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CLOSED END
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Alliance World
Dollar Government
Fund II
Annual Report
March 31, 2000
AllianceCapital [LOGO](R)
The Investment Professional's Choice
<PAGE>
Investment Products Offered
---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
---------------------------
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
LETTER TO SHAREHOLDERS
May 11, 2000
Dear Shareholder:
We are pleased to report to you on the strategy, performance and outlook of the
Alliance World Dollar Govern ment Fund II for the annual reporting period ended
March 31, 2000.
Investment Objective and Policies
The Fund is designed for investors who seek high current income and capital
appreciation. To achieve this objective, it invests primarily in high-yielding,
high-risk sovereign debt and U.S. corporate fixed-income obligations that we
expect to benefit from improving economic and credit fundamentals.
Fund Performance
The following table shows how the Fund performed over the past six-month and
12-month periods ended March 31, 2000. For comparison, we have included the JP
Morgan Emerging Markets Bond Index, a standard measure of the performance of a
basket of unmanaged emerging market debt securities.
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INVESTMENT RESULTS*
Periods Ended March 31, 2000
Total Returns
6 Months 12 Months
-------------------------------------------------------------------------------
Alliance
World Dollar
Government
Fund II 31.66% 44.16%
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JP Morgan
Emerging
Markets
Bond Index 19.81% 23.27%
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* The Fund's investment results represent total returns and are based on the
net asset value as of March 31, 2000. All fees and expenses related to the
operation of the Fund have been deducted. Returns for the Fund include the
reinvestment of any distributions paid during the period. Past performance
is no guarantee of future results.
The JP Morgan Emerging Markets Bond Index is composed of dollar-
denominated restructured sovereign bonds; a large percentage of the index
is made up of Brady bonds. An investor cannot invest directly in an index
and its results are not indicative of the performance for any specific
investment, including Alliance World Dollar Government Fund II.
We are pleased to report that the Fund significantly outperformed the benchmark
in both the six- and 12-month periods largely as a result of positive security
selection. Most significantly, our overweighting of Russian debt, which well
outperformed other countries within the index, helped to boost returns. Our
holdings in Latin America also contributed positively to performance.
Investment Strategy
During the period under review, we maintained the Fund's allocation in Latin
America, however we reallocated individual country exposure. We also reduced the
Fund's allocation to Arge ntina and Venezuela and increased our exposure to
Brazil because we believe Brazil will receive a credit upgrade within the next
12 months. Additio nally, we added to our Russian holdings as prospects
continued to improve there.
Market Overview
The global macroeconomic outlook continues to brighten. The U.S. econ-
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ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 1
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
omy grew 7.3% on an annual basis during the final quarter of 1999 and 5.4%
during the first quarter of 2000. Consumer spending appears to have accelerated
during the first quarter as consumers remain confident. The rise in commodity
prices, led by oil, is affecting U.S. inflation as the headline Consumer Price
Index reached 3.7% in March on a year-over-year basis, more than double the 1.6%
rate in February. With economic activity remaining strong, the U.S. Federal
Reserve enacted four rate hikes, moving interest rates to 6.50%.
Europe is enjoying a virtuous circle of falling unemployment, improved consumer
confidence and spending, and stronger economic growth. European governments are
maintaining fiscal disci pline while adopting business-friendly reforms. Japan
is expected to finally grow as corporate restructuring, stimulating public
policies and a technology investment boom are supporting a still-fragile
economy. Consumer and business spending are accelerating, and a self-sustaining
recovery could be under way in Japan late this year. Strength in the developed
economies is spilling over to East Asia, Latin America, and emerging Europe.
Final ly, the dollar broke through parity with the euro in late January,
reaching a high of $0.95 vesus the euro, while trading in a 100-110 range
against the yen during the quarter.
Emerging market debt performed well over the period as global economic growth
continued to improve. The emerging market debt sector outperformed all other
bond market sectors, posting 19.81% (as measured by the JP Morgan Emerging
Markets Bond Index--JPM EMBI) during the six-month period. Most individual
country returns were positive during the period with Russia posting the largest
gains (+122%, as measured by the JPM EMBI). Russia outperformed during the
period due to a change in political leadership, higher oil prices, and a
favorable debt rescheduling agreement. Other individual outperformers within the
index included Ecuador (+40%) and Brazil (+21%).
