ALLIANCE WORLD DOLLAR GOVERNMENT
ANNUAL REPORT
MARCH 31, 1996
ALLIANCECAPITAL
MUTUAL FUNDS WITHOUT THE MYSTERY.
LETTER TO SHAREHOLDERS ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
_______________________________________________________________________________
April 25, 1996
Dear Shareholder:
The U.S. bond market enjoyed a sustained broad-based rally throughout most of
1995 and into early 1996, but economic news led to a setback in February. The
market reacted negatively to the stronger-than-expected job growth in the U.S.
and doubts about whether the Federal Reserve would lower interest rates again.
Outside the U.S., emerging market and other foreign debt prices rose sharply as
positive developments in Latin America and Central Europe encouraged foreign
investors.
FUND PERFORMANCE
We are pleased to report that Alliance World Dollar Government Fund II, which
trades under the New York Stock Exchange symbol 'AWF,' benefited from this
favorable investment environment. For the six months ended March 31, 1996, AWF
returned +11.83% on a net asset value basis, which compares with the J.P.
Morgan Emerging Markets Bond Index return of +14.34%. For the one-year period
ended March 31, the Fund achieved a total return of +40.48%, compared with
+48.84% for the benchmark Index.
THE ECONOMY
The U.S. economy survived an inventory scare in 1995 and entered 1996 in a
relatively balanced and healthy condition. The latest economic data show the
U.S. economy's 'soft landing' is still intact. February's shocking payroll gain
grabbed headlines, but the 12-month comparisons were all numbers that support a
soft landing. Consumer confidence has bounced back, debt service burdens are
still manageable, and February retail sales had their best showing since last
summer, climbing 5% on a year-on-year basis. Manufacturing is likely to remain
a soft spot, although new orders for durable goods are showing hidden strength
and unfilled orders continue to rise. Revised data show the much-feared
slowdown in capital spending has already occurred. We expect a gradual
re-strengthening in the U.S. economy over the next six to 12 months.
Measured inflation at the consumer and producer levels remains well behaved and
the U.S. economy continues to operate in the inflation 'safe zone.' However,
recent increases in unit labor costs and commodity prices warn against
complacency. Federal Reserve policy has moved into a holding pattern, and
chances for a meaningful deficit reduction plan have receded as politicians
increasingly turn their attention to the 1996 election campaign.
ECONOMIC AND INVESTMENT OUTLOOK
The U.S. economy appears to be healthy, with modest growth expected in the
period ahead and falling into the 2%-2.5% range by year end. With a gradually
strengthening economy and steady inflation, we expect no Federal Reserve action
on interest rates over the medium term. If our forecast proves correct, the
result should be steady U.S. bond prices.
We continue to have a favorable outlook for emerging market debt securities.
Moderate growth in the U.S., stable inflation and steady bond prices provide a
strong positive environment for this area of fixed income investing. Further,
emerging market countries continue to follow policies leading to improving
fundamentals. The last 15 months have proved to be a difficult period, but in
general, the reform process has not been halted. We continue to believe that
Argentina and Poland provide very good risk/return profiles. Argentina has held
steady to the economic policies designed to keep inflation around 2.0%, and
bank deposits and international reserves have returned to levels existing prior
to the Mexican peso devaluation in December 1994. Poland's Brady bonds received
an investment-grade rating from Moody's Investor Services in January,
highlighting Poland's improving credit fundamentals. This rating is a
breakthrough event as it proves that Brady bonds can receive investment-grade
ratings if the countries undertake necessary economic reforms. Since an
investment-grade rating broadens the investor base for Brady bonds, it can also
lead to a considerable narrowing of yield spreads resulting from increased
demand. Between the end of December and the end of January, the yield spreads
on Polish Brady bonds narrowed over 200 basis points, or about 2%, versus U.S.
Treasury securities due largely to the rating upgrade.
1
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
_______________________________________________________________________________
Some of the significant factors that could affect emerging market bond prices
in the coming months include elec-tions in Russia and Ecuador, the
International Monetary Fund agreement on economic reforms in Brazil, and
ongoing resolution of the banking system problems in Mexico.
Thank you for your interest in Alliance World Dollar Government Fund II. We
look forward to reporting to you again on market activity and the Fund's
investment results in coming periods.
