UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-7732
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
Alliance Capital Management, L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: March 31, 2004
Date of reporting period: March 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
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Closed End
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AllianceBernstein [LOGO](SM)
Investment Research and Management
Alliance World Dollar Government Fund II
Annual Report--March 31, 2004
Investment Products Offered
---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
---------------------------
You may obtain a description of the Fund's proxy voting policies and
procedures, without charge, upon request by visiting Alliance Capital's web
site at www.alliancebernstein.com (click on Investors, then the "proxy voting
policies and procedures" link on the left side of the page), or by going to the
Securities and Exchange Commission's web site at www.sec.gov, or by calling
Alliance Capital at (800) 227-4618.
AllianceBernstein Investment Research and Management, Inc., is an affiliate of
Alliance Capital Management L.P., the manager of the funds, and is a member of
the NASD.
May 15, 2004
Annual Report
This report provides management's discussion of fund performance for Alliance
World Dollar Government Fund II (the "Fund") for the annual reporting period
ended March 31, 2004.
Investment Objective and Policies
This closed-end fund is designed for investors who seek high current income
and, secondarily, 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.
Investment Results
The following table shows the Fund's performance over the six- and 12-month
periods ended March 31, 2004. For comparison, we have included the J.P. Morgan
Emerging Markets Bond Index Plus (JPM EMBI+), which is a standard measure of
the performance of a basket of unmanaged emerging market debt securities.
INVESTMENT RESULTS*
Periods Ended March 31, 2004
---------------------------------
Returns
---------------------------------
6 Months 12 Months
-------------- --------------
Alliance World Dollar
Government Fund II (NAV) 10.50% 30.01%
------------------------------------------------------------
J.P. Morgan Emerging
Markets Bond Index Plus 8.71% 23.64%
------------------------------------------------------------
The Fund's Market Price per share on March 31, 2004 was $12.91. For additional
Financial Highlights, please see page 25.
* The Fund's investment results are for the periods shown and are based on the
net asset value (NAV) of the Fund as of March 31, 2004. Performance assumes
reinvestment of distributions and does not account for taxes. All fees and
expenses related to the operation of the Fund have been deducted. Past
performance is no guarantee of future results.
The unmanaged J.P. Morgan Emerging Markets Bond Index Plus (JPM EMBI+) does not
reflect fees and expenses associated with the active management of a mutual
fund portfolio. The Index is comprised of dollar-denominated restructured
sovereign bonds; a large percentage of the Index is made up of Brady bonds.
Investors cannot invest directly in an index, and its results are not
indicative of any specific investment, including Alliance World Dollar
Government Fund II.
The Fund outperformed its benchmark, the JPM EMBI+, for both the six- and
12-month periods ended March 31, 2004. The Fund benefited primarily from its
emerging market debt country weightings and individual security selection.
The Fund's security selection in Mexican government bonds, followed by holdings
in Brazil, Venezuela and Turkey were the primary contributors to positive
performance. The top performing country within the JPM EMBI+, Ecuador, also
contributed to the Fund's outperformance for the
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 1
12-month period under review. During this annual period, Ecuador returned
73.34%, as measured by the Index. The positioning of Uruguayan and Venezuelan
debt also helped the Fund to outperform versus the Index, as both countries
conducted debt exchanges during this period that significantly improved the
maturity structure of their external debt. Uruguay is not part of the JPM EMBI+.
Market Review and Investment Strategy
The emerging market debt class, as represented by the JPM EMBI+, returned a
strong 23.64% for the annual period ended March 31, 2004. The emerging debt
markets benefited as a result of a very favorable world financial environment
in which the average central bank policy rate declined 100 basis points to just
2.65%. Additionally, limited supply, strong investor demand and global
liquidity levels all remained supportive for this asset class. For the annual
period under review, Latin countries outperformed non-Latin countries, posting
returns of 27.17% versus 18.91%, respectively. All countries represented within
the Index posted positive returns for the reporting period. Top performing
countries included Ecuador at 73.34%, Turkey at 51.78%, Venezuela at 48.80% and
Brazil at 38.94%.
Early in the reporting period, we increased the Fund's overweight exposure to
Brazilian sovereign bonds as President Lula exceeded expectations in his
ability to push forward reforms. However, at the beginning of 2004, we reduced
the Fund's holdings due to concerns over fundamentals, inflation worries and
the possible inability of Brazil's Central Bank to continue reducing interest
rates. In addition, political scandal and subsequent missteps have caused the
Lula administration to lose much of the political goodwill it had in 2003.
We decreased the Fund's holdings in Mexico as a result of stalled growth, which
was due to poor external demand, mainly from the U.S., and loss of
competitiveness in Mexico's manufacturing sector.
We have maintained the Fund's position in Russian sovereign debt as credit
statistics continued to improve. Russia, which was recently upgraded by
Standard & Poor's (S&P) to BB+ and is rated Baa3 by Moody's Investors Service,
has strong gross domestic product momentum and little need to issue new debt.
The country is also benefiting from high oil prices and President Putin's
appointment of a pro-reform government. Russia comprises approximately 20% of
the JPM EMBI+.
Early in the reporting period, we increased the Fund's holdings in Uruguay as
the government announced an aggressive plan to swap its outstanding debt (with
the support of the International Monetary Fund (IMF)) for longer maturity
securities. This strategy contributed positively to the Fund's performance.
We also increased the Fund's holdings in Ecuador, which benefited from
_______________________________________________________________________________
2 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
higher oil prices and greater output, significant structural reforms and
engagement with the IMF.
S&P raised Turkey's rating to B+ from B during the reporting period, crediting
the government's efforts to comply with targets set by the IMF and its resolve
to implement reforms. At that time, we added to the Fund's position in Turkey.
Finally, we have reduced the Fund's leverage and scaled back the interest rate
duration of the Fund due to the prospect of tighter monetary policy in the U.S.
