,194,375
BRAZIL-4.9%
Republic of Brazil
Discount Notes FRN
Series Z
6.687%, 4/15/24
(cost $32,519,227) 65,000 32,906,250
BULGARIA-4.6%
Republic of Bulgaria
Discount Bonds FRN
7.562%, 7/28/24
(cost $34,151,550) 73,000 30,705,625
ECUADOR-7.9%
Republic of Ecuador
Discount Bonds FRN
7.25%, 2/28/25 71,000 31,595,000
Par Bonds
3.00%, 2/28/25 79,000 21,132,500
Total Ecuadorian Securities
(cost $56,604,157) 52,727,500
JORDAN-0.9%
National Government of Jordan
Euro Par Bonds VRN
4.00%, 12/23/23
(cost $8,755,299) 19,900 6,268,500
MEXICO-4.0%
Republic of Mexico
Euro Par Bonds
6.25%, 12/31/19
Series A $25,500 $12,048,750
Series B 31,000 14,647,500
Total Mexican Securities
(cost $25,151,333) 26,696,250
NIGERIA-16.4%
Central Bank of Nigeria VRN
6.25%, 11/15/20
(cost $133,787,204) 287,000 109,418,750
POLAND-3.0%
Republic of Poland
Discount Bonds FRN
6.8125%, 10/27/24
(cost $23,602,218) 31,500 20,199,375
VENEZUELA-1.2%
Republic of Venezuela
Par Bonds
6.75% , 3/31/20
Series W-A 7,000 3,023,125
SeriesW-B 10,000 4,318,750
Total Venezuelan Securities
(cost $7,391,339) 7,341,875
Total Collateralized
Brady Bonds
(cost $412,633,528) 361,458,500
NON-COLLATERALIZED
BRADY BONDS-18.7%
ARGENTINA-7.1%
Republic of Argentina FRB
7.312%, 3/31/05
(cost $49,839,050) 87,500 47,250,000
3
PORTFOLIO OF INVESTMENTS (CONT.)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -----------------------------------------------------------------------
BRAZIL-10.3%
Republic of Brazil
C-Bonds
8.00%, 4/15/14(a)
(cost $89,500,256) $185,640 $68,454,750
ECUADOR-1.3%
Republic of Ecuador
PDI FRN
7.25%, 2/27/15 27,774 6,318,585
IE Bonds
7.687%, 12/21/04 5,517 2,730,915
Total Ecuadorian Securities
(cost $11,106,046) 9,049,500
Total Non-Collateralized
Brady Bonds
(cost $150,445,352) 124,754,250
LOAN PARTICIPATIONS & ASSIGNMENTS-2.8%
MOROCCO-2.6%
Kingdom of Morocco
Loan Participation FRN
7.375%, 1/01/09
(cost $22,693,782) 30,000 17,550,000
RUSSIA-0.2%
Vnesheconombank Loan Assignment (b)
(cost $2,727,362) 4,959 1,121,937
Total Loan Participations &
Assignments
(cost $25,421,144) 18,671,937
OTHER SOVEREIGN DEBT-RELATED-5.1%
Bayerische Landesbank Spread Notes
U.S. Treasury Bond
6.25%, 8/15/23 vs Brazil
Par Bonds 4.00%, 4/15/24
9.125%, 10/13/95 (d) 4,500 846,000
Morgan Guaranty Trust Co.
Indexed Notes(e)
Indexed to Ivory Coast
Restructured Loan Assignment
9.00%, 6/19/95 $ 8,627 $5,666,998
Indexed to Ivory Coast
Unrestructured Loan Assignment
9.00%, 6/19/956,709 4,673,200
Indexed to Russian
Vnesheconombank Loan Assignment
9.00%, 7/25/9521,534 22,679,234
Total Other Sovereign
Debt-Related
(cost $41,369,108) 33,865,432
Total Sovereign
Debt Obligations
(cost $629,869,132) 538,750,119
CORPORATE DEBT OBLIGATIONS-14.1%
Alliant Techsystems, Inc.
