ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
November 11, 1997
Dear Shareholder:
Since our last report dated March 31, 1997, the U.S. bond market has posted
strong returns. The market rallied over the summer to end the period with solid
gains. Within the traditional bond market (ie. governments, investment grade
corporates, mortgage-backed securities and asset-backed securities) corporates
were the best performing, followed by governments, mortgage-backed securities
and asset-backed securities. The high yield sector continued to benefit from
the strong economy and stable credit environment. As a result, this sector
posted solid gains and outperformed all sectors of the traditional market.
INVESTMENT RESULTS
For the six months ended September 30, 1997, we are pleased to report that
Alliance World Dollar Government Fund II returned 23.86% on a net asset value
(NAV) basis. This compares with a return of 18.05% for the J.P. Morgan Emerging
Markets Bond Index. For the 12 month period ended September 30, 1997, the Fund
achieved a total return of 32.41% at NAV compared with 28.08% for the J.P.
Morgan Emerging Markets Bond Index.
Your Fund's outperformance relative to its benchmark can be attributed to an
overweighted position in Russia in particular, and a general bias toward spread
duration and fixed rate assets across the emerging market country spectrum.
INVESTMENT RESULTS*
Period Ended September 30, 1997
TOTAL RETURN
6 MONTHS 12 MONTHS
---------- -----------
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II 23.86% 32.41%
J.P. MORGAN EMERGING MARKETS BOND INDEX 18.05% 28.08%
* THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR THE PERIOD
AND ARE BASED ON THE NET ASSET VALUE AS OF SEPTEMBER 30, 1997. ALL FEES AND
EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED. RETURNS FOR
THE FUND INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE J.P. MORGAN EMERGING MARKETS BOND INDEX IS COMPOSED OF
DOLLAR-DENOMINATED RESTRUCTURED SOVEREIGN BONDS; A LARGE PERCENTAGE OF THE
INDEX IS MADE UP OF BRADY BONDS. THE INDEX IS UNMANAGED AND REFLECTS NO FEES OR
EXPENSES. AN INVESTOR CANNOT INVEST DIRECTLY IN THE INDEX.
ECONOMIC REVIEW
U.S. Gross Domestic Product (GDP) growth slowed from a robust 4.9% first
quarter pace to 3.3% in the second quarter. Weakness in consumer spending was
the catalyst, as retail and auto sales declined and housing activity slowed.
While some wage pressures were apparent, inflation remained subdued.
During the third quarter, economic growth continued at a healthy pace and
inflation remained at low absolute levels worldwide. Although U.S. growth
slowed from its first half level, the economy remained strong, led by strength
in the labor market. The unemployment rate remained low at 4.9%, consumer
confidence reached new highs, and real income grew solidly. GDP growth for the
third quarter was 3.5%, slightly higher than anticipated.
The Federal Reserve made no change to monetary policy during the reporting
period despite the fact that growth remained above trend levels. Improving
inflation fundamentals, a strong dollar and currency devaluations in Southeast
Asia argued against an increase in official U.S. interest rates. Inflation
remained well-behaved with consumer prices advancing 2.2% and producer prices
unchanged between September 1996 and September 1997.
INVESTMENT OUTLOOK
Recent slowing in employment gains and soft retail sales suggest the U.S.
economy is poised to slow from its torrid pace of the last year. The currency
devaluations
1
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
and economic uncertainty in Southeast Asia should also temper U.S. growth.
Therefore, we anticipate 3.5% U.S. GDP growth for 1997. Given the prolonged
period of strong capacity utilization, employment gains and the difficulty of
forecasting U.S. inflation in an increasingly global economy, there is a small
but measurable chance that the Federal Reserve will modestly raise interest
rates as a precautionary measure. Accordingly, some caution is warranted by
investors.
We continue to have a favorable outlook for the high yield market. The strong
U.S. economy will provide support for this market sector, and as interest rates
remain in a trading range between 5.75%-6.75%, investor demand for higher
yields should remain strong. However, as the economy begins to slow, security
selection within the high yield sector will take on added importance. As a
result, we will continue to review each security using a fundamental, bottom-up
approach.