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 3
Performance Update
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PERFORMANCE UPDATE
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II (NAV)
GROWTH OF A $10,000 INVESTMENT
3/31/94 TO 3/31/04
Alliance World Dollar Government Fund II: $41,169
J.P. Morgan Emerging Markets Bond Index Plus: $38,628
[THE FOLLOWING TABLE WAS DEPICTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL.]
Alliance World Dollar J.P. Morgan Emerging
Government Fund II Markets Bond Index Plus
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3/31/94 $ 10,000 $ 10,000
3/31/95 $ 8,982 $ 9,147
3/31/96 $ 12,606 $ 13,559
3/31/97 $ 16,532 $ 18,308
3/31/98 $ 20,415 $ 21,600
3/31/99 $ 14,608 $ 18,474
3/31/00 $ 21,040 $ 23,840
3/31/01 $ 22,667 $ 26,140
3/31/02 $ 26,344 $ 27,086
3/31/03 $ 31,666 $ 31,243
3/31/04 $ 41,169 $ 38,628
This chart illustrates the total value of an assumed $10,000 investment in
Alliance World Dollar Government Fund II at net asset value (NAV) (from 3/31/94
to 3/31/04) as compared to the performance of an appropriate index. The chart
assumes the reinvestment of dividends and capital gains distributions. Past
performance is not indicative of future results, and is not representative of
future gain or loss in capital value or dividend income.
The unmanaged J.P. Morgan Emerging Markets Bond Index Plus (JPM EMBI+) does not
reflect fees and expenses associated with the active management of a mutual
fund portfolio. The Index is comprised of dollar-denominated restructured
sovereign bonds; a large percentage of the Index is made up of Brady bonds.
Investors cannot invest directly in an index, and its results are not
indicative of any specific investment, including Alliance World Dollar
Government Fund II.
_______________________________________________________________________________
4 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Portfolio Summary
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PORTFOLIO SUMMARY
March 31, 2004
INCEPTION DATE
7/28/93
PORTFOLIO STATISTICS
Net Assets ($mil): $919.5
SECURITY TYPE
81.5% Sovereign Debt Obligations
9.1% Corporate Debt Obligations [PIE CHART OMITTED]
9.4% Short-Term
All data as of March 31, 2004. The Fund's security type breakdown is expressed
as a percentage of total investments and may vary over time.
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ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 5
Portfolio of Investments
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PORTFOLIO OF INVESTMENTS
March 31, 2004
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-85.4%
Argentina-1.8%
Republic of Argentina FRN
1.234%, 8/03/12 $ 24,387 $ 16,278,323
-------------
Belize-0.6%
Government of Belize
9.50%, 8/15/12 5,300 5,570,533
-------------
Brazil-15.2%
Federal Republic of Brazil
11.00%, 8/17/40(a) 22,125 23,662,688
12.75%, 1/15/20 13,515 16,481,543
14.50%, 10/15/09 2,380 3,035,690
C-Bonds
8.00%, 4/15/14 65,456 63,819,208
DCB FRN
Series L
2.063%, 4/15/12 37,225 32,571,875
-------------
139,571,004
-------------
Bulgaria-1.8%
Republic of Bulgaria
8.25%, 1/15/15(b) 13,841 16,886,020
-------------
Colombia-5.1%
Republic of Colombia
10.75%, 1/15/13 13,810 16,565,095
11.75%, 2/25/20 23,511 30,047,057
-------------
46,612,152
-------------
Ecuador-4.7%
Republic of Ecuador
7.00%, 8/15/30(b)(c) 43,225 38,167,674
12.00%, 11/15/12(b) 5,300 5,441,775
-------------
43,609,449
-------------
El Salvador-0.4%
Republic of El Salvador
8.50%, 7/25/11(b) 3,700 4,264,250
-------------
Indonesia-0.7%
Republic of Indonesia
6.75%, 3/10/14(b) 6,185 6,138,613
-------------
Jamaica-0.6%
Government of Jamaica
11.75%, 5/15/11(b) 4,610 5,313,025
-------------
_______________________________________________________________________________
6 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Portfolio of Investments
-------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Mexico-13.6%
United Mexican States
6.625%, 3/03/15 $ 2,000 $ 2,181,500
8.125%, 12/30/19(d) 58,705 69,858,949
11.375%, 9/15/16(d) 34,926 52,921,621
-------------
124,962,070
-------------
Panama-2.5%
Republic of Panama
8.875%, 9/30/27 1,450 1,573,250
9.375%, 7/23/12 1,900 2,242,950
9.375%, 4/01/29 8,775 10,003,500
10.75%, 5/15/20 7,300 9,252,750
-------------
23,072,450
-------------
Peru-4.4%
Republic of Peru
8.75%, 11/21/33 9,000 9,099,000
9.125%, 2/21/12 12,025 13,669,419
9.875%, 2/06/15 8,675 10,232,163
FLIRB
4.50%, 3/07/17(c) 8,450 7,430,719
-------------
40,431,301
-------------
Philippines-3.2%
Republic of the Philippines
8.25%, 1/15/14 6,150 6,096,188
9.00%, 2/15/13 6,650 6,857,813
9.875%, 1/15/19 12,750 13,196,250
10.625%, 3/16/25 3,425 3,724,688
-------------
29,874,939
-------------
Russia-15.7%
Russian Federation
5.00%, 3/31/30(a)(b)(c) 88,842 89,008,578
Russian Ministry of Finance
Series V
3.00%, 5/14/08 13,387 12,282,573
Series VI
3.00%, 5/14/06(b) 300 295,890
3.00%, 5/14/06 16,390 16,165,457
Series VII