Sincerely,
John D. Carifa
Chairman
Wayne D. Lyski
President
2
PORTFOLIO OF INVESTMENTS
MARCH 31, 1996 ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $VALUE
- ------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-89.5%
COLLATERALIZED BRADY BONDS*-47.5%
ARGENTINA-9.1%
Republic of Argentina
Euro Par Bonds 5.00%, 3/31/23(k)
(cost $86,416,125) $150,360 $77,999,250
BRAZIL-3.3%
Republic of Brazil
Series YL4 Par Bonds 4.25%, 4/15/24(k)
(cost $29,925,186) 55,500 28,270,312
BULGARIA-6.6%
Republic of Bulgaria
Discount Bonds FRN 6.25%, 7/28/24
(cost $56,414,220) 114,000 57,000,000
ECUADOR-7.5%
Republic of Ecuador
Discount Bonds FRN 6.0625%, 2/28/25 106,500 57,576,562
Par Bonds 3.25%, 2/28/25(k) 20,000 7,018,700
Total Ecuadorian Securities
(cost $62,013,688) 64,595,262
MEXICO-5.6%
United Mexican States
Euro Par Bonds
Series A
6.25%, 12/31/19 21,000 13,380,990
Series B
6.25%, 12/31/19 54,750 34,886,152
Total Mexican Securities
(cost $49,556,187) 48,267,142
NIGERIA-8.1%
Central Bank of Nigeria
Par Bonds 6.25%, 11/15/20(k)
(cost $65,587,047) 133,000 69,451,270
VENEZUELA-7.3%
Republic of Venezuela
Par Bonds
Series W-A
6.75%, 3/31/20 104,700 59,351,551
Series W-B
6.75%, 3/31/20 7,000 3,968,108
Total Venezuelan Securities
(cost $61,410,245) 63,319,659
Total Collateralized Brady Bonds
(cost $411,322,698) 408,902,895
NON-COLLATERALIZED BRADY BONDS-17.5%
BRAZIL-2.5%
Republic of Brazil
C-Bonds 8.00%, 4/15/14(a)
(cost $22,279,049) 37,142 21,925,501
BULGARIA-5.9%
Republic of Bulgaria
IAB FRN 6.25%, 7/28/11 88,000 39,160,000
FLIRB FRN 2.00%, 7/28/12 40,000 11,950,000
Total Bulgarian Securities
(cost $54,327,755) 51,110,000
ECUADOR-1.4%
Republic of Ecuador
PDI Bonds FRN 6.0625%, 2/27/15(b)
(cost $12,550,963) 29,816 11,618,907
3
PORTFOLIO OF INVESTMENTS (CONT.)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $VALUE
- ------------------------------------------------------------------------
PANAMA-3.3%
Republic of Panama
IRB 3.50%, 6/30/14(g)(i)(k)
(cost $27,195,625) $ 59,000 $ 27,951,250
POLAND-4.4%
Republic of Poland
PDI FRN 3.75%, 10/27/14
(cost $30,908,307) 50,000 38,062,500
Total Non-Collateralized Brady Bonds
(cost $147,261,699) 150,668,158
OTHER SOVEREIGN DEBT OBLIGATIONS-12.6%
ARGENTINA-12.6%
Republic of Argentina
Bocon Prevision FRN 5.32%, 4/01/01(c)
(cost $105,738,284) 130,037 108,036,429
SOVEREIGN DEBT-RELATED-6.3%
Bayerische Landesbank
Spread Note
U.S. Treasury Bond
7.625%, 2/15/25 vs Brazil
Par Bonds 4.00%, 4/15/24
9.125%, 4/12/96(d) 4,500 5,145,210
Morgan Guaranty Trust Co.
Spread Note
U.S. Treasury Bond 5.875%, 11/15/05 vs
Poland PDI Bonds 3.75%, 10/27/14
10.00%, 7/25/96(d) 10,690 15,768,915
Morgan Guaranty Trust Co.
Index Note
Linked Russian US$ Vneshekonombank
Loan Assignment 10.00%, 7/23/96(e) 35,505 33,715,431
Total Sovereign Debt-Related
(cost $50,694,877) 54,629,556
LOAN PARTICIPATION-5.6%
MOROCCO-5.6%
Kingdom of Morocco
Loan Participation FRN
6.59375%, 1/01/09
(cost $45,029,665) 70,000 48,343,750
Total Sovereign Debt Obligations
(cost $760,047,223) 770,580,788
U.S. GOVERNMENT OBLIGATIONS-13.9%
U.S. Treasury Stripped Bond
Zero coupon, 8/15/11
(cost $124,501,572) 341,500 119,287,657
CORPORATE DEBT OBLIGATIONS-4.5%
Allbritton Communications
9.75%, 11/30/07(g) 15,000 14,212,500
IXC Communications, Inc.