11.75%, 3/01/03 5,000 5,118,750
Continental Medical Systems, Inc.
10.375%, 4/01/03 7,000 6,405,000
10.875%, 8/15/02 9,500 8,858,750
Food 4 Less Supermarkets, Inc.
10.45%, 4/15/00 8,300 8,134,000
Fort Howard Corp.
9.00%, 2/01/06 4,250 3,729,375
GB Property Funding
10.875%, 1/15/04 3,500 3,001,250
Hemmeter Enterprises, Inc.
12.00%, 12/15/00 6,000 4,290,000
JPS Automotive Products
11.125%, 6/15/01 5,400 5,292,000
Mesa Capital Corp.
12.75%, 6/30/98(c) 10,100 9,746,500
Mobile Telecommunication Technologies Corp.
13.50%, 12/15/02 6,000 6,270,000
4
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -----------------------------------------------------------------------
PRT Funding Corp.
11.625%, 4/15/04 $ 1,450 $1,196,250
Pagemart Nationwide
15.00%, 2/01/05(c)(f) 15,000 8,137,500
Terex Corp.
13.00%, 08/01/96(f) 3,202 3,137,960
Transamerican Refining
18.00%, 8/15/98(c) 20,163 12,165,080
Union Carbide Global Enterprises
12.00%, 1/15/05(f) 5,000 5,250,000
WRT Energy Corp.
13.875%, 3/01/02 3,000 2,970,000
Total Corporate Debt Obligations
(cost $93,884,722) 93,702,415
SHARES, OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -----------------------------------------------------------------------
PREFERRED STOCK-1.1%
Prime Retail, Inc.
Convertible Pfd.
Series B, 8.50%
(cost $10,500,000) 420,000 $7,297,500
TIME DEPOSIT-2.1%
Bank of New York
6.00%, 4/03/95
(cost $14,153,000) $ 14,153 14,153,000
TOTAL INVESTMENTS-98.1%
(cost $748,406,854) 653,903,034
Other assets less liabilities-1.9% 12,664,038
NET ASSETS-100% $666,567,072
* Sovereign debt obligations issued as part of debt restructuring 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 consists of 4.00% cash payment and 4.00% paid-in-kind.
(b) Non-income producing security.
(c) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective until
final maturity.
(d) The redemption value of this security is indexed to the spread between the
referenced treasury yield and the referenced emerging market debt yield.
(e) The redemption value of these securities is linked to the change in the bid
price of the referenced emerging market debt.
(f) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At March 31, 1995
these securities amounted to $16,525,460 or 2.5% of net assets.
Glossary of Terms:
FRB Floating rate bond.
FRN Floating rate note. Stated interest rate in effect at March 31. 1995.
IE Interest equalization.
PDI Past due interest.
VRN Variable rate note. Stated interest rate in effect at March 31, 1995.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995 ALLIANCE WORLD DOLLAR GOVERNMENT
FUND II, INC.
ASSETS
Investments in securities, at value (cost $748,406,854) $653,903,034
Receivable for investment securities sold 109,145,080
Interest receivable 19,979,499
Deferred organization expenses and other assets 74,537
Total assets 783,102,150
LIABILITIES
Due to custodian 1,290,453
Payable for investment securities purchased 103,277,020
Dividend payable 8,293,888
Unrealized depreciation on interest rate swap contract 2,724,000
Advisory fee payable 543,372
Administrative fee payable 81,506
Accrued expenses and other liabilities 324,839
Total liabilities 116,535,078
NET ASSETS (equivalent to $9.53 per share, based on
69,931,602 shares outstanding) $666,567,072
COMPOSITION OF NET ASSETS
Capital stock, at par $699,316
Additional paid-in capital 965,661,970
Accumulated net realized loss on investments (202,539,241)
Net unrealized depreciation of investments and other assets (97,254,973)
$666,567,072
NET ASSET VALUE PER SHARE $9.53
See notes to financial statements.