3.00%, 5/14/11 32,770 27,035,250
-------------
144,787,748
-------------
South Africa-0.7%
Republic of South Africa
7.375%, 4/25/12 5,475 6,392,063
-------------
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 7
Portfolio of Investments
-------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Turkey-4.3%
Republic of Turkey
9.875%, 3/19/08 $ 3,500 $ 4,056,500
11.00%, 1/14/13 6,400 8,108,800
11.50%, 1/23/12 875 1,127,656
11.75%, 6/15/10 4,455 5,702,400
11.875%, 1/15/30 7,770 11,169,375
12.375%, 6/15/09 7,060 9,098,575
-------------
39,263,306
-------------
Ukraine-4.7%
Government of Ukraine
6.875%, 3/04/11(b) 3,900 4,017,000
7.65%, 6/11/13(b) 21,151 22,229,083
11.00%, 3/15/07(b) 15,064 16,871,981
-------------
43,118,064
-------------
Uruguay-0.6%
Republic of Uruguay
7.875%, 1/15/33 7,272 5,454,264
-------------
Venezuela-4.8%
Republic of Venezuela
5.375%, 8/07/10 10,725 8,901,750
9.25%, 9/15/27 31,610 28,101,289
DCB FRN
Series DL
2.125%, 12/18/07 7,047 6,624,547
Discount Bonds FRN
Series W-B
2.063%, 3/31/20 216 176,040
-------------
43,803,626
-------------
Total Sovereign Debt Obligations
(cost $658,975,909) 785,403,200
-------------
CORPORATE DEBT OBLIGATIONS-9.6%
Kazakhstan-0.8%
Hurricane Finance
9.625%, 2/12/10(b) 3,500 3,920,000
Kazkommerts International BV
8.50%, 4/16/13(b) 3,000 3,195,000
-------------
7,115,000
-------------
Malaysia-0.3%
Petronas Capital Ltd.
7.875%, 5/22/22(b) 2,340 2,811,571
-------------
_______________________________________________________________________________
8 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Portfolio of Investments
-------------------------------------------------------------------------------
Contracts(e)
or
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Mexico-3.0%
Innova S De. R.L., SA
9.375%, 9/19/13 $ 7,955 $ 8,670,950
12.875%, 4/01/07 2,787 2,800,600
Monterrey Power SA De CV
9.625%, 11/15/09(b) 3,609 4,367,225
Petroleos Mexicanos
9.25%, 3/30/18 10,000 12,325,000
-------------
28,163,775
-------------
Romania-0.4%
MobiFon Holdings BV
12.50%, 7/31/10 3,075 3,551,625
-------------
Russia-4.4%
Gazprom Oao
9.625%, 3/01/13(b) 13,780 15,915,900
Mobile Telesystems Finance
9.75%, 1/30/08(b) 4,590 5,071,950
10.95%, 12/21/04 8,210 8,661,550
Tyumen Oil
11.00%, 11/06/07(b) 9,025 10,528,563
-------------
40,177,963
-------------
United States-0.7%
Citgo Petroleum Corp.
11.375%, 2/01/11 760 891,100
Freeport-McMoran Copper & Gold
10.125%, 2/01/10 4,800 5,472,000
-------------
6,363,100
-------------
Total Corporate Debt Obligations
(cost $79,834,356) 88,183,034
-------------
CALL OPTIONS PURCHASED(f)-0.0%
Brazil-0.0%
Federal Republic of Brazil
11.00%, 8/17/40
expiring Apr '04 @ 105.65 8,580,000 137,280
expiring Apr '04 @ 110.75 2,865,000 -0-
expiring Apr '04 @ 110.80 2,865,000 -0-
-------------
Total Call Options Purchased
(cost $262,206) 137,280
-------------
PUT OPTIONS PURCHASED(f)-0.0%
Brazil-0.0%
Federal Republic of Brazil
11.00%, 8/17/40
expiring Apr '04 @ 105.30 5,730,000 28,650
-------------
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 9
Portfolio of Investments
-------------------------------------------------------------------------------
Contracts(e),
Shares or
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Russia-0.0%
Russian Federation
5.00%, 3/31/30
expiring Apr '04 @ 97.6625 5,730,000 $ -0-
-------------
Total Put Options Purchased
(cost $203,415) 28,650
-------------
WARRANTS(f)-0.0%
Central Bank of Nigeria
Warrants, expiring 11/15/20 43,000 -0-
Republic of Venezuela
Warrants, expiring 4/15/20 25,000 -0-
-------------
Total Warrants
(cost $0) -0-
-------------
SHORT-TERM INVESTMENT-9.8%
Time Deposit-9.8%
Societe Generale
1.03%, 4/01/04
(cost $90,300,000) $90,300 90,300,000
-------------
Total Investments-104.8%
(cost $829,575,886) 964,052,164
Other assets less liabilities-(4.8%) (44,599,562)
-------------
Net Assets-100% $ 919,452,602
=============
CALL OPTIONS WRITTEN (see Note C)
Exercise Expiration
Description Contracts(e) Price Month U.S. $ Value
-------------------------------------------------------------------------------
Federal Republic
of Brazil
11.00%, 8/17/40 5,730,000 $ 107.00 Apr. '04 $ (45,840)
Russian Federation
5.00%, 03/31/30 5,730,000 98.3125 Apr. '04 (103,140)
----------
(premiums received
$203,415) $ (148,980)
==========
_______________________________________________________________________________
10 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Portfolio of Investments
-------------------------------------------------------------------------------
CREDIT DEFAULT SWAP CONTRACTS (see Note C)
Notional Unrealized
Swap Counterparty & Amount Interest Termination Appreciation/
Referenced Obligation (000's) Rate Date (Depreciation)
-------------------------------------------------------------------------------
Buy Contracts:
--------------
Citigroup Global
Markets, Inc.
Federal Republic
of Brazil
12.25%, 3/06/30 9,100 5.85% 2/20/14 $ 186,550
Citigroup Global
Markets, Inc.
