ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
ANNUAL REPORT
MARCH 31, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
May 5, 1997
Dear Shareholder:
Since our last report in September 1996, the U.S. bond market has posted modest
returns. After rallying at the end of 1996, the market reversed direction in
early 1997 and gave up some of its earlier gains. Data indicating resurgent
strength in the economy, particularly within the labor market, and renewed
concerns about inflation, pushed the bond market lower during the first
quarter. In response to continued strong growth, and what were perceived as
potential inflationary imbalances, the Federal Reserve raised interest rates in
March, further eroding bond market returns.
INVESTMENT RESULTS
Although the pace of price appreciation of securities in the emerging market
and high yield bond sectors has slowed recently, we are pleased to report that
Alliance World Dollar Government Fund II posted solid returns over the most
recent reporting period. For the six months ended March 31, 1997, the Fund
returned 6.91% on a net asset value (NAV) basis. This compares with a return of
8.50% for its benchmark, the J.P. Morgan Emerging Markets Bond Index. Your
Fund's return trailed that of its benchmark for the most recent period due
mainly to the sluggish performance of the securities of Peru, Venezuela and
Russia. Debt securities of these countries, which had been performing strongly,
were particularly hard hit by higher interest rates recently, and the Fund's
overweight positions in these countries negatively impacted portfolio
performance. For the twelve months ended March 31, 1997, the Fund achieved a
total return of 31.15% on a net asset value basis, compared with 31.06% for its
benchmark.
As is usually the case with funds that invest in emerging markets, your Fund's
performance was strongly influenced by developments in the U.S. economy.
Economic developments in the U.S., which directly impact the domestic high
yield bond market, also substantially, though less directly, impact the
emerging market debt sector. Most emerging market bonds are issued in U.S.
dollars and trade in the U.S. relative to the U.S. yield curve, making them
sensitive to U.S. interest rate levels. Therefore, we present you with a U.S.
economic review and investment outlook in addition to an emerging markets
investment outlook.
ECONOMIC REVIEW
The U.S. economy finished 1996 on a strong note. After moderating in the third
quarter, the economy picked up speed as the year came to a close, led by a
rebound in consumer spending. The annualized gain in retail sales of
merchandise jumped to 4.8% in the fourth quarter, up from only 0.9% in the
third quarter. An unexpected surge in export growth also added to year-end
growth. In all, growth in aggregate output, as measured by Gross Domestic
Product (GDP), which dipped to 2.1% in the third quarter, accelerated to 3.8%
during the final three months of 1996.
The economy continued its strong performance in the first quarter of 1997,
buoyed by continued growth in the labor market. The unemployment rate edged
down to 5.2% and wages continued to climb, with hourly earnings up 4% annually
through March. Retail sales continued their strong pace during the first
quarter and consumer confidence remained elevated. The production side of the
economy also showed considerable strength with first quarter industrial
production up by 4.9% over levels from a year earlier and total hours worked up
by 3.8% over the same time period. Overall, GDP growth jumped to 5.6% during
the first three months of 1997--its fastest rate of increase in nearly 10 years.
Despite this strong growth, inflation remained well-behaved. After moving
slightly higher late in 1996, consumer and producer price gains both retreated
in early 1997 with consumer prices advancing through March at a 2.8% annual
rate and producer prices up just 1.6% for the same period. Nonetheless, the
Federal Reserve raised interest rates 0.25% at the end of March in a preemptive
strike against what were seen as mounting inflationary pressures.
INVESTMENT OUTLOOK
U.S. economic growth has continued into its third consecutive quarter at a pace
considered above the long-term, non-inflationary rate. While continued growth
at the current pace may warrant additional rate increases, we expect the U.S.
economy to gradually slow over the next several quarters to a more sustainable
2% to 2.5%
1
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
growth rate. We anticipate that this slowing will occur before any substantial
inflationary pressures materialize. Given the potential for further rate
increases in the near-term, the market will be particularly vulnerable to daily
economic news which may put upward pressure on yields. In contrast to recent
periods of rising rates, the relative lack of leverage in the U.S. financial
system suggests that interest rates and volatility will be less substantial
than in 1994.