12.50%, 10/01/05(g)(h) 8,000 8,120,000
Nextel Communications
9.75%, 8/15/04(j) 20,000 11,500,000
Pegasus Media & Communications
12.50%, 7/01/05(g) 5,000 5,143,750
Total Corporate Debt Obligations
(cost $39,305,051) 38,976,250
4
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
_______________________________________________________________________________
SHARES U.S. $VALUE
- ------------------------------------------------------------------------
COMMON STOCK-0.0%
Pegasus Media & Communications(f) 500 $162,500
Transamerican Refining Corp.
Warrants, expiring Feb '02 264 594
Total Common Stock & Warrants
(cost $36,543) 163,094
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
TIME DEPOSIT-3.3%
Bank of New York
5.0625%, 4/01/96
(cost $27,918,000) $27,918 $ 27,918,000
TOTAL INVESTMENTS-111.2%
(cost $951,808,389) 956,925,789
Other assets less liabilities-(11.2%) (96,083,298)
NET ASSETS-100% $860,842,491
* 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) Coupon consists of 3.00% cash payment and 3.0625% paid-in-kind.
(c) All interest is paid-in-kind.
(d) Principal amount represents par value at purchase date. The redemption
value of these securities are indexed to the spread between the referenced
treasury yield and the referenced emerging market debt yield.
(e) Principal amount represents par value at purchase date. The redemption
value of this security is linked to the change in the bid price of the
referenced emerging market debt.
(f) Non-income producing security.
(g) 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, 1996
these securities amounted to $55,427,500 or 6.4% of net assets.
(h) Security will have an increased interest rate of 1/2% until registration
under Rule 144A of the Securities Act of 1933 becomes effective. At that time,
interest will accrue at the rate shown.
(i) When issued.
(j) Indicates a security that has a zero coupon until a predetermined date at
which time the stated coupon rate becomes effective until final maturity.
(k) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at March 31, 1996.
Glossary of Terms:
FLIRB Front Loaded Interest Reduction Bonds.
FRN Floating Rate Note. Coupon will fluctuate based upon an interest
rate index. Stated interest rate in effect at March 31, 1996.
IAB Interest Arrears Bond.
IRB Interest Reduction Bond.
PDI Past Due Interest.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $951,808,389) $ 956,925,789
Cash 23,840
Receivable for investment securities sold 41,341,511
Interest receivable 21,436,713
Unrealized appreciation on swap contract 131,031
Deferred organization expenses and other assets 72,388
Total assets 1,019,931,272
LIABILITIES
Payable for investment securities purchased 158,001,055
Advisory fee payable 708,929
Administrative fee payable 106,339
Accrued expenses and other liabilities 272,458
Total liabilities 159,088,781
NET ASSETS $ 860,842,491
COMPOSITION OF NET ASSETS
Capital stock, at par $ 719,803
Additional paid-in capital 988,628,046
Accumulated net realized loss on investments (133,748,225)
Net unrealized appreciation of investments and other assets 5,242,867
$ 860,842,491
NET ASSET VALUE PER SHARE (based on 71,980,285 shares outstanding) $11.96
See notes to financial statements.
6
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1996 ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Interest $98,729,988
Dividends 669,375 $ 99,399,363
EXPENSES
Advisory fee 8,087,245
Administrative fee 1,213,087
Custodian 427,135
Transfer agency 296,896
Taxes 174,394
Audit and legal 107,568
Registration 67,771
Printing 55,496
Directors' fees 25,567
Amortization of organization expenses 6,014
Miscellaneous 39,711
Total expenses 10,500,884
Net investment income 88,898,479
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 72,802,329
Net change in unrealized depreciation of investments
and other assets 102,497,840
Net gain on investments 175,300,169
NET INCREASE IN NET ASSETS FROM OPERATIONS $264,198,648
See notes to financial statements.