Republic of Hungary
4.50%, 2/06/13 3,075 0.50 11/26/13 (34,852)
Citigroup Global
Markets, Inc.
Republic of
Philippines
10.625%, 3/16/25 4,070 5.60 3/20/14 8,769
Citigroup Global
Markets, Inc.
Republic of Turkey
11.875%, 1/15/30 3,965 3.85 1/31/09 (73,708)
Deutsche Bank
Republic of Peru
9.875%, 2/06/15 6,150 3.90 9/20/08 (42,435)
Deutsche Bank
Republic of Turkey
11.875%, 1/15/30 7,930 3.25 1/24/09 52,906
Deutsche Bank
Republic of Venezuela
9.25%, 9/15/27 4,800 3.65 1/20/06 50,059
Sale Contracts:
---------------
Citigroup Global
Markets, Inc.
Federal Republic
of Brazil
12.25%, 3/06/30 11,000 6.35 8/20/05 680,151
Citigroup Global
Markets, Inc.
Federal Republic
of Brazil
12.25%, 3/06/30 9,100 5.26 2/20/09 (95,712)
Citigroup Global
Markets, Inc.
Republic of Philippines
10.625%, 3/16/25 4,070 4.95 3/20/09 (2,473)
Deutsche Bank
Republic of Turkey
11.875%, 1/15/30 6,542 1.80 7/24/05 37,944
Deutsche Bank
Republic of Turkey
11.875%, 1/15/30 9,913 1.50 1/24/05 55,510
JP Morgan Chase
Russian Federation
5.00%, 3/31/30 14,500 3.20 6/25/13 911,631
JP Morgan Chase
Russian Federation
5.00%, 3/31/30 14,500 3.20 6/26/13 910,344
Morgan Stanley
Federal Republic
of Brazil
10.125%, 5/15/27 7,200 17.75 2/13/08 3,216,000
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 11
Portfolio of Investments
-------------------------------------------------------------------------------
REVERSE REPURCHASE AGREEMENTS (see Note C)
Interest
Broker Rate Maturity Amount
-------------------------------------------------------------------------------
JP Morgan Chase 0.75% 4/19/04 $ 33,757,844
JP Morgan Chase 0.10 4/19/04 25,239,451
------------
$ 58,997,295
============
(a) A position or portion of the underlying securities has been segregated by
the Fund for the written call options outstanding at March 31, 2004. The value
of these securities amounted to $11,868,979 at March 31, 2004.
(b) Security is 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, 2004,
the aggregate market value of these securities amounted to $254,444,098 or
27.7% of net assets.
(c) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at March 31, 2004.
(d) Position, or portion thereof, with an aggregate market value of
$59,043,074 has been segregated to collateralize reverse repurchase agreements.
(e) One contract relates to principal amount of $1.00.
(f) Non-income producing security.
Glossary of Terms:
DCB - Debt Conversion Bonds
FLIRB - Front Loaded Interest Reduction Bond
FRN - Floating Rate Note
See notes to financial statements.
_______________________________________________________________________________
12 o Alliance World Dollar Government Fund II
Statement of Assets & Liabilities
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STATEMENT OF ASSETS & LIABILITIES
March 31, 2004
ASSETS
Investments in securities, at value (cost $829,575,886) $ 964,052,164
Cash 112,805
Unrealized appreciation of swap contracts 6,109,864
Interest receivable 15,612,252
Receivable for investment securities sold 12,860,979
-------------
Total assets 998,748,064
-------------
LIABILITIES
Outstanding call options written, at value
(premiums received $203,415) 148,980
Unrealized depreciation of swap contracts 249,180
Payable for reverse repurchase agreements 58,997,295
Payable for investment securities purchased 12,772,214
Dividend payable 5,750,141
Advisory fee payable 824,664
Administrative fee payable 201,653
Accrued expenses 351,335
-------------
Total liabilities 79,295,462
-------------
Net Assets $ 919,452,602
=============
COMPOSITION OF NET ASSETS
Capital stock, at par $ 676,487
Additional paid-in capital 915,684,345
Distributions in excess of net investment income (4,872,958)
Accumulated net realized loss on investment transactions (132,426,640)
Net unrealized appreciation of investments 140,391,368
-------------
$ 919,452,602
=============
NET ASSET VALUE PER SHARE
(based on 67,648,715 shares outstanding) $13.59
======
See notes to financial statements.
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 13
Statement of Operations
-------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended March 31, 2004
INVESTMENT INCOME
Interest $ 85,291,371
EXPENSES
Advisory fee $ 9,536,160
Administrative 1,430,424
Custodian 443,567
Transfer agency 142,951
Audit and legal 137,477
Printing 87,320
Registration 62,968
Directors' fees 31,747
Miscellaneous 39,146
------------
Total expenses before interest 11,911,760
Interest expense 398,662
------------
Total expenses 12,310,422
------------
Net investment income 72,980,949
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT TRANSACTIONS
Net realized gain on:
Investment transactions 218,516,012
Swaps contracts 17,178,335
Written options 1,847,311
Net change in unrealized
appreciation/depreciation of:
Investments (65,193,052)
Swaps 4,610,732
Written options 341,532
------------
Net gain on investment transactions 177,300,870
------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $250,281,819
============
See notes to financial statements.