In the developing markets, commitment to economic integration remains high and
the global environment of relatively stable growth and inflation will support
the integration process. Nonetheless, in the period ahead, we believe growth
and inflation prospects will diverge. In our view, Latin America, Eastern
Europe and Russia will generally enhance global growth as their economic and
inflation trends improve. Much of Southeast Asia will detract from global
growth as their economies slow and inflation increases. We believe that country
selection will be more critical than in the last several quarters.
The picture in Latin America continues to be one of growth, albeit slower than
in past years, and low inflation. In Brazil, inflation fell in August and is
expected to register 4.5%-5.0% for all of 1997. The government's recent
decision to vigorously defend the Brazilian real will likely produce temporary
weakness but will provide a sound foundation to ensure continued economic
growth. Although the Mexican peso fell victim to the currency crisis plaguing
Southeast Asia, economic fundamentals remain strong. The Mexican economy grew
at a 7.0% rate during the first half of 1997 and industrial production surged
8.2% between August 1996 and August 1997, following July's jump of 10.3%. These
figures bode well for third quarter growth and are consistent with our belief
that Mexico will grow 5%-6% annually through 2000. Despite excellent
fundamentals, Argentina will continue to be hit by the spillover from Southeast
Asia. Although there is no question about the government's resolve to protect
the currency, the fact that Argentina has a fixed exchange rate leaves it
vulnerable to investor concerns about a devaluation and/or loss in liquidity.
Longer-term, we remain positive on Argentina's economic prospects.
In Russia, the economy appears to be expanding. Russia's GDP in August 1997
showed a 0.7% increase over year earlier levels. Industrial production shows a
similar pattern, increasing 3.0% between August 1996 and August 1997 following
a 3.4% increase between July 1996 and July 1997. The recently completed
restructuring of Russia's London Club debt should also support continued gains
in the prices of Russian bonds. However, a recent downturn in revenue
generation, threatens the excellent reform momentum and bears close scrutiny.
In Southeast Asia, the near-term outlook is bleak. The unfolding adjustments
for these countries involve much weaker currencies, higher interest rates,
lower stock prices, numerous bankruptcies, banking-sector consolidation and
slower growth. Financial markets in this region will remain under intense
pressure as policy makers grapple with appropriate responses to economic
crises. The IMF's decision to step in and provide funds to shore up the shaky
Thai and Indonesian financial sectors should eventually help to provide needed
stability. Long term, we are optimistic about the investment value in this
region, since favorable fundamentals are still in place. We will be monitoring
developments in this region closely in the upcoming periods.
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
SEPTEMBER 30, 1997 (UNAUDITED)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
TOTAL SOVEREIGN DEBT OBLIGATIONS-86.5%
SOVEREIGN DEBT OBLIGATIONS-45.4%
ARGENTINA-5.1%
Republic of Argentina
9.75%, 9/19/27 $ 36,250 $ 36,512,813
Republic of Argentina Global Bond
11.375%, 1/30/17 20,000 23,320,000
-------------
59,832,813
BRAZIL-8.6%
Republic of Brazil Global Bond
10.125%, 5/15/27 100,322 100,547,725