Our outlook remains favorable for the U.S. high yield market. Currently,
approximatley 9% of your Fund's portfolio is invested in U.S. high yield
securities at market value. The growing economy should provide solid support
for this market sector, and the higher coupons available on high yield
securities should continue to attract investors and offset any price weakness
the bond market may experience. We have no major sector themes driving our
security selection. We will continue to review each security using a
fundamental, bottom-up approach.
Overall, we remain positive on emerging market debt. Currently, approximately
86% of your Fund's portfolio is invested in emerging markets at market value.
Higher U.S. interest rates may produce temporary weakness in emerging market
debt prices; however, the fundamental economics remain sound for this
fixed-income sector and should support additional gains in the upcoming year.
In Argentina, the economy is gaining momentum and we believe it is on track for
at least 5% growth this year, after 4.4% growth in 1996. The strength of the
economic expansion is producing a rapid increase in tax revenues, while fiscal
expenditures remain largely unchanged from last year's levels. The recent
decision by Standard & Poor's to raise many Argentine corporate debt ratings
underscores the economic progress being made in this country.
Panama's external debt (including Brady bonds) was recently assigned a Ba1
rating by Moody's. This rating reflects the sound economic policies being
pursued by the Panamanian government and should support significant price gains
in the debt securities of that country in the upcoming year.
The Mexican economy continues to perform strongly, led by sharp increases in
production and manufacturing. Growth is expected to remain strong at around 4%
in 1997 and inflation and interest rates should both decline during the
upcoming year. Investor confidence in Mexico's economic policies is growing.
The decision to prepay the remaining $3.5 billion owed to the U.S. for the 1995
peso bailout is another positive step in Mexico's efforts to restore their
credibility in international capital markets.
In Russia, recent data indicate that the economy is beginning to grow.
Inflation remains on a downward trend and reserves have increased considerably.
The government has reinforced its commitment to pursuing a market-oriented
economy with the naming of an aggressive, reform-minded cabinet, but the fiscal
situation remains negative. The development of a realistic budget will be an
essential step in putting the country's fiscal affairs in order.
Thank you for your continued interest and investment 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, 1997
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-78.2%
COLLATERALIZED BRADY BONDS(A)-40.3%
ARGENTINA-5.0%
Republic of Argentina Euro Par Bonds
5.25%, 3/31/23(b) $ 79,500 $49,737,187
BRAZIL-3.7%
Republic of Brazil
Series YL4 Par Bonds
5.00%, 4/15/24(b) 59,000 36,838,125
BULGARIA-4.4%
Republic of Bulgaria Discount Bonds FRN
6.5625%, 7/28/24 73,900 43,878,125
ECUADOR-4.3%
Republic of Ecuador
Discount Bonds FRN
6.4375%, 2/28/25 17,500 11,353,125
Par Bonds FRN
3.50%, 2/28/25 75,000 30,937,500
Total Ecuadorian Securities 42,290,625
MEXICO-3.1%
United Mexican States
Euro Par Bonds Series A
6.25%, 12/31/19(c) 25,400 17,938,750
Euro Par Bonds Series B
6.25%, 12/31/19(c) 18,750 13,242,188
Total Mexican Securities 31,180,938
NIGERIA-4.1%
Central Bank of Nigeria Par Bonds
6.25%, 11/15/20(d) 63,500 40,759,062
VENEZUELA-15.7%
Republic of Venezuela
Par Bonds Series W-A
6.75%, 3/31/20(e) 139,200 97,918,500
Par Bonds Series W-B
6.75%, 3/31/20(e) 82,000 57,681,875
Total Venezuelan Securities 155,600,375
Total Collateralized Brady Bonds
(cost $382,523,591) 400,284,437
SOVEREIGN DEBT-RELATED-15.6%
Morgan Guaranty Trust Co.