_______________________________________________________________________________
14 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Statement of Changes in Net Assets
-------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
March 31, March 31,
2004 2003
============= =============
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 72,980,949 $ 83,488,349
Net realized gain (loss) on
investment transactions 237,541,658 (28,508,765)
Net change in unrealized
appreciation/depreciation
of investments (60,240,788) 93,026,805
------------- -------------
Net increase in net assets from
operations 250,281,819 148,006,389
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income (87,373,144) (82,323,739)
COMMON STOCK TRANSACTIONS
Tender offer resulting in the
redemption of 10,201,653
shares of Common Stock (132,891,565) -0-
------------- -------------
Total increase 30,017,110 65,682,650
NET ASSETS
Beginning of period 889,435,492 823,752,842
------------- -------------
End of period (including distributions
in excess of net investment income
and undistributed net investment
income of $4,872,958 and $3,958,010,
respectively) $ 919,452,602 $ 889,435,492
============= =============
See notes to financial statements.
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 15
Statement of Cash Flows
-------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
Year Ended March 31, 2004
INCREASE (DECREASE) IN CASH FROM
OPERATING ACTIVITIES:
Interest received $ 81,765,220
Interest expense paid (574,516)
Operating expenses paid (12,089,997)
--------------
Net increase in cash from operating
activities $ 69,100,707
INVESTING ACTIVITIES:
Proceeds from disposition of long-term
portfolio investments 1,710,909,803
Purchase of long-term portfolio
investments (1,462,156,319)
Proceeds from disposition of short-term
investments, net (20,994,992)
--------------
Net increase in cash from investing
activities 227,758,492
FINANCING ACTIVITIES:*
Decrease in reverse repurchase
agreements (82,948,171)
Cash dividends paid (81,623,003)
Tender Offer (132,891,565)
--------------
Net decrease in cash from
financing activities (297,462,739)
--------------
Net decrease in cash (603,540)
Cash at beginning of period 716,345
--------------
Cash at end of period $ 112,805
==============
_______________________________________________________________________________
RECONCILIATION OF NET INCREASE IN
NET ASSETS FROM OPERATIONS TO
NET INCREASE IN CASH FROM OPERATING
ACTIVITIES:
Net increase in net assets resulting
from operations $ 250,281,819
ADJUSTMENTS:
Decrease in interest receivable $ 6,710,029
Net realized gain on investment
transactions (237,541,658)
Net change in unrealized
appreciation/depreciation
of investments 60,240,788
Accretion of bond discount and
amortization of bond premium (10,236,180)
Decrease in interest payable (175,854)
Decrease in accrued expenses (178,237)
--------------
Total adjustments (181,181,112)
--------------
NET INCREASE IN CASH FROM OPERATING
ACTIVITIES $ 69,100,707
==============
See notes to financial statements.
_______________________________________________________________________________
16 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Notes to Financial Statements
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
March 31, 2004
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 financial statements have been prepared in conformity
with accounting principles generally accepted in the United States, 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 expenses 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
In accordance with Pricing Policies adopted by the Board of Directors of the
Fund (the "Pricing Policies") and applicable law, portfolio securities are
valued at current market value or at fair value. The Board of Directors has
delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the
Board's continuing oversight, certain responsibilities with respect to the
implementation of the Pricing Policies. Pursuant to the Pricing Policies,
securities for which market quotations are readily available are valued at
their current market value. In general, the market value of these securities is
determined as follows:
Securities listed on a national securities exchange or on a foreign securities
exchange are valued at the last sale price at the close of the exchange or
foreign securities exchange. If there has been no sale on such day, the
securities are valued at the mean of the closing bid and asked prices on such
day. If no bid or asked prices are quoted on such day, then the security is
valued in good faith at fair value in accordance with the Pricing Policies.
Securities listed on more than one exchange are valued by reference to the
principal exchange on which the securities are traded; securities not listed on
an exchange but traded on The Nasdaq Stock Market, Inc. ("NASDAQ") are valued
in accordance with the NASDAQ Official Closing Price; listed put or call
options are valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on that day; open
futures contracts and options thereon are valued using the closing settlement
price or, in the absence of such a price, the most recent quoted bid price. If
there are no quotations available for the day of valuations, the last available
closing settlement price is used; securities traded in the over-the-counter
market, (but excluding securities traded on NASDAQ) are valued at the mean of
the current bid and asked prices as reported by the National Quotation Bureau
or other comparable sources; U.S. Government securities and other debt
instruments having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or by amortizing
their fair value as of the 61st day prior to maturity if their original term to
maturity exceeded 60 days; fixed-income securities, including
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 17
Notes to Financial Statements
-------------------------------------------------------------------------------
mortgage backed and asset backed securities, may be valued on the basis of
prices provided by a pricing service or at a price obtained from one or more of
the major broker/dealers. In cases where broker/dealer quotes are obtained, the
Pricing Policies provide that the Adviser may establish procedures whereby
changes in market yields or spreads are used to adjust, on a daily basis, a
recently obtained quoted price on a security; and OTC and other derivatives are
valued on the basis of a quoted bid price or spread from a major broker/dealer
in such security.
Securities for which market quotations are not readily available are valued at
fair value in accordance with the Pricing Policies. The Fund fair values a
security that it holds when a significant event (e.g., an earthquake or a major
terrorist attack) occurs after the time that the latest market quotation was
established, and, as a result, such market quotation cannot be said to
represent the current market value of the security as of the time the Fund
prices its shares. Fair valuing securities is imprecise, and there is no
assurance that the Fund could dispose of the security at the price used for
determining the Fund's net asset value.
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 provisions for federal income or excise taxes are
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 discounts as
adjustments to interest income. Additionally, the Fund amortizes premiums on
debt securities for financial statement reporting purposes.
4. 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
accounting principles generally accepted in the United States. 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 Fee and Other Transactions with Affiliates
Under the terms of the Investment Advisory Agreement, the Fund pays the Adviser
an advisory fee at an annual rate of 1% of the Fund's average weekly net
assets. Such fee is accrued daily and paid monthly.