7
STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
MARCH 31,1996 MARCH 31,1995
------------ --------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 88,898,479 $ 82,068,447
Net realized gain (loss) on investment
transactions 72,802,329 (251,236,720)
Net change in unrealized depreciation of
investments and other assets 102,497,840 90,659,718
Net increase (decrease) in net assets from
operations 264,198,648 (78,508,555)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (88,898,479) (82,068,447)
Distributions in excess of net investment income (4,011,313) (15,520,836)
Distribution from net realized gain on investments -0- (15,412,493)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in issuance
of common stock 22,986,563 30,133,909
Total increase (decrease) 194,275,419 (161,376,422)
NET ASSETS
Beginning of year 666,567,072 827,943,494
End of year $860,842,491 $ 666,567,072
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 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. 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 and are determined in accordance with tax regulations.
6. RECLASSIFICATION OF COMPONENTS OF NET ASSETS
During the year, the Fund reclassified certain components of net assets. The
reclassification resulted in a net decrease to distributions in excess of net
investment income and a corresponding increase to accumulated net realized loss
on investments of $4,011,313. This reclassification was the result of permanent
book to tax differences in the classification of short term capital gains as
ordinary income. Net assets were not affected by the reclassification.
NOTE B: ADVISORY AND ADMINISTRATIVE FEES
Under the terms of an Investment Advisory Agreement, the Fund pays Alliance
Capital Management L.P. (the 'Adviser'), a monthly fee equal to the annualized
rate of 1% of the Fund's average weekly net assets. Under the terms of an
Administrative Agreement, the Fund pays Alliance Capital Management L.P. (the
'Administrator'), a monthly fee equal to the annualized rate of .15 of 1% of
the Fund's average weekly net assets. The Administrator provides administrative
functions as well as other clerical services to the Fund and prepares financial
and regulatory reports.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. Government Securities) aggregated $2,768,203,308 and $2,786,598,804,
respectively, for the year ended March 31, 1996.
9
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
_______________________________________________________________________________
At March 31, 1996, the cost of investments for federal income tax purposes was
$965,749,894. Accordingly, gross unrealized appreciation of investments was
$27,176,395 and gross unrealized depreciation of investments was $36,000,500,
resulting in net unrealized depreciation of $8,824,105. At March 31, 1996, the
Fund had a capital loss carryforward of approximately $161,154,911, of which
$99,736,778 expires in 2003 and $61,418,133 expires in 2004.
NOTED:SWAP AGREEMENTS
The Fund enters into swaps on sovereign debt obligations to protect itself from
interest rate fluctuations on the underlying floating rate debt instruments and
for investment purposes. A swap is an agreement that obligates two parties to
exchange a series of cash flows at specified intervals based upon or calculated
by reference to changes in specified prices or rates for a specified amount of
an underlying asset. The payment flows are usually netted against each other,
with the difference being paid by one party to the other.
Risks may arise as a result of the failure of another party to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of a counterparty is generally limited to the net interest payment
to be received by the Fund, and/or the termination value at the end of the
contract. Therefore the Fund considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.
The Fund records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid in the interest
period. Net interest received or paid on these contracts is recorded as
interest income (or as an offset to interest income). Fluctuations in the value
of swap contracts are recorded for financial statement purposes as unrealized
appreciation or depreciation on swap contracts.
At March 31, 1996, the Fund had an outstanding swap contract as follows:
<TABLE>
<CAPTION>
PAYMENTS MADE BY THE FUND PAYMENTS RECEIVED BY THE FUND
-------------------------- ---------------------------
SWAP TERMINATION NOTIONAL NOTIONAL UNREALIZED
COUNTERPARTY DATE AMOUNT RATE AMOUNT RATE APPRECIATION
- ------------ ----------- ----------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Morgan 3/14/97 $17,550,000 LIBOR+ -.50% $13,500,000 LIBOR+ +.75% $131,031*
Guaranty
</TABLE>
+ LIBOR(London Interbank Offered Rate).
* Unrealized appreciation on this agreement is calculated based on the present
value of future interest payments to be exchanged and is also linked to the
relative value of Argentina Pensioner I Bonds minus Brazil IDU Bonds.
NOTE E: CAPITAL STOCK
There are 100,000,000 shares of $0.01 par value common stock authorized.
Of the 71,980,285 shares outstanding at March 31, 1996, the Adviser owned 7,200
shares. During the years ended March 31, 1996 and 1995, the Fund issued
2,048,683 and 2,700,756 shares, respectively, in connection with the Fund's
dividend reinvestment plan.