During the period under review, the high-yield market posted a modest return of
0.77% as measured by the CS First Boston High Yield Index. Liquid ity concerns,
rising default rates and mutual fund outflows all contributed to weakness in the
high-yield sector during the period. The best performing industry sectors
included paper and packaging, communications, technology and cable, while health
care, supermarket and drug, retail, consumer and manufacturing were among the
worst performing. Double B rated securities outperformed single B rated
securities, as excess supply and reduced liquidity caused investors to focus on
larger, more liquid securities.
Outlook
In the period ahead, we expect the U.S. economy to remain relatively strong and
the global economy to continue to strengthen. We believe that ongoing reforms
and a favorable economic backdrop will make the emerging market sector the best
performing sector of fixed-income secu rities. Stronger global growth, coupled
with recent firming in commodity prices, should continue to provide the
environment necessary for emerging countries to further improve their credit
profiles.
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2 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
--------------------------------------------------------------------------------
[PHOTO OMITTED] John D.
Carifa
[PHOTO OMITTED] Wayne D.
Lyski
Portfolio Manager, Wayne D. Lyski, oversees fixed-income investment at Alliance
and manages assets in both domestic and international markets.
Mr. Lyski has over 26 years of investment experience.
--------------------------------------------------------------------------------
Emerging European countries are enjoying healthy recoveries in the aftermath of
the Russian economic turmoil and the Asian crisis. We forecast a 3.5% growth for
this region in 2000. With improving global growth and liquidity conditions, we
expect East Asian growth to reach 6.5% in 2000, following a similar pace in
1999. Labor market conditions are improving, boosting consumer spending, while
export earnings are driving investment expenditures. The Latin American region
will continue its recovery momentum, as we look for this region to head toward
4% growth with moderate inflation over the next year.
The underlying fundamentals of a growing economy, low inflation and relatively
low (though trending upwards) interest rates remain supportive of high yield.
Another strong year in the equity markets could engender some rebalancing of
portfolios in 2000 toward fixed-income, and high-yield in particular, thereby
improving demand. We currently view the high-yield market relatively cheap
compared to other fixed-income sectors and expect the high-yield sector to
perform well over a medium to longer-term time horizon.
Thank you for your continued interest and investment in Alliance World Dollar
Government Fund II. We look forward to reporting to you on market activity and
the Fund's investment results in the coming periods.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman
/s/ Wayne D. Lyski
Wayne D. Lyski
President
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ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 3
<PAGE>
------------------
PERFORMANCE UPDATE
------------------
PERFORMANCE UPDATE
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
HISTORY OF RETURNS
YEARLY PERIODS ENDED 3/31
[BAR CHART OMITTED]
Alliance World Dollar Government Fund II--Yearly Periods Ended 3/31
-------------------------------------------------------------------------------
Alliance World Dollar JP Morgan Emerging
Government Fund II Markets Bond Index
-------------------------------------------------------------------------------
3/31/94* -5.07 -4.18
3/31/95 -10.19 -11.18
3/31/96 40.36 48.83
3/31/97 31.15 31.05
3/31/98 23.48 20.61
3/31/99 -28.44 -10.99
3/31/00 44.16 23.27
Past performance is no guarantee of future results. The Fund's investment
results represent total returns and are based on the Fund's net asset value. 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. The JP 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. An investor cannot invest directly in an index and
its results are not indicative of the performance for any specific investment,
including Alliance World Dollar Government Fund II.
* Fund returns for the period ended 3/31/94 are from the Fund's inception
date of 7/28/93 through 3/31/94. Benchmark returns for the period ended
3/31/94 are from 7/31/93 through 3/31/94.
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4 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
<PAGE>
-----------------
PORTFOLIO SUMMARY
-----------------
PORTFOLIO SUMMARY
March 31, 2000
INCEPTION DATE PORTFOLIO STATISTICS
(Class A Shares) Assets ($mil): $843.4
7/28/93
SECURITY TYPE
67.32% Sovereign Debt Obligations
18.76% Time Deposit
6.27% Brady Bonds
6.05% Yankee Bonds [PIE CHART OMITTED]
1.44% Loan Participation & Assignments
0.16% Common Stock
COUNTRY BREAKDOWN
18.92% United States
16.26% Russia
15.95% Brazil
15.01% Mexico
8.05% Argentina
4.70% Philippines
3.90% Panama [PIE CHART OMITTED]
3.86% Turkey
3.80% Bulgaria
2.82% Columbia
2.43% Peru
1.44% Algeria
1.06% Venezuela
0.99% Malaysia
0.78% Hong Kong
0.03% Nigeria
All data as of March 31, 2000. Security type and country breakdowns may vary
over time. These breakdowns are expressed as a percentage of total investments.