_______________________________________________________________________________
18 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Notes to Financial Statements
-------------------------------------------------------------------------------
Under the terms of the Administration Agreement, the Fund pays the Adviser an
administrative fee at an annual rate of .15 of 1% of the Fund's average weekly
net assets. Such fee is accrued daily and paid monthly. The Adviser 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
Global Investor Services, Inc. ("AGIS"), a wholly-owned subsidiary of the
Adviser, whereby the Fund reimburses AGIS for costs relating to servicing phone
inquiries on behalf of the Fund. During the year ended March 31, 2004, there
was no reimbursement paid to AGIS.
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended March 31, 2004, were as follows:
Purchases Sales
============== ==============
Investment securities (excluding
U.S. government securities) $1,433,057,570 $1,671,571,959
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation (excluding written options and swap
contracts) are as follows:
Cost $ 835,993,856
==============
Gross unrealized appreciation $ 132,973,684
Gross unrealized depreciation (4,915,376)
--------------
Net unrealized appreciation $ 128,058,308
==============
1. Option Transactions
For hedging and investment purposes, the Fund may purchase and write (sell) put
and call options on U.S. and foreign government securities and foreign
currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 19
Notes to Financial Statements
-------------------------------------------------------------------------------
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from written options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from options
written. The difference between the premium received and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium received is less than the
amount paid for the closing purchase transaction, as a realized loss. If a call
option is exercised, the premium received is added to the proceeds from the
sale of the underlying security or currency in determining whether the Fund has
realized a gain or loss. If a put option is exercised, the premium received
reduces the cost basis of the security or currency purchased by the Fund. In
writing an option, the Fund bears the market risk of an unfavorable change in
the price of the security or currency underlying the written option. Exercise
of an option written by the Fund could result in the Fund selling or buying a
security or currency at a price different from the current market value.
Transactions in written options for the year ended March 31, 2004, were as
follows:
Number of Premiums
Contracts Received
============= =============
OPTIONS OUTSTANDING AT
MARCH 31, 2003 36,595,124 $ 508,492
Options written 89,499,920 1,542,599
Options terminated in closing purchase
transactions (54,103,007) (804,583)
Options expired (60,532,037) (1,043,093)
------------- -------------
OPTIONS OUTSTANDING AT
MARCH 31, 2004 11,460,000 $ 203,415
============= =============
2. Swap Agreements
The Fund may enter into swaps to hedge its exposure to interest rates and
credit risk or 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 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 interim 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 accrues for the interim payments on swap contracts on a daily basis,
with the net amount recorded within unrealized appreciation/depreciation of
_______________________________________________________________________________
20 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Notes to Financial Statements
-------------------------------------------------------------------------------
swap contracts on the statement of assets and liabilities. Once the interim
payments are settled in cash, the net amount is recorded as realized gain/loss
on swaps, in addition to realized gain/loss recorded upon the termination of
swap contracts on the statement of operations. Fluctuations in the value of
swap contracts are recorded as a component of net change in unrealized
appreciation/ depreciation of investments.
The Fund may enter into credit default swaps. The Fund may purchase credit
protection on the referenced obligation of the credit default swap ("Buy
Contract") or provide credit protection on the referenced obligation of the
credit default swap ("Sale Contract"). A sale/(buy) in a credit default swap
provides upon the occurrence of a credit event, as defined in the swap
agreement, for the Fund to buy/(sell) from/(to) the counterparty at the
notional amount (the "Notional Amount") and receive/(deliver) the principal
amount of the referenced obligation. If a credit event occurs, the maximum
payout amount for a Sale Contract is limited to the Notional Amount of the swap
contract ("Maximum Payout Amount"). During the term of the swap agreement, the
Fund receives/(pays) semi-annual fixed payments from/(to) the respective
counterparty, calculated at the agreed upon interest rate applied to the
Notional Amount. These interim payments are recorded within unrealized
appreciation/depreciation of swap contracts on the statement of assets and
liabilities.
Credit default swaps may involve greater risks than if a Fund had invested in
the referenced obligation directly. Credit default swaps are subject to general
market risk, liquidity risk, counterparty risk and credit risk. If the Fund is
a buyer and no credit event occurs, it will lose its investment. In addition,
if the Fund is a seller and a credit event occurs, the value of the referenced
obligation received by the Fund coupled with the periodic payments previously
received, may be less than the Maximum Payout Amount it pays to the buyer,
resulting in a loss to the Fund.
At March 31, 2004, the Fund had Sale Contracts outstanding with Maximum Payout
Amounts aggregating $76,825,000, with net unrealized appreciation of $5,713,395
and terms ranging from 10 months to 9 years, as reflected in the portfolio of
investments.
In certain circumstances, the Fund may hold Sale Contracts on the same
referenced obligation and with the same counterparty it has purchased credit
protection, which may reduce its obligation to make payments on Sale Contracts,
if a credit event occurs. The Fund had Buy Contracts outstanding with a
Notional Amount of $21,100,000 with respect to the same referenced obligations
and same counterparties of certain Sale Contracts outstanding, which reduced
its obligation to make payments on Sale Contracts to $55,725,000 as of March
31, 2004.
3. 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
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 21
Notes to Financial Statements
-------------------------------------------------------------------------------
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.
For the year ended March 31, 2004, the average amount of reverse repurchase
agreements outstanding was $63,069,505 and the daily weighted average interest
rate was .85%.
NOTE D
Capital Stock
There are 100,000,000 shares of $.01 par value common stock authorized. Of the
67,648,715 shares outstanding at March 31, 2004, the Adviser owned 7,200
shares. During the year ended March 31, 2004, the Fund repurchased 10,201,653
shares of its outstanding common stock for $13.02 per share pursuant to a
tender offer. The Fund incurred tender offering costs of $66,049 which were
charged to additional paid-in capital. During the years ended March 31, 2004
and March 31, 2003, the Fund issued no shares in connection with the Fund's
dividend reinvestment plan.