MEXICO-5.1%
United Mexican States
11.375%, 9/15/16 50,000 59,400,000
RUSSIA-6.5%
Russia Principal Loans - WI FRN
12/15/15(a)(b) 9,788 8,084,276
12/15/20(a)(b) 91,500 68,224,688
-------------
76,308,964
TURKEY-2.2%
Republic of Turkey
10.00%, 9/19/07(a) 25,000 25,812,500
VENEZUELA-17.9%
Republic of Venezuela
9.25%, 9/15/27 219,000 208,871,250
Sovereign Debt Obligations
(cost $521,214,315) 530,773,252
SOVEREIGN DEBT RELATED-14.5%
Morgan Guaranty Trust Co. Indexed Note
Linked To Russian US$
Vneshekonombank Loan Assignment
14.00%, 10/15/97(c)
(cost $166,189,998) 166,190 168,829,926
COLLATERALIZED BRADY BONDS(D)-12.2%
ARGENTINA-0.5%
Republic of Argentina Euro Par Bonds
5.50%, 3/31/23(e) 7,500 5,674,219
BULGARIA-5.0%
Republic of Bulgaria Discount Bonds FRN
6.6875%, 7/28/24 69,900 58,104,375
ECUADOR-4.8%
Republic of Ecuador
Discount Bonds FRN
6.6875%, 2/28/25 (e) 40,500 33,020,156
Par Bonds FRN
3.50%, 2/28/25 42,000 23,638,125
-------------
56,658,281
NIGERIA-1.9%
Central Bank of Nigeria Par Bonds
6.25%, 11/15/20(f) 30,500 22,646,250
Collateralized Brady Bonds
(cost $120,966,427) 143,083,125
3
PORTFOLIO OF INVESTMENTS (CONT.)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
LOAN PARTICIPATIONS & ASSIGNMENTS-9.0%
ALGERIA-2.6%
Algeria Refinancing Trust FRN Loan
Assignment Tranche A
6.6875%, 3/04/00 $ 15,909 $ 13,900,568
7.375%, 3/04/00 19,091 16,680,681
-------------
30,581,249
MOROCCO-6.3%
Kingdom of Morocco Series A
Loan Participation FRN
6.8125%, 1/01/09 78,000 73,222,500
RUSSIA-0.1%
Vneshekonombank Loan Participation(g) 959 994,496
Loan Participations & Assignments
(cost $98,316,985) 104,798,245
NON-COLLATERALIZED BRADY BONDS-5.4%
PERU-5.4%
Republic of Peru FLIRB
3.25%, 3/07/17(a)(e) 35,000 21,568,750
Republic of Peru PDI
4.00%, 3/07/17(a)(e) 61,000 41,022,500
Non-Collateralized Brady Bonds
(cost $56,328,966) 62,591,250
Total Sovereign Debt Obligations
(cost $963,016,691) 1,010,075,798
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-14.0%
Grupo Mexicano de Desarrollo, SA
8.25%, 2/17/01(a)(h) $ 17,000 $ 7,395,000
Home Holdings, Inc.
8.625%, 12/15/03(h)(i) 4,870 1,461,000
Iridium LLC/Capital Corp.
14.00%, 7/15/05(a) 51,500 55,684,375
Mc-Cuernavaca Trust
9.25%, 7/25/01 7,992 7,672,496
Mexico City Toluca Toll Road
11.00%, 5/19/02 24,988 24,488,010
Riverwood International Corp.
10.625%, 8/01/07(a) 20,000 21,000,000
10.875%, 4/01/08 10,300 10,338,625
Trikem, SA
10.625%, 7/24/07(a) 35,000 35,105,000
Corporate Debt Obligations
(cost $161,838,888) 163,144,506
COMMON STOCK-0.0%
Pegasus Media &
Communications, Inc.(h)
(cost $35,816) 11,282 242,563
TOTAL INVESTMENTS-100.5%
(cost $1,124,891,395) 1,173,462,867
Other assets less liabilities-(0.5%) (5,386,970)
NET ASSETS-100% $1,168,075,897
4
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
(a) 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 September 30,
1997, these securities amounted to $283,897,089 or 24.3% of net assets.
(b) An interest rate based on the six-month Libor Rate plus 81.25 basis points
will take effect upon issuance of bonds.
(c) 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.
(d) 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.
(e) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at September 30, 1997.
(f) Security trades with oil warrants expiring November 15, 2020.
(g) Security is in default and is non-income producing.
(h) Non-income producing securities.
(i) Illiquid security, valued at fair value.
Glossary of Terms:
FLIRB Front Loaded Interest Reduction Bond.
FRN Floating Rate Note.
PDI Past Due Interest.