NOTE F: CONCENTRATION OF RISK
Investing in securities of foreign governments involves special risks, which
include revaluation of currencies and the possibility of future adverse
political and economic developments. Moreover, securities of many foreign
governments and their markets may be less liquid and their prices more volatile
than those of the United States government. The Fund invests in the sovereign
debt obligations of countries that are considered emerging market countries at
the time of purchase. Therefore, the Fund is susceptible to governmental
factors and economic and debt restructuring developments adversely affecting
the economies of these emerging market countries. In addition, these debt
obligations may be less liquid and subject to greater volatility than debt
obligations of more developed countries.
10
FINANCIAL HIGHLIGHTS ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED MARCH 31, JULY 28,1993*
------------------------ TO
1996 1995 MARCH 31,1994
----------- ----------- ------------
Net asset value, beginning of period $9.53 $12.31 $13.93(a)
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.25(d) 1.19(d) .77
Net realized and unrealized gain (loss)
on investments and other assets 2.49 (2.32) (1.28)
Net increase (decrease) in net asset
value from operations 3.74 (1.13) (.51)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (1.25) (1.19) (.77)
Distributions in excess of net
investment income (.06) (.23) (.10)
Distributions from net realized gain
on investments -0- (.23) (.24)
Total dividends and distributions (1.31) (1.65) (1.11)
Net asset value, end of period $11.96 $9.53 $12.31
Market value, end of period $12.375 $10.375 $13.375
TOTAL RETURN
Total investment return based on: (b)
Market value 33.51% (10.08)% (4.05)%
Net asset value 40.48% (10.26)% (5.04)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $860,842 $666,567 $827,943
Ratio of expenses to average net assets 1.30% 1.28% 1.26%(c)
Ratio of net investment income to
average net assets 10.99% 10.31% 7.62%(c)
Portfolio turnover rate 395% 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.
11
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, 1996, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance World Dollar Government Fund II, Inc. at March 31, 1996, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights for
each of the indicated periods, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
New York, New York
April 29, 1996
12
ADDITIONAL INFORMATION ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
_______________________________________________________________________________
Shareholders whose shares are registered in their own names may elect to 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. 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
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 State Street Bank and Trust Company, P.O. Box 366,
Boston, Massachusetts 02101.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change
of control of the Fund, (iii) no material changes in the principal risk factors
associated with investment in the Fund, and (iv) no change in the person
primarily responsible for the day-to-day management of the Fund's portfolio,
who is Wayne D. Lyski, the President of the Fund.
13
ADDITIONAL INFORMATION (CONTINUED)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
_______________________________________________________________________________
SUPPLEMENTAL PROXY INFORMATION
The Annual Meeting of Shareholders of The Alliance World Dollar Government Fund
II, Inc. was held on January 23, 1996. The description of each proposal and
number of shares voted at the meeting are as follows:
SHARES VOTED
SHARES WITHOUT
VOTED FOR AUTHORITY
- -------------------------------------------------------------------------------
1. To elect directors: Class Two Directors
(term expires in 1999)
John H. Dobkin 60,645,092 248,824
William H. Foulk 60,680,576 213,340
James M. Hester 60,663,801 230,115
SHARES SHARES VOTED SHARES VOTED
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 March 31, 1996: 60,717,732 60,269 115,915
14
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN
RUTH BLOCK
DAVID H. DIEVLER
JOHN H. DOBKIN
WILLIAM H. FOULK, JR.
DR. JAMES M. HESTER
CLIFFORD L. MICHEL
ROBERT C. WHITE
OFFICERS
WAYNE D. LYSKI, PRESIDENT
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
PAUL J. DENOON, VICE PRESIDENT
VICKI L. FULLER, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER &CHIEF FINANCIAL OFFICER
JOSEPH J. MANTINEO, CONTROLLER
ADMINISTRATOR
ALLIANCE CAPITAL MANAGEMENT, L.P.
1345 Avenue of the Americas
New York, NY10105
CUSTODIAN
THE BANK OF NEW YORK
48 Wall Street
New York, NY10286
DIVIDENDPAYINGAGENT, TRANSFERAGENTANDREGISTRAR
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, MA02110-1520
INDEPENDENTAUDITORS
ERNST &YOUNG LLP
787 Seventh Avenue
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.
15
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
ALLIANCECAPITAL
MUTUAL FUNDS WITHOUT THE MYSTERY.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE
CAPITAL MANAGEMENT L.P.
WDGIIAR