NOTE E
Risks Involved in Investing in the Fund
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes
in interest rates will affect the value of the Fund's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Fund's investments to decline. Credit risk is
the risk that the issuer or guarantor of a debt security, or the counterparty
to a derivative contract, will be unable or unwilling to make timely principal
and/or interest payments, or to otherwise honor its obligations. The degree of
risk for a particular security may be reflected in its credit risk rating.
Credit risk is greater for medium quality and lower-rated securities.
Lower-rated debt securities and similar unrated securities (commonly known as
"junk bonds") have speculative elements or are predominantly speculative risks.
Concentration of Risk--Investing in securities of foreign companies or 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 or foreign governments and their markets may be less
liquid and their prices more volatile than those of comparable United States
companies or of the United States government.
In the ordinary course of business, the Fund enters into contracts that contain
a variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these indemnification provisions and expects the risk of loss
thereunder to be remote.
_______________________________________________________________________________
22 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Notes to Financial Statements
-------------------------------------------------------------------------------
NOTE F
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended March 31,
2004 and March 31, 2003 were as follows:
2004 2003
============= =============
Distributions paid from:
Ordinary income $ 87,373,144 $ 82,323,739
------------- -------------
Total taxable distributions 87,373,144 82,323,739
------------- -------------
Total distributions paid $ 87,373,144 $ 82,323,739
============= =============
As of March 31, 2004, the components of accumulated earnings/(deficit) on a tax
basis were as follows:
Undistributed ordinary income $ 2,695,800
Accumulated capital and other losses (127,414,167)(a)
Unrealized appreciation/(depreciation) 133,560,278(b)
-------------
Total accumulated earnings/(deficit) $ 8,841,911
=============
(a) On March 31, 2004, the Fund had a net capital loss carryforward of
$127,414,167 of which $68,891,646 expires in the year 2010 and $58,522,521
expires in the year 2011. To the extent future capital gains are offset by
capital loss carryforwards, such gains will not be distributed. During the
fiscal year, the fund utilized capital loss carryforwards of $225,624,007.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales, the difference between book and tax amortization methods
for premium and the difference between book and tax treatment of swap income.
During the current fiscal year, permanent differences, primarily due to the tax
treatment of bond premium and the tax treatment of swap income, resulted in a
net decrease in distributions in excess of net investment income and an
increase in accumulated net realized loss on investment transactions. This
reclassification had no effect on net assets.
NOTE G
Legal Proceedings
As has been previously reported in the press, the Staff of the U.S. Securities
and Exchange Commission ("SEC") and the Office of the New York Attorney General
("NYAG") have been investigating practices in the mutual fund industry
identified as "market timing" and "late trading" of mutual fund shares. Certain
other regulatory authorities have also been conducting investigations into
these practices within the industry and have requested that Alliance Capital
Management L.P. ("Alliance Capital"), the Fund's Adviser, provide information
to them. Alliance Capital has been cooperating and will continue to cooperate
with all of these authorities. The shares of the Fund are not redeemable by the
Fund, but are traded on an exchange at prices established by the market.
Accordingly, the
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 23
Notes to Financial Statements
-------------------------------------------------------------------------------
Fund and its shareholders are not subject to the market timing and late trading
practices that are the subject of the investigations mentioned above or the
lawsuits described below. Please see below for a description of the agreements
reached by Alliance Capital and the SEC and NYAG in connection with the
investigations mentioned above.
In addition, numerous lawsuits have been filed against Alliance Capital and
certain other defendants in which plaintiffs make claims purportedly based on
or related to the same practices that are the subject of the SEC and NYAG
investigations referred to above. Some of these lawsuits name the Fund as a
party. Management of the Fund's Adviser believes that these private lawsuits
are not likely to have a material adverse effect on the results of operations
or financial condition of the Fund.
On December 18, 2003, Alliance Capital confirmed that it had reached terms with
the SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is subject to final,
definitive documentation. Among the key provisions of these agreements are the
following:
(i) Alliance Capital agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) Alliance Capital agreed to reduce the advisory fees it receives from some
of the AllianceBernstein long-term, open-end retail funds, commencing January
1, 2004, for a period of at least five years; and
(iii) Alliance Capital agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order contemplates that Alliance
Capital's registered investment company clients, including the Fund, will
introduce governance and compliance changes.
The shares of the Fund are not redeemable by the Fund, but are traded on an
exchange at prices established by the market. Accordingly, the Fund and its
shareholders are not subject to the market timing practices described in the
SEC Order and are not expected to participate in the Reimbursement Fund. Since
the Fund is a closed-end fund, it will not have its advisory fee reduced
pursuant to the terms of the agreements mentioned above.
_______________________________________________________________________________
24 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Financial Highlights
-------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
Year Ended March 31,
---------------------------------------------------------------
2004(a) 2003 2002(b) 2001 2000
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $11.42 $10.58 $10.37 $10.83 $8.52
INCOME FROM INVESTMENT
OPERATIONS
Net investment income(c) .99 1.07 1.32 1.25 1.16
Net realized and unrealized
gain (loss) on investment
transactions 2.36 .83 .19 (.62) 2.29
Net increase in net asset
value from operations 3.35 1.90 1.51 .63 3.45
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from
net investment income (1.18) (1.06) (1.30) (1.09) (1.10)
Tax return of capital -0- -0- -0- -0- (.04)
Total dividends and
distributions (1.18) (1.06) (1.30) (1.09) (1.14)
Net asset value,
end of period $13.59 $11.42 $10.58 $10.37 $10.83
Market value,
end of period $12.91 $10.91 $10.32 $9.15 $9.19
Premium/(Discount) (5.00)% (4.47)% (2.46)% (11.76)% (15.14)%
TOTAL RETURN
Total investment return
based on:(d)
Market value 29.27% 17.72% 27.02% 12.05% 11.15%
Net asset value 30.01% 20.20% 16.22% 7.73% 44.16%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $919,453 $889,435 $823,753 $807,476 $843,390
Ratio to average net
assets of:
Expenses 1.29% 1.49% 1.88% 1.90% 1.51%
Expenses, excluding
interest expense 1.25% 1.35% 1.29% 1.28% 1.30%
Net investment income 7.65% 10.53% 12.69% 11.31% 12.33%
Portfolio turnover rate 158% 121% 178% 203% 217%
See footnote summary on page 26.