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ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 5
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
PORTFOLIO OF INVESTMENTS
March 31, 2000
<TABLE>
<CAPTION>
Principal
Amount
(000) U.S. $ Value
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sovereign Debt Obligations-85.6%
Other Sovereign Debt Obligations-76.8%
Argentina-9.2%
Republic of Argentina
9.75%, 9/19/27(a) ...................................................... $ 39,000 $ 33,590,700
12.125%, 2/25/19(a) .................................................... 42,850 43,889,113
-------------
77,479,813
-------------
Brazil-16.0%
Republic of Brazil
10.125%, 5/15/27(a) .................................................... 50,000 40,500,000
12.25%, 3/6/30 ......................................................... 97,500 94,233,750
-------------
134,733,750
-------------
Colombia-3.2%
Republic of Colombia
8.625%, 4/01/08 ........................................................ 4,715 3,925,238
9.75%, 4/23/09 ......................................................... 25,700 23,166,000
-------------
27,091,238
-------------
Mexico-14.5%
United Mexican States Global Bond
10.375%, 2/17/09(b) .................................................... 56,000 60,522,000
11.375%, 9/15/16 ....................................................... 52,000 61,490,000
-------------
122,012,000
-------------
Panama-4.4%
Republic of Panama
8.875%, 9/30/27 ........................................................ 10,000 8,850,000
9.375%, 4/01/29 ........................................................ 30,000 28,650,000
-------------
37,500,000
-------------
Philippines-5.4%
Republic of Philippines
9.875%, 1/15/19 ........................................................ 37,000 33,947,500
10.625%, 3/16/25 ....................................................... 11,800 11,287,290
-------------
45,234,790
-------------
Russia-18.5%
Russian Ministry of Finance
3.00%, 5/14/03 ......................................................... 24,000 12,240,000
Russian Federation WI
2.25%, 3/31/30(c) ...................................................... 165,875 59,922,344
Russian Federation
12.75%, 6/24/28(d) ..................................................... 99,900 84,295,620
-------------
156,457,964
-------------
</TABLE>
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6 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) U.S. $ Value
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Turkey-4.4%
Republic of Turkey
11.875%, 1/15/30 ....................................................... $ 35,000 $ 37,143,750
-------------
Venezuela-1.2%
Republic of Venezuela
9.25%, 9/15/27 ......................................................... 15,467 10,208,220
-------------
Total Other Sovereign Debt Obligations
(cost $615,913,864) .................................................... 647,861,525
-------------
Collateralized Brady Bonds(e)-4.4%
Bulgaria-4.3%
Republic of Bulgaria Discount Bonds FRN
7.063%, 7/28/24 ........................................................ 45,500 36,572,900
-------------
Nigeria-0.1%
Central Bank of Nigeria Par Bonds
6.25%, 11/15/20(f) ..................................................... 500 300,000
-------------
Total Collateralized Brady Bonds
(cost $35,939,543) ..................................................... 36,872,900
-------------
Non-Collateralized Brady Bonds-2.8%
Peru-2.8%
Republic of Peru FLIRB
3.75%, 3/07/17(c)(d)
(cost $22,676,597) ..................................................... 38,250 23,428,125
-------------
Loan Participations & Assignments-1.6%
Algeria-1.6%
Algeria Refinancing Trust FRN Loan Assignment
Tranche 1
6.813%, 3/04/06
(cost $15,814,727) ..................................................... 17,273 13,904,545
-------------
Total Sovereign Debt Obligations
(cost $690,344,731) .................................................... 722,067,095
-------------
Corporate Debt Obligations-6.9%
Grupo Mexicano de Desarrollo, SA
8.25%, 2/17/01(g) ...................................................... 17,000 5,100,000
Guangdong Enterprises Holdings
8.875%, 5/22/07(d)(g) .................................................. 17,850 7,497,000
MC-Cuernavaca Trust
9.25%, 7/25/01 ......................................................... 3,257 2,963,542
</TABLE>
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ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 7
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount
(000) U.S. $ Value
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mexico City Toluca Toll Road
11.00%, 5/19/02 ........................................................ $ 21,491 $ 14,398,913
Tenaga Nasional Berhad
7.625%, 4/29/07(d) ..................................................... 10,000 9,541,300
Trikem, SA
10.625%, 7/24/07(d) .................................................... 23,000 18,745,000
-------------
Total Corporate Debt Obligations
(cost $79,614,994) ..................................................... 58,245,755
-------------
Common Stock-0.2%
Pegasus Media & Communications, Inc.(h)
(cost $35,817) ......................................................... 11,282 1,587,941
-------------
Time Deposit-21.4%
Bank of New York
6.25%, 4/03/00
(cost $180,500,000) ................................................. $180,500 180,500,000
-------------
Total Investments-114.1%
(cost $950,495,542) .................................................... 962,400,791
Other assets less liabilities-(14.1%) ..................................... (119,010,812)
-------------
Net Assets-100% ........................................................... $ 843,389,979
=============
</TABLE>
(a) Securities, or portions thereof, with an aggregate market value of
$92,013,489, have been segregated to collateralize reverse repurchase
agreements.