Indexed Note(i)
Linked Russian US$
Vneshekonombank Loan Assignment
14.00%, 4/22/97
(cost $175,097,206) 175,097 154,295,658
OTHER SOVEREIGN DEBT OBLIGATIONS-10.1%
ARGENTINA-2.4%
Republic of Argentina Bocon Prevision FRN
5.375%, 9/01/02(f) 20,943 18,766,119
Republic of Argentina Global Bond
11.375%, 1/30/17 4,500 4,637,250
Total Argentinian Securities 23,403,369
PANAMA-3.4%
Republic of Panama PDI
6.5625%, 7/17/16(b) 42,844 34,168,077
3
PORTFOLIO OF INVESTMENTS (CONT.)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
PERU-2.3%
Republic of Peru PDI
4.00%, 3/07/17(b)(g) $39,000 $22,425,000
RUSSIA-2.0%
Russia Principal Loans-WI
FRN
12/19/20(g)(h) 35,000 19,687,500
Total Other Sovereign Debt Obligations
(cost $100,218,358) 99,683,946
NON-COLLATERALIZED BRADY BONDS-8.3%
BULGARIA-0.4%
Republic of Bulgaria IAB FRN
6.5625%, 7/28/11 7,500 4,289,063
PANAMA-5.6%
Republic of Panama IRB
3.50%, 7/17/14(b) 79,000 55,102,500
PERU-2.3%
Republic of Peru FLIRB
3.25%, 3/07/17(b)(g) 45,000 23,287,500
Total Non-Collaterlized Brady Bonds
(cost $66,903,200) 82,679,063
LOAN PARTICIPATIONS & ASSIGNMENTS-3.9%
ALGERIA-2.8%
Algeria Refinancing Trust
FRN Loan Assignment Tranche A
6.50%, 3/04/00 15,909 12,727,273
7.25%, 3/04/00 19,091 15,272,727
Total Algerian Securities 28,000,000
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
MOROCCO-1.0%
Kingdom of Morocco
Loan Participation FRN
6.375%, 1/01/09 $11,000 $ 9,487,500
RUSSIA-0.1%
Vneshekonombank Loan Participation(j) 959 750,292
Total Loan Participations & Assignments
(cost $38,718,319) 38,237,792
Total Sovereign Debt Obligations
(cost $763,460,678) 775,180,896
CORPORATE DEBT OBLIGATIONS-7.9%
Allbritton Communications
9.75%, 11/30/07 30,000 27,975,000
Grupo Mexicano de Desarollo
8.25%, 2/17/01(g) 7,000 4,655,000
Home Holdings, Inc.
8.625%, 12/15/03(k)(l) 3,370 438,100
Mc-Cuernavaca Trust
9.25%, 1/25/10 8,686 7,557,174
Mexico City Toluca Toll Road
11.00%, 5/19/02 25,345 22,303,570
Riverwood International Corp.
10.875%, 4/01/08 18,300 15,189,000
Total Corporate Debt Obligations
(cost $82,483,219) 78,117,844
NON CONVERTIBLE PREFERRED STOCKS-4.3%
Cablevision Systems Corp.,
11.125%, Series M PIK(m)
(cost $42,080,264) 476,305 42,629,298
4
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCK-0.0%
Pegasus Media & Communications, Inc.(l) 11,282 $ 124,102
Transamerican Refining Corp. Warrants,
expiring Feb '02(l) 264 792
Total Common Stocks (cost $36,543) 124,894
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
TIME DEPOSIT-4.6%
Bank of New York
5.125%, 4/01/97
(cost $46,244,000) $ 46,244 $ 46,244,000
TOTAL INVESTMENTS-95.0%
(cost $934,304,704) 942,296,932
Other assets less liabilities-5.0% 49,206,546
NET ASSETS-100% $991,503,478
(a) 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.
(b) Coupon will increase periodically based upon a predetermined schedule.
Stated interest rate in effect at March 31, 1997.
(c) Security trades with value recovery rights expiring June 30, 2003.
(d) Security trades with oil warrants expiring November 15, 2020.
(e) Security trades with oil warrants expiring April 15, 2020.
(f) All interest is paid-in-kind.
(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, 1997,
these securities amounted to $70,055,000 or 7.07% of net assets.
(h) An interest rate based on the six month Libor Rate plus 81.25 basis points
will take effect upon issuance of bonds.
(i) 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.
(j) Security is in default and is non-income producing.
(k) Restricted and illiquid security, valued at fair value (see Notes A & E).