6
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1995 ALLIANCE WORLD DOLLAR
GOVERNMENT FUND II, INC.
INVESTMENT INCOME
Interest $90,211,006
Dividends 2,007,573 $92,218,579
EXPENSES
Advisory fee 7,967,297
Administrative fee 1,195,094
Custodian 711,613
Registration 78,545
Transfer agency 63,637
Audit and legal 54,850
Printing 25,801
Directors' fees 21,920
Amortization of organization expenses 5,997
Miscellaneous 25,378
Total expenses 10,150,132
Net investment income 82,068,447
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions (251,236,720)
Net change in unrealized depreciation of
investments and other assets 90,659,718
Net loss on investments (160,577,002)
NET DECREASE IN NET ASSETS FROM OPERATIONS
$(78,508,555)
See notes to financial statements.
7
STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE WORLD DOLLAR GOVERNMENT
FUND II, INC.
JULY 28,1993*
YEAR ENDED TO
MARCH 31, MARCH 31,
1995 1994
------------ -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $82,068,447 $51,933,947
Net realized gain (loss) on
investment transactions (251,236,720) 102,114,613
Net change in unrealized depreciation of
investments and other assets 90,659,718 (187,914,691)
Net decrease in net assets from operations (78,508,555) (33,866,131)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (82,068,447) (51,933,947)
Distributions in excess of net investment income (15,520,836) (6,402,077)
Distribution from net realized gain on
investments (15,412,493) (16,081,728)
COMMON STOCK TRANSACTIONS
Net proceeds from sale of common shares -0- 934,650,000
Offering costs charged to
additional paid-in capital -0- (1,672,000)
Reinvestment of dividends resulting in
issuance of common stock 30,133,909 3,148,937
Total increase (decrease) (161,376,422) 827,843,054
NET ASSETS
Beginning of period 827,943,494 100,440
End of period $666,567,072 $827,943,494
* Commencement of operations
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995 ALLIANCE WORLD DOLLAR GOVERNMENT
FUND II, INC.
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance World Dollar Government Fund II, Inc. (the 'Fund') was incorporated
under the laws of the State of Maryland on May 20, 1993 and is registered under
the Investment Company Act of 1940, as a non-diversified, closed-end
management
investment company. On July 15, 1993, the Fund sold 7,200 shares of common
stock for $100,440 to Alliance Capital Management L.P. (the 'Adviser'). The
Fund commenced operations on July 28, 1993. 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 sales 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 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 $30,000 have been deferred and are being
amortized on a straight-line basis through July, 1998.
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 SECURITY TRANSACTIONS
Interest income is accrued daily. Security transactions are accounted for on
the date securities are purchased or sold. Security 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. Income dividends and capital gain distributions are determined in
accordance with tax regulations, which may differ from generally accepted
accounting principles.
As a result of permanent book and tax differences, shareholder distributions
have been reclassified to accumulated realized loss on investments. As of March
31, 1995, the cumulative effect of such difference totalled $21,922,913, and
was reclassified from distributions in excess of net investment income to
accumulated realized loss on investments. Net investment income, net realized
gains and net assets were not affected by this change.
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 as well as other clerical services to the Fund and prepares financial
and regulatory reports.
9
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE WORLD DOLLAR GOVERNMENT
FUND II, INC.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $2,482,822,678 and $2,674,870,451, respectively, for the year ended
March 31, 1995.
At March 31, 1995, the cost of investments for federal income tax purposes was
$769,872,289. Accordingly, gross unrealized appreciation of investments was
$4,424,640 and gross unrealized depreciation of investments was $120,393,895,
resulting in net unrealized depreciation of $115,969,255 (excluding interest
rate swap contract). At March 31, 1995, the Fund had a capital loss
carryforward of approximately $99,700,000 which expires in the year 2003.