(b) Security trades with warrants expiring on February 17, 2009.
(c) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at March 31, 2000.
(d) 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,
2000, these securities amounted to $143,507,045 or 17.02% of net assets.
(e) 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.
(f) Security trades with warrants expiring November 15, 2020.
(g) Security is in default and is non-income producing.
(h) Non-income producing security.
Glossary of Terms:
FLIRB - Front Loaded Interest Reduction Bond.
FRN - Floating Rate Note.
WI - When Issued.
See notes to financial statements.
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8 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
---------------------------------
STATEMENT OF ASSETS & LIABILITIES
---------------------------------
STATEMENT OF ASSETS & LIABILITIES
March 31, 2000
Assets
Investments in securities, at value
(cost $950,495,542) ..................................... $ 962,400,791
Cash ....................................................... 93,387
Receivable for investment securities sold .................. 83,047,169
Interest receivable ........................................ 18,326,897
---------------
Total assets ............................................... 1,063,868,244
---------------
Liabilities
Reverse repurchase agreements .............................. 94,181,306
Payable for investment securities purchased ................ 125,164,733
Advisory fee payable ....................................... 733,983
Administrative fee payable ................................. 199,770
Interest payable on reverse repurchase agreements .......... 28,659
Accrued expenses ........................................... 169,814
---------------
Total liabilities .......................................... 220,478,265
---------------
Net Assets ................................................. $ 843,389,979
---------------
Composition of Net Assets
Capital stock, at par ...................................... $ 778,503
Additional paid-in capital ................................. 1,048,473,894
Distribution in excess of net investment income ............ (3,669,875)
Accumulated net realized loss on investment
transactions and swap contracts ......................... (214,097,792)
Net unrealized appreciation on investment transactions ..... 11,905,249
---------------
$ 843,389,979
===============
Net Asset Value Per Share (based on 77,850,368
shares outstanding) ..................................... $10.83
======
See notes to financial statements.
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ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 9
<PAGE>
-----------------------
STATEMENT OF OPERATIONS
-----------------------
STATEMENT OF OPERATIONS
Year Endeed March 31, 2000
<TABLE>
<S> <C> <C>
Investment Income
Interest ............................................. $ 100,474,072
Expenses
Advisory fee ......................................... $ 7,259,138
Administrative fee ................................... 1,088,871
Custodian ............................................ 377,350
Audit and legal ...................................... 311,287
Printing ............................................. 178,993
Transfer agency ...................................... 102,552
Registration ......................................... 68,647
Directors' fees ...................................... 35,726
Miscellaneous ........................................ 10,649
------------
Total expenses before interest ....................... 9,433,213
Interest expense ..................................... 1,558,621
------------
Total expenses ....................................... 10,991,834
-------------
Net investment income ................................ 89,482,238
-------------
Realized and Unrealized Gain (Loss)
on Investments
Net realized loss on investment
transactions ...................................... (86,979,313)
Net realized gain on swap contracts .................. 5,387,068
Net change in unrealized appreciation/
depreciation of investment transactions
and swap contracts ................................ 259,550,920
-------------
Net gain on investment transactions .................. 177,958,675
-------------
Net Increase in Net Assets
from Operations ................................... $ 267,440,913
=============
</TABLE>
See notes to financial statements.