WI When Issued.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 (UNAUDITED)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $1,124,891,395) $1,173,462,867
Receivable for investment securities sold 117,116,250
Interest receivable 16,549,560
Deferred organization expenses and other assets 66,214
Total assets 1,307,194,891
LIABILITIES
Due to custodian 1,793,035
Payable for investment securities purchased 135,867,117
Advisory fee payable 954,432
Administrative fee payable 143,165
Accrued expenses 361,245
Total liabilities 139,118,994
NET ASSETS $1,168,075,897
COMPOSITION OF NET ASSETS
Capital stock, at par $ 719,803
Additional paid-in capital 988,628,046
Undistributed net investment income 6,147,861
Accumulated net realized gain on investment transactions 124,008,715
Net unrealized appreciation of investments 48,571,472
$1,168,075,897
NET ASSET VALUE PER SHARE
(based on 71,980,285 shares outstanding) $16.23
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 54,639,380
EXPENSES
Advisory fee $5,421,812
Administrative fee 813,272
Custodian 221,268
Transfer agency 149,522
Audit and legal 49,747
Taxes 41,857
Registration 34,799
Printing 25,459
Directors' fees 13,473
Amortization of organization expenses 3,007
Miscellaneous 11,170
Total expenses 6,785,386
Net investment income 47,853,994
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 139,359,293
Net change in unrealized appreciation of investments 40,579,244
Net gain on investment transactions 179,938,537
NET INCREASE IN NET ASSETS FROM OPERATIONS $227,792,531
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
_______________________________________________________________________________
SIX MONTHS ENDED
SEP. 30,1997 YEAR ENDED
(UNAUDITED) MARCH 31,1997
--------------- -------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 47,853,994 $ 86,709,523
Net realized gain on investment transactions 139,359,293 165,236,482
Net change in unrealized appreciation
of investments 40,579,244 2,749,361
Net increase in net assets from operations 227,792,531 254,695,366
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income (51,220,112) (86,709,523)
Distributions in excess of net investment
income -0- (37,324,856)
Total increase 176,572,419 130,660,987
NET ASSETS
Beginning of year 991,503,478 860,842,491
End of period (including undistributed net
investment income of $6,147,861 and
$9,513,979, respectively) $1,168,075,897 $991,503,478
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
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
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. Due to 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 and restricted securities which are subject to limitations as
to there resale 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. Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences, do not require such
reclassification.
NOTE B: ADVISORY 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 Administration 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 six months ended September 30, 1997 there was no reimbursement paid
to AFS.
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,
U.S. government securities and U.S. government agency) aggregated
$1,636,763,667 and $1,520,211,013, respectively, for the six months ended
September 30, 1997. There were no purchases or sales of U.S. government and
government agency obligations for the six months ended September 30, 1997.
At September 30, 1997, the cost of investments for federal income tax purposes
was $1,126,096,954. Accordingly, gross unrealized appreciation of investments
was $55,227,463 and gross unrealized depreciation of investments was
$7,861,550, resulting in net unrealized appreciation of $47,365,913. 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 a component
of net change in unrealized appreciation of investments.
At September 30, 1997, the Fund did not have any interest rate 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 September 30, 1997, the Adviser owned
7,200 shares. During the six months ended September 30, 1997 and the year ended
March 31, 1997, the Fund did not issue shares in connection with the Fund's
dividend reinvestment plan.
NOTE E: 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
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS JULY 28,
ENDED 1993(A)
SEPTEMBER 30, YEAR ENDED MARCH 31, TO
1997 ------------------------------------- MARCH 31,
(UNAUDITED) 1997 1996 1995 1994
-------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.77 $11.96 $ 9.53 $12.31 $13.93(b)
INCOME FROM INVESTMENT OPERATIONS
Net investment income .67 1.21 1.25(c) 1.19(c) .77
Net realized and unrealized gain (loss)
on investments 2.50 2.32 2.49 (2.32) (1.28)
Net increase (decrease) in net asset
value from operations 3.17 3.53 3.74 (1.13) (.51)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.71) (1.21) (1.25) (1.19) (.77)
Distributions in excess of net
investment income -0- (.51) (.06) (.23) (.10)
Distributions from net realized gain
on investments -0- -0- -0- (.23) (.24)
Total dividends and distributions (.71) (1.72) (1.31) (1.65) (1.11)
Net asset value, end of period $16.23 $13.77 $11.96 $ 9.53 $12.31
Market value, end of period $14.875 $13.375 $12.375 $10.375 $13.375
TOTAL RETURN
Total investment return based on: (d)
Market value 16.87% 23.11% 33.51% (10.08)% (4.05)%
Net asset value 23.86% 31.15% 40.48% (10.26)% (5.04)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $1,168,076 $991,503 $860,842 $666,567 $827,943
Ratio of expenses to average net assets 1.25%(e) 1.29% 1.30% 1.28% 1.26%(e)
Ratio of net investment income to
average net assets 8.80%(e) 8.92% 10.99% 10.31% 7.62%(e)
Portfolio turnover rate 169% 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.
11
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.
12
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."
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 questions concerning shareholder account information, or if you would like
a brochure describing the Dividend Reinvestment Plan, 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.
WDGIISR