NOTE D: INTEREST RATE SWAP AGREEMENTS
The Fund enters into interest rate swaps on sovereign debt obligations to
protect itself from interest rate fluctuations on the underlying floating rate
debt instruments. A swap is an agreement that obligates two parties to exchange
a series of cash flows at specified intervals based upon or calculated by
reference to changes in specified prices or rates for a specified amount of an
underlying asset. The payment flows are usually netted against each other, with
the difference being paid by one party to the other.
Risks may arise as a result of the failure of another party to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of a counterparty is generally limited to the net interest payment
to be received by the Fund, and/or the termination value at the end of the
contract. Therefore the Fund considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.
The Fund records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid in the interest
period. Net interest received or paid on these contracts is recorded as
interest income (or as an offset to interest income). Fluctuations in the value
of swap contracts are recorded for financial statement purposes as unrealized
appreciation or depreciation on interest rate swap contracts.
At March 31, 1995, 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$ 30,000,000 1/01/09 Floating-LIBOR+
Fixed-7.00% $ 2,724,000
</TABLE>
+ London Interbank Offered Rate.
10
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
NOTE E: CAPITAL STOCK
There are 100,000,000 shares of $0.01 par value common stock authorized.
Of the 69,931,602 shares outstanding at March 31, 1995, the Adviser owned 7,200
shares. In addition to the shares issued to the Adviser, an initial public
offering of the Fund's shares resulted in the issuance of 67,000,000 shares of
the Fund's common stock, for net proceeds of $934,650,000 after deducting
underwriting discounts and commissions. Offering costs of $1,672,000 have been
charged to additional paid-in capital.
YEAR ENDED JULY 28, 1993*
MARCH 31, TO
1995 MARCH 31, 1994
------------ ---------------
Transactions in shares of common
stock were as follows:
Shares sold -0- 67,007,200
Shares reinvested 2,700,756 223,646
Net increase in shares of common
stock outstanding 2,700,756 67,230,846
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.
NOTE G: QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NET INCREASE
NET REALIZED (DECREASE)
AND UNREALIZED IN NET ASSETS
NET INVESTMENT GAIN (LOSS) ON
RESULTING FROM
INCOME INVESTMENTS
OPERATIONS MARKET PRICE ON
--------------- -------------------- ------------------- -----------------
TOTAL PER TOTAL PER TOTAL
PER NYSE
QUARTER ENDED (000) SHARE (000) SHARE (000)
SHARE HIGH LOW
- ------------- ------- ----- ---------- ------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
March 31, 1995 $21,256 $ .29 $ (91,260) $(1.31) $ (70,004) $(1.02) $11.125 $ 9.000
December 31, 1994 21,618 .32 (107,085) (1.56) (85,467)
(1.24) $12.250 $10.000
September 30, 1994 20,269 .30 74,278 1.08 94,547 1.38 $12.875 $11.625
June 30, 1994 18,925 .28 (36,510) (.53) (17,585) (.25) $13.625 $11.500
$82,068 $1.19 $(160,577) $(2.32) $(78,509) $(1.13)
March 31, 1994 $17,060 $ .25 $(261,977) $(3.91) $(244,917) $(3.66) $16.250 $12.250
December 31, 1993 21,270 .32 139,794 2.09 161,064 2.41 $16.250 $14.625
September 30, 1993* 13,604 .20 36,383 .54 49,987 .74 $15.375 $15.000
$51,934 $.77 $(85,800) $(1.28) $(33,866) $(.51)
</TABLE>
* Commencement of operations
11
FINANCIAL HIGHLIGHTS ALLIANCE WORLD DOLLAR
GOVERNMENT FUND II, INC.