--------------------------------------------------------------------------------
10 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
<PAGE>
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
STATEMENT OF CHANGES
IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
March 31, March 31,
2000 1999
---------- ----------
<S> <C> <C>
Increase (Decrease) in Net Assets
from Operations
Net investment income ....................................... $ 89,482,238 $ 89,841,564
Net realized loss on investment
transactions ............................................. (81,592,245) (128,009,950)
Net change in unrealized appreciation/
depreciation of investment transactions
and swap contracts ....................................... 259,550,920 (248,662,309)
------------- -------------
Net increase (decrease) in net assets from
operations ............................................... 267,440,913 (286,830,695)
Dividends and Distributions to
Shareholders
Dividends from net investment income ........................ (85,169,265) (108,151,832)
Tax return of capital ....................................... (3,407,497) -0-
Common Stock Transactions
Reinvestment of dividends resulting in
issuance of Common Stock ................................. 12,559,183 17,157,886
------------- -------------
Total increase (decrease) ................................... 191,423,334 (377,824,641)
Net Assets
Beginning of year............................................ 651,966,645 1,029,791,286
------------- -------------
End of year ................................... $ 843,389,979 $ 651,966,645
------------- -------------
</TABLE>
See notes to financial statements.
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ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 11
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
NOTE A
Significant Accounting Policies
Alliance World Dollar Government Fund II (the "Fund") was incorporated un
der 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 financial statements have been prepared in conformity
with generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and ex penses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. Security Valuation
Portfolio securities traded on a national securities ex change or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are generally
valued at the last reported sale price or, if there was no sale on such day, the
last bid price quoted on such day. If no bid prices are quoted, then the
security is valued at the mean of the bid and asked prices as obtained on that
day from one or more dealers regularly making a market in that security.
Securities traded on the over-the-counter market, securities listed on a foreign
securities exchange whose operations are similar to the United States
over-the-counter market and securities listed on a national securities exchange
whose primary market is believed to be over-the-counter are valued at the mean
of the closing bid and asked prices provided by two or more dealers regularly
making a market in such securities. U.S. government securities and other debt
securities which mature in 60 days or less are valued at amortized cost unless
this method does not represent fair value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by, or in accordance with procedures approved by, the Board of
Directors. Fixed income securities may be valued on the basis of prices provided
by a pricing service when such prices are believed to reflect the fair market
value of such securities.
2. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provision for federal income or excise taxes is
required.
3. Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are accounted for on
the date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund accretes discount as an
adjustment to interest income.
4. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
-------------------------------------------------------------------------------
12 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
date. Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences do not require such
reclassification. During the current fiscal year, permanent differences,
primarily due to the tax return of capital, resulted in a net decrease in
distributions in excess of net investment income and additional paid-in capital
and a corresponding increase in accumulated net realized loss on investment
transactions and swap contracts. This reclassification had no effect on net
assets.
NOTE B
Advisory, Administrative Fees and Other Affiliated Transactions
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
year ended March 31, 2000, the Fund reimbursed AFS $5,240, relating to
shareholder servicing costs.
NOTE C
Investment Transactions
Purchases and sales of investment securities (exclud ing short-term investments,
U.S. government securities and U.S. government agencies) aggregated
$1,491,428,184 and $1,510,512,931, respectively, for the year ended
March 31, 2000. There were sales of $72,015,000 and no purchases of U.S.
government and government agency obligations for the year ended March 31, 2000.
At March 31, 2000, the cost of investments for federal income tax purposes was
$952,342,270. Ac cord ingly, gross unrealized appreciation of investments was
$43,885,634 and gross unrealized depreciation of invest ments was $33,827,113,
result ing in net un real ized appre cia tion of $10,058,521.
At March 31, 2000, the Fund had a capital loss carryforward of $146,700,849, of
which $103,516,115 expires in the year 2007 and $43,184,734 expires in the year
2008.
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
$65,550,215 during fiscal year 2000. To the extent that the carryover losses are
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ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 13
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
used to offset future capital gains, it is probable that the gain so offset will
not be distributed to shareholders.
Swap Agreements
The Fund enters into swaps on sovereign debt obliga tions to protect itself from
interest rate fluc tuations 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 speci fied intervals based upon or calculated
by reference to changes in specified prices or rates for a specified amount of
an underlying asset. The payment flows are usually netted against each other,
with the difference being paid by one party to the other.