(l) Non-income producing security.
(m) PIK Preferred, quarterly stock payments.
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, 1997.
IAB Interest arrears bond.
IRB Interest reduction bond.
PDI Past due interest bond.
PIK Payment in kind.
WI When issued.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $934,304,704) $ 942,296,932
Cash 32,365
Receivable for investment securities sold 103,120,000
Interest receivable 19,486,046
Deferred organization expenses and other assets 60,227
Total assets 1,064,995,570
LIABILITIES
Payable for investment securities purchased 72,100,125
Advisory fee payable 858,261
Administrative fee payable 128,739
Accrued expenses and other liabilities 404,967
Total liabilities 73,492,092
NET ASSETS $ 991,503,478
COMPOSITION OF NET ASSETS
Capital stock, at par $ 719,803
Additional paid-in capital 988,628,046
Undistributed net investment income 9,513,979
Accumulated net realized loss on investments (15,350,578)
Net unrealized appreciation of investments 7,992,228
$ 991,503,478
NET ASSET VALUE PER SHARE (based on 71,980,285 shares outstanding) $13.77
See notes to financial statements.
6
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1997
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 99,253,670
EXPENSES
Advisory fee $9,723,927
Administrative fee 1,458,591
Custodian 622,155
Transfer agency 406,283
Audit and legal 98,627
Registration 69,105
Taxes 61,050
Printing 57,174
Directors' fees 20,000
Amortization of organization expenses 5,997
Miscellaneous 21,238
Total expenses 12,544,147
Net investment income 86,709,523
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 165,236,482
Net change in unrealized appreciation of investments 2,749,361
Net gain on investments 167,985,843
NET INCREASE IN NET ASSETS FROM OPERATIONS $254,695,366
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
MARCH 31,1997 MARCH 31,1996
------------- -------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 86,709,523 $ 88,898,479
Net realized gain on investment transactions 165,236,482 72,802,329
Net change in unrealized appreciation of
investments 2,749,361 102,497,840
Net increase in net assets from operations 254,695,366 264,198,648
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (86,709,523) (88,898,479)
Distributions in excess of net investment income (37,324,856) (4,011,313)
COMMON STOCK TRANSACTIONS
Reinvestment of dividends resulting in issuance
of common stock -0- 22,986,563
Total increase 130,660,987 194,275,419
NET ASSETS
Beginning of year 860,842,491 666,567,072
End of year (including undistributed net
investment income of $9,513,979 at
March 31, 1997) $991,503,478 $860,842,491
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance World Dollar Government Fund II (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
Any security for which the primary market is on an exchange is 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 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 INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are accounted for on
the date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund accretes discounts as
adjustments to interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with tax regulations.
6. RECLASSIFICATION OF COMPONENTS OF NET ASSETS
During the year, the Fund reclassified certain components of net assets. The
reclassification resulted in a net increase to undistributed net investment
income and a corresponding increase to accumulated net realized loss on
investments. Net assets were not affected by the reclassification.
NOTE B: ADVISORY AND ADMINISTRATIVE FEES
Under the terms of the 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 the
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.
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 March 31, 1997, the Fund reimbursed AFS $7,685, relating
to shareholder servicing costs.
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $1,997,134,907 and $2,180,970,224,
respectively, for the year ended March 31, 1997. There were purchases of
$382,699,285 and sales of $496,386,055 of U.S. government and government agency
obligations for the year ended March 31, 1997.
At March 31, 1997, the cost of investments for federal income tax purposes was
$935,143,202. Accordingly, gross unrealized appreciation of investments was
$40,449,032 and gross unrealized depreciation of investments was $33,295,302,
resulting in net unrealized appreciation of $7,153,730. At March 31, 1997, the
Fund had a capital loss carryforward of $14,512,080 which expires in 2004.
INTEREST RATESWAP 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, 1997, the Fund did not have any swap contracts outstanding.
NOTE D: 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, 1997, the Adviser owned 7,200
shares. During the year ended March 31, 1997, the Fund did not issue shares in
connection with the dividend reinvestment plan. During the year ended March 31,
1996, the Fund issued 2,048,683 shares in connection with the Fund's dividend
reinvestment plan.