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING
THROUGHOUT EACH PERIOD
YEAR ENDED JULY 28, 1993*
MARCH 31, TO
1995 MARCH 31, 1994
Net asset value, beginning of period $12.31 $13.93(a)
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.19(d) .77
Net realized and unrealized loss on investments
and other assets (2.32) (1.28)
Net decrease in net asset value
from operations (1.13) (.51)
LESS: DISTRIBUTIONS
Dividends from net investment income (1.19) (.77)
Distributions in excess of net investment income (.23) (.10)
Distributions from net realized gain on investments (.23) (.24)
Total dividends and distributions (1.65) (1.11)
Net asset value, end of period $9.53 $12.31
Market value, end of period $10.375 $13.375
TOTAL RETURN
Total investment return based on: (b)
Market value (10.08)% (4.05)%
Net asset value (10.26)% (5.04)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $666,567 $827,943
Ratio of expenses to average net assets 1.28% 1.26%(c)
Ratio of net investment income to average net assets 10.31% 7.62%(c)
Portfolio turnover rate 274% 192%
* Commencement of operations.
(a) Net of offering costs of $.02.
(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.
(d) Based on average shares outstanding.
12
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE WORLD DOLLAR
GOVERNMENT FUND II, INC.
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II,INC.
We have audited the accompanying statement of assets and liabilities of
Alliance World Dollar Government Fund II, Inc., including the portfolio of
investments, as of March 31, 1995, and the related statement of operations for
the year then ended, and the statement of changes in net assets and the
financial highlights for 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
March 31, 1995, by correspondence with the custodian and others. 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 II, Inc. at March 31, 1995, the results
of its operations for the year then ended, and the changes in its net assets
and the financial highlights for each of the indicated periods, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
New York, New York
April 21, 1995
13
ADDITIONAL INFORMATION ALLIANCE WORLD DOLLAR
GOVERNMENT FUND II, INC.
DIVIDEND REINVESTMENT PLAN
Pursuant to the Fund's Dividend Reinvestment Plan (the 'Plan') all shareholders
whose shares are registered in their own names will have all distributions
reinvested automatically in additional shares of the Fund (the 'Dividend
Shares'). State Street Bank and Trust Company (the 'Agent') will act as agent
for participants under the Plan. Shareholders whose shares are held in the name
of a broker or nominee will automatically have distributions reinvested by the
broker or nominee, unless the shareholder elects to receive distributions in
cash.
A shareholder who has elected to participate in the Plan may withdraw from the
Plan at any time. There will be no penalty for withdrawal from the Plan and
shareholders who have previously withdrawn from the Plan may rejoin it at any
time. Changes in elections must be in writing and should include the
shareholder's name and address as they appear on the share certificate. An
election to withdraw from the Plan will, until such election is changed, be
deemed to be an election by a shareholder to take all subsequent distributions
in cash. An election will only be effective for a distribution declared and
having a record date of at least ten days after the date on which the election
is received.
Commencing not more than five business days before the dividend payment date,
purchases of the Fund's shares may be made by the Agent, on behalf of the
participants in the Plan, from time to time to satisfy dividend reinvestments
under the Plan. Such purchases by the Agent on or before the dividend payment
date may be made on the New YorkStock Exchange (the 'Exchange') or elsewhere
at
any time when the price plus estimated commissions of the Fund's Common Stock
on the Exchange is lower than the Fund's most recently calculated net asset
value per share.
If the Agent determines on the dividend payment date that the shares purchased
as of such date are insufficient to satisfy the dividend reinvestment
requirements, the Agent, on behalf of the participants in the Plan, will obtain
the necessary additional shares as follows. To the extent that outstanding
shares are not available at a cost of less than per share net asset value, the
Agent, on behalf of the participants in the Plan, will accept payment of the
dividend, or the remaining portion thereof, in authorized but unissued shares
of the Fund on the dividend payment date. Such shares will be issued at a per
share price equal to the higher of (1) the net asset value per share on the
payment date, or (2) 95% of the closing market price per share on the payment
date. If the closing sale or offer price, plus estimated commissions, of the
Common Stock on the Exchange on the payment date is less than the Fund's net
asset value per share on such day, then the agent will purchase additional
outstanding shares on the Exchange or elsewhere. If before the Agent has
completed such purchases, the market price plus commissions exceeds the net
asset value of the Fund's shares, the average per share purchase price paid by
the Agent may exceed the net asset value of the Fund's shares, resulting in the
acquisition of fewer shares than if shares had been 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-certificated 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 brokerage 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.