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. The loss incurred by the
failure of a counterparty is generally limited to the net interest payment to be
received by the Fund, and/or the termination value at the end of the contract.
Therefore, the Fund considers the creditworthiness of each counterparty to a
swap contract in evaluating potential credit risk. Additionally, risks may arise
from unanticipated movements in interest rates or in the underlying value of the
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 un realized appreciation of investments and swap contracts.
At March 31, 2000 the Fund did not have any outstanding swap agreements.
NOTE D
Capital Stock
There are 100,000,000 shares of $0.01 par value common stock authorized.
Of the 77,850,368 shares outstanding at March 31, 2000, the Adviser owned 7,200
shares. During the years ended March 31, 2000 and 1999, the Fund issued
1,365,986 and 1,993,779 shares, respectively, in con nection with the Fund's
dividend reinvestment plan.
NOTE E
Reverse Repurchase Agreements
Under a reverse repurchase agreement, the Fund sells securities and agrees to
repurchase them at a mutually agreed upon date and price. At the time the Fund
enters into a reverse repurchase agreement, it will establish a segregated
account with the custodian containing liquid assets having a value at least
equal to the repurchase price.
As of year end March 31, 2000, the Fund had entered into the following reverse
repurchase agreements:
Amount Broker Interest Rate Maturity
------------ ------------------ ------------- --------------
$ 45,376,068 Merrill Lynch & Co. 5.50% April 12, 2000
$ 43,523,438 Merrill Lynch & Co. 5.80% April 14, 2000
$ 5,281,800 JP Morgan & Co. 5.80% April 14, 2000
-------------------------------------------------------------------------------
14 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
For the year ended March 31, 2000, the maximum amount of reverse repurchase
agreements outstand ing was $220,067,400, the average amount out stand ing was
approximate ly $83,576,777, and the daily weighted average interest rate was
5.32%.
NOTE F
Concentration of Risk
Investing in securities of foreign companies and foreign governments involves
special risks, which include changes in foreign exchange rates and the
possibility of future political and economic developments which could adversely
affect the value of such securities. Moreover, securities of many foreign
companies and foreign governments and their markets may be less liquid and their
prices more volatile than those of comparable U.S. companies and the United
States government.
-------------------------------------------------------------------------------
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 15
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout the Each Year
<TABLE>
<CAPTION>
Year Ended March 31,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year .......... $ 8.52 $ 13.82 $ 13.77 $ 11.96 $9.53
------------------------------------------------------------------------------------
Income From
Investment Operations
Net investment income ......... 1.16(a) 1.20(a) 1.30(a) 1.21 1.25(a)
Net realized and unrealized
gain (loss) on investments
and swap contracts ......... 2.29 (5.06) 1.70 2.32 2.49
------------------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations ................. 3.45 (3.86) 3.00 3.53 3.74
------------------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income .......... (1.10) (1.44) (1.42) (1.21) (1.25)
Distributions in excess of net
investment income .......... -0- -0- -0- (.51) (.06)
Tax return of capital ......... (.04) -0- -0- -0- -0-
Distributions from net realized
gain on investments ........ -0- -0- (1.53) -0- -0-
------------------------------------------------------------------------------------
Total dividends and
distributions .............. (1.14) (1.44) (2.95) (1.72) (1.31)
------------------------------------------------------------------------------------
Net asset value,
end of year ................ $ 10.83 $ 8.52 $13.82 $13.77 $11.96
====================================================================================
Market value,
end of year ................ $ 9.188 $9.375 $13.75 $13.375 $12.375
====================================================================================
Total Return
Total investment return
based on:(b)
Market value ............... 11.15% (20.95)% 26.49% 23.11% 33.51%
Net asset value ............ 44.16% (28.44)% 23.48% 31.15% 40.48%
Ratios/Supplemental Data
Net assets, end of year
(000's omitted) ............ $843,390 $651,967 $1,029,791 $991,503 $860,842
Ratio of expenses to
average net assets ......... 1.51% 1.31% 1.26% 1.29% 1.30%
Ratio of expenses to average
net assets, excluding
interest expense ........... 1.30% 1.31% 1.26% 1.29% 1.30%
Ratio of net investment
income to average
net assets ................. 12.33% 11.89% 8.92% 8.92% 10.99%
Portfolio turnover rate .... 217% 262% 327% 257% 395%
</TABLE>
See footnote summary on page 17.