NOTE E: RESTRICTED SECURITY
SECURITY DATE ACQUIRED U.S. $ COST
- -------- ------------- -----------
Home Holdings
8.625%, 12/15/03 7/17/96 $1,850,871
8/13/96 $ 210,295
The security shown above is restricted and illiquid and has been valued at fair
value in accordance with procedures described in Note A. The value of this
security at March 31, 1997 was $438,100, representing .04% of net assets.
10
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
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.
11
FINANCIAL HIGHLIGHTS
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, JULY 28,1993(A)
------------------------------------- TO
1997 1996 1995 MARCH 31,1994
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.96 $ 9.53 $12.31 $13.93(b)
INCOME FROM INVESTMENT OPERATIONS
Net investment income 1.21 1.25(c) 1.19(c) .77
Net realized and unrealized gain (loss)
on investments 2.32 2.49 (2.32) (1.28)
Net increase (decrease) in net asset
value from operations 3.53 3.74 (1.13) (.51)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (1.21) (1.25) (1.19) (.77)
Distributions in excess of net
investment income (.51) (.06) (.23) (.10)
Distributions from net realized gain
on investments -0- -0- (.23) (.24)
Total dividends and distributions (1.72) (1.31) (1.65) (1.11)
Net asset value, end of period $13.77 $11.96 $ 9.53 $12.31
Market value, end of period $13.375 $12.375 $10.375 $13.375
TOTAL RETURN
Total investment return based on: (d)
Market value 23.11% 33.51% (10.08)% (4.05)%
Net asset value 31.15% 40.48% (10.26)% (5.04)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $991,503 $860,842 $666,567 $827,943
Ratio of expenses to average net assets 1.29% 1.30% 1.28% 1.26%(e)
Ratio of net investment income to
average net assets 8.92% 10.99% 10.31% 7.62%(e)
Portfolio turnover rate 257% 395% 274% 192%
</TABLE>
(a) Commencement of operations.
(b) Net of offering costs of $.02.
(c) Based on average shares outstanding.
(d) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day of
the period reported. Dividends and distributions, if any, are assumed, for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's Dividend Reinvestment Plan. Generally, total investment return based on
net asset value will be higher than total investment return based on market
value in periods where there is an increase in the discount or a decrease in
the premium of the market value to the net asset value from the beginning to
the end of such periods. Conversely, total investment return based on net asset
value will be lower than total investment return based on market value in
periods where there is a decrease in the discount or an increase in the premium
of the market value to the net asset value from the beginning to the end of
such periods. Total investment return calculated for a period of less than one
year is not annualized.
(e) Annualized.
12
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
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, 1997, 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, 1997, 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, 1997, 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
May 1, 1997
13
ADDITIONAL INFORMATION
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
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.
14
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
SUPPLEMENTAL PROXY INFORMATION
The Annual Meeting of Shareholders of The Alliance World Dollar Government Fund
II was held on January 23, 1997. The description of each proposal and number of
shares voted at the meeting are as follows:
SHARES SHARES VOTED
VOTED FOR WITHOUT AUTHORITY
- -------------------------------------------------------------------------------
1. To elect directors: Class One Directors
(term expires in 1998)
Donald J. Robinson 62,535,937 699,886
Class Three Directors
(term expires in 2000)
Ruth Block 62,535,973 699,850
John D. Carifa 62,536,769 699,054
Robert C. White 62,532,510 703,313
SHARES SHARES
SHARES VOTED 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, 1997: 62,381,596 290,852 563,374
15
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
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
WAYNE C. TAPPE, 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
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
(1) Member of the Audit Committee.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its Common Stock in the open market.
This report, including the financial statements herein, is transmitted to
the shareholders of Alliance World Dollar Government Fund II 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
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Summary of General Information
THE FUND
Alliance World Dollar Government Fund II 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, each Sunday in the NEW YORK TIMES and each Saturday in BARRON'S and
other newspapers in a table called "Closed-End Funds." Additional information
about the Fund is available by calling 1-800-247-4154.
DIVIDEND REINVESTMENT PLAN
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
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.
WDGIIAR