Shareholders participating in the Plan may receive benefits not available to
shareholders not participating in the Plan. If the market price plus
commissions of the Fund's shares is above the net asset value, participants in
the Plan will receive shares of the Fund at a discount of up to 5% from the
current market value. However, if the market price plus commissions is below
the net asset value, participants will receive distributions in shares with a
net asset value greater than the value of any cash distribution they would have
received on their shares. There may be insufficient shares available in the
market to make distri-
14
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
butions in shares at prices below the net asset value. Also, since the Fund
does not redeem its shares, the price on resale may be more or less than the
net asset value.
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.
In the case of foreign participants whose dividends are subject to United
States income tax withholding and in the case of any participants subject to
31% federal backup withholding, the Agent will reinvest dividends after
deduction of the amount required to be withheld.
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; however, the Fund reserves the right to amend
thePlan to include a service charge payable to the Agent by the participants.
All correspondence concerning the Plan should be directed to the Agent at State
Sreet Bank and Trust Company, P.O. Box 8200, Boston, Massachusetts
02266-8200.
OTHER INFORMATION
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.
15
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN WILLIAM H. FOULK, JR.
RUTH BLOCK DR. JAMES M. HESTER
DAVID H. DIEVLER CLIFFORD L. MICHEL
JOHN H. DOBKIN ROBERT C. WHITE
OFFICERS
WAYNE D. LYSKI, PRESIDENT EDMUND P. BERGAN, JR.,
SECRETARY
ROBERT M. SINCHE, SENIOR VICE PRESIDENT MARK D. GERSTEN,
TREASURER &
PAUL J. DENOON, VICE PRESIDENT CHIEF FINANCIAL OFFICER
PAUL J. DENOON, VICE PRESIDENT JOSEPH J. MANTINEO,
CONTROLLER
ADMINISTRATOR DIVIDENDPAYINGAGENT,
ALLIANCE CAPITAL MANAGEMENT, L.P.
TRANSFERAGENTANDREGISTRAR
1345 Avenue of the Americas STATE STREET BANK AND TRUST
COMPANY
New York, NY10105 225 Franklin Street
Boston, MA02110-1520
CUSTODIAN INDEPENDENTAUDITORS
THE BANK OF NEW YORK ERNST &YOUNG LLP
48 Wall Street 787 Seventh Avenue
New York, NY10286 New York, NY 10019
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 II, 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.
16
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ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
Summary of General Information
THE FUND
Alliance World Dollar Government Fund II, Inc. is a non-diversified, closed-end
management investment company investing exclusively in fixed income securities
denominated in U.S. dollars. The Fund is designed for investors who seek high
current income and capital appreciation over a period of years from investment
in a portfolio of high yielding, high risk sovereign debt & U.S. corporate
fixed income obligations which the Fund's investment adviser expects to benefit
from improving economic fundamentals.
SHAREHOLDER INFORMATION
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transactions Section of newspaper each day. The Fund's
NYSE
trading symbol is 'AWF'. Weekly comparative net asset value (NAV) and market
price information about the Fund is published each Monday in the Wall Street
Journal and each Saturday in the New York Times and 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
If your shares are held in your own name, you will automatically be a
participant in the Plan unless you elect to receive cash. If your shares are
held in nominee or street name through a broker or nominee who provides this
service, you will also automatically be a participant in the Plan. If your
shares are held in the name of a broker or nominee who does not provide this
service, you will need to instruct them to participate in the Plan on your
behalf or your distributions will not be reinvested. In such case, you will
receive your distributions in cash. For a copy of the Plan Brochure, please
call State Street Bank and Trust Company at 1-800-219-4218.
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
1345 Avenue of the Americas
New York, New York 10105
Alliance Capital
Mutual funds without the Mystery
WDGIISR
ALLIANCE
WORLD DOLLAR
GOVERNMENT
FUND II
ANNUAL REPORT
MARCH 31, 1995
Alliance
Mutual funds without the Mystery