-------------------------------------------------------------------------------
16 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming a purchase of common stock
on the opening of the first day and a sale on the closing of the last day
of the period reported. Dividends and distributions, if any, are assumed,
for purposes of this calculation, to be reinvested at prices obtained
under the Fund's Dividend Reinvestment Plan. Generally, total investment
return based on net asset value will be higher than total investment
return based on market value in periods where there is an increase in the
discount or a decrease in the premium of the market value to the net asset
value from the beginning to the end of such periods. Conversely, total
investment return based on net asset value will be lower than total
investment return based on market value in periods where there is a
decrease in the discount or an increase in the premium of the market value
to the net asset value from the beginning to the end of such periods.
-------------------------------------------------------------------------------
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 17
<PAGE>
------------------
AUDITOR'S REPORT
------------------
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
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, 2000, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years then
ended, and the financial highlights for each of the five years then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsi bility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of March 31, 2000, by correspondence with
the custodian and others. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance World Dollar Government Fund II, Inc. as of March 31, 2000, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years then ended, and the financial highlights for each of the
five years then ended, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
May 10, 2000
-------------------------------------------------------------------------------
18 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
<PAGE>
----------------------
ADDITIONAL INFORMATION
----------------------
ADDITIONAL INFORMATION
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 distri bution 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.
-------------------------------------------------------------------------------
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II O 19
<PAGE>
----------------------
ADDITIONAL INFORMATION
----------------------
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, except that
50% of the Fund's required investments in sovereign debt obligations is no
longer required to be invested in collateralized Brady Bonds, (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.
Supplemental Proxy Information
The Annual Meeting of Shareholders of The Alliance World Dollar Gov ernment Fund
II was held on March 28, 2000. The description of each proposal and number of
shares voted at the meeting are as follows:
<TABLE>
<CAPTION>
Abstain/
Authority
Voted For Withheld
-----------------------------------------------------------------------------------------
<S> <C> <C>
1. To elect directors: Class Three Directors
(terms expire in 2003)
John D. Carifa 68,979,033 1,089,319
Ruth Block 68,970,249 1,089,104
Robert C. White 68,970,870 1,097,482
<CAPTION>
Abstain/
Voted Authority
Voted For Against Withheld
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify the selection of Ernst & Young LLP
as the Fund's independent auditors for the
Fund's fiscal year ending March 31, 2000: 69,116,642 394,391 557,319
</TABLE>
-------------------------------------------------------------------------------
20 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
<PAGE>
----------------------------
GLOSSARY OF INVESTMENT TERMS
----------------------------
GLOSSARY OF INVESTMENT TERMS
basis point (bp)
One basis point equals 0.01%.
benchmark
A standard by which a fund's performance can be measured. A benchmark is usually
an unmanaged index, such as the Standard & Poor's 500 Stock Index or the Lehman
Brothers Aggregate Bond Index.
bond
Governments or corporations issue bonds when they need to raise cash. Bonds are
sold, or issued, to investors and have a maturity date, which is the date the
issuer is obligated to repay the investor for the principal, or face amount, of
the bond. Bonds also pay interest until maturity. Bonds are also called
fixed-income securities
consumer price index (CPI)
An index that measures the cost of living. The CPI is published by the U.S.
Bureau of Labor Statistics.
credit rating
Credit ratings are issued by independent organizations, such as the Standard &
Poor's Ratings group or Moody's Investors Service. These groups attempt to
assess the likelihood that the issuer of the bond will be able to make timely
payments of principal and interest on the bond, based on such factors as the
issuer's financial condition and any collateral securing these obligations.
Ratings typically range from AAA, which is the highest rating, to D, which is
the lowest rating.
current yield
The ratio of interest to the current market price of the bond, expressed as a
percentage.
equity
Another term for stock.
fixed-income security
A bond.
fixed rate
The interest rate does not change during the entire term of the loan.
index
A compilation of securities of similar types of companies that is used to
measure the investment performance of securities within that specific market. An
index is often used as a benchmark for a mutual fund. An investor cannot invest
directly in an index.
long-term debt
Loans and obligations with a maturity greater than one year.
portfolio
The collection of securities that make up a fund's or an investor's investments.
price-to-earnings (P/E) ratio
What an investor pays for a security versus a company's earnings per share of
outstanding stock.
sector
Refers to a distinct part of the economy, for example, the technology sector.
yield
The rate of return on an asset, usually referring to dividend or interest
payments, expressed as a percentage of current market price.
-------------------------------------------------------------------------------
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II O 21
<PAGE>
----------------
ALLIANCE CAPITAL
----------------
ALLIANCE CAPITAL
The Investment Professional's Choice
Alliance Capital is a leading global investment management firm with over $394
billion in assets under management. In recognition of our far-reaching
investment capabilities, Alliance Capital has been selected by employee benefit
plans for 28 of the FORTUNE 100 companies and public retirement funds in 33
states as well as by hundreds of foundations, endowments and foreign
institutions. By sharing this institutional money management ex perience with
millions of mutual fund investors as well, Alliance stands out as a "manager of
choice" for thousands of investment professionals around the world.
At Alliance Capital, we place a premium on investment research. We carefully
select securities based on our proprietary research, conducted by over 276
investment professionals in 22 investment offices worldwide. Our commitment to
this process means that our mutual fund shareholders have their portfolios
managed by the same experienced analysts and portfolio managers who manage the
pension funds of some of America's largest institutional in
All information on Alliance Capital is as of 3/31/00.
-------------------------------------------------------------------------------
22 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
<PAGE>
------------------
BOARD OF DIRECTORS
------------------
BOARD OF DIRECTORS
John D. Carifa, Chairman
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
William H. Foulk, Jr.(1)
Dr. James M. Hester(1)
Clifford L. Michel(1)
Donald J. Robinson(1)
Robert C. White(1)
OFFICERS
Wayne D. Lyski, President
Kathleen A. Corbet, Senior Vice President
Paul J. DeNoon, Vice President
Vicki L. Fuller, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Juan J. Rodriguez, Controller
Administrator
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Dividend Paying Agent,
Transfer Agent and Registrar
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110-1520
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
Legal Counsel
Seward & Kissel LLP
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.
-------------------------------------------------------------------------------
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 23
<PAGE>
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
Domestic Equity Funds
Balanced Shares
Conservative Investors Fund
Disciplined Value Fund
Growth & Income Fund
Growth Fund
Growth Investors Fund
Health Care Fund
Premier Growth Fund
Quasar Fund
Real Estate Investment Fund
Technology Fund
The Alliance Fund
Utility Income Fund
Global & International Equity Funds
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Premier Portfolio
Technology Portfolio
Fixed Income Funds
Corporate Bond Portfolio
Global Dollar Government Fund
Global Strategic Income Trust
High Yield Fund
Limited Maturity Government Fund
Mortgage Securities Income Fund
Multi-Market Strategy Trust
North American Government Income Trust
Quality Bond Portfolio
U.S. Government Portfolio
Municipal Income Funds
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
Alliance also offers AFD Exchange Reserves, which serves as the money market
fund exchange vehicle for the Alliance mutual funds.
To obtain a prospectus for any Alliance Capital fund, call your investment
professional, or call Alliance at (800) 227-4618.
-------------------------------------------------------------------------------
24 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
<PAGE>
------------------------------
SUMMARY OF GENERAL INFORMATION
------------------------------
SUMMARY OF GENERAL
INFORMATION
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 and U.S. corporate
fixed income obligations which the Fund's investment adviser expects to benefit
from improving economic fundamentals.
Shareholder Information
The daily net asset value of the Fund's shares is available from the Fund's
Transfer Agent by calling (800) 426-5523. The Fund also distributes its daily
net asset value (NAV) to various financial publications or independent orga
nizations such as Lipper Analytical Services, Inc., Morningstar, Inc. and
Bloomberg. Daily market prices for the Fund's shares are published in the New
York Stock Exchange Composite Transactions Section of different newspapers each
day. The Fund's NYSE trading symbol is "AWF". Weekly comparative net asset value
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 (800) 219-4218.
-------------------------------------------------------------------------------
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 25
<PAGE>
Alliance World Dollar Government Fund II
1345 Avenue of the Americas
New York, NY 10105
AllianceCapital [LOGO](R)
The Investment Professional's Choice
(R) These registered service marks used
under license from the owner, Alliance
Capital Management L.P.
WDGIISR300