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 25
Financial Highlights
-------------------------------------------------------------------------------
(a) As of April 1, 2003, the Fund has adopted the method of accounting for
interim payments on swap contracts in accordance with Financial Accounting
Standards Board Statement No. 133. These interim payments are reflected within
net realized and unrealized gain (loss) on swap contracts, however prior to
April 1, 2003, these interim payments were reflected within interest
income/expense on the statement of operations. The effect of this change for
the year ended March 31, 2004, was to decrease net investment income per share
by $0.06 and increase net realized and unrealized gain (loss) on investment
transactions per share by $0.06, and decrease the ratios of net investment
income and expenses to average net assets by 0.50% and 0.20%, respectively.
(b) As required, effective April 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide, Audits of Investment Companies, and
began amortizing premium on debt securities for financial statement reporting
purposes only. The effect of this change for the year ended March 31, 2002 was
to decrease net investment income per share by $.01, increase net realized and
unrealized gain on investments per share by $.01, and decrease the ratio of net
investment income to average net assets from 12.74% to 12.69%. Per share,
ratios and supplemental data for periods prior to April 1, 2001 have not been
restated to reflect this change in presentation.
(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
each 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.
_______________________________________________________________________________
26 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Report of Independent Registered Public Accounting Firm
-------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of 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, 2004, and the related statements of operations and
cash flows 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 five years in the period then ended. 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 the standards of the Public Company
Accounting Oversight Board (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, 2004, by correspondence with the custodian and others. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance World Dollar Government Fund II, Inc. at March 31, 2004, the results
of its operations and its cash flows 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 five years in the period then ended, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
May 14, 2004
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 27
Additional Information
-------------------------------------------------------------------------------
ADDITIONAL INFORMATION
(unaudited)
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
_______________________________________________________________________________
28 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Additional Information
-------------------------------------------------------------------------------
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, 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 Paul J. DeNoon, a Vice President of the Fund.
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 29
Supplemental Proxy Information
-------------------------------------------------------------------------------
SUPPLEMENTAL PROXY INFORMATION
(unaudited)
A Special Meeting of Shareholders of Alliance World Dollar Government Fund II,
Inc. was held on March 25, 2004. The description of each proposal and number of
shares voted at the meeting are as follows:
Authority
Voted For Withheld
-------------------------------------------------------------------------------
1. To elect directors Class One Nominees
(terms expire in 2007)
David H. Dievler 61,246,532 1,002,272
Clifford L. Michel 61,305,733 943,071
Donald J. Robinson 61,263,991 984,813
Class Three Nominee
(terms expire in 2006)
Marc O. Mayer 61,235,167 1,013,637
_______________________________________________________________________________
30 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Board of Directors
-------------------------------------------------------------------------------
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Dr. James M. Hester(1)
Clifford L. Michel(1)
Donald J. Robinson(1)
OFFICERS
Paul J. DeNoon(2), Vice President
Mark R. Manley, Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Vincent S. Noto, 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
Equiserve Trust Company, N.A.
P.O. Box 43011
Providence, RI02940-3011
Independent Auditors
Ernst & Young LLP
5 Times Square
New York, NY 10036
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
(1) Member of the Audit Committee.
(2) Mr. DeNoon is the person primarily responsible for the day-to-day
management of the Fund's investment portfolio.
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 31
Management of the Fund
-------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the
Board of Directors. Certain information concerning the Fund's Directors is set
forth below.
PORTFOLIOS
PRINCIPAL IN FUND OTHER
NAME, AGE OF DIRECTOR, OCCUPATION(S) COMPLEX DIRECTORSHIP
ADDRESS DURING PAST OVERSEEN BY HELD BY
(YEARS OF SERVICE*) 5 YEARS DIRECTOR DIRECTOR
-------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
William H. Foulk, Jr.,#+, 71 Investment adviser and an 116 None
2 Sound View Drive independent consultant. He was
Suite 100 formerly Senior Manager of
Greenwich, CT 06830 Barrett Associates, Inc., a
(11) registered investment adviser,
Chairman of the Board with which he had been
associated since prior to 1999. He
was formerly Deputy Comptroller
and Chief Investment Officer of
the State of New York and, prior
thereto, Chief Investment Officer of
the New York Bank for Savings.
Ruth Block,#+, 73 Formerly Executive Vice President 96 None
500 SE Mizner Blvd., and Chief Insurance Officer of
Boca Raton, FL 33432 The Equitable Life Assurance
(11) Society of the United States;
Chairman and Chief Executive
Officer of Evlico; Director of
Avon, BP (oil and gas), Ecolab
Incorporated (specialty chemicals),
Tandem Financial Group and
Donaldson, Lufkin & Jenrette
Securities Corporation; former
Governor at Large National
Association of Securities
Dealers, Inc.
David H. Dievler,#+, 74 Independent consultant. Until 100 None
P.O. Box 167 December 1994 he was Senior
Spring Lake, NJ 07762 Vice President of Alliance Capital
(11) Management Corporation
("ACMC") responsible for mutual
fund administration. Prior to joining
ACMC in 1984 he was Chief
Financial Officer of Eberstadt Asset
Management since 1968. Prior to
that he was a Senior Manager at
Price Waterhouse & Co. Member of
American Institute of Certified
Public Accountants since 1953.
_______________________________________________________________________________
32 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Management of the Fund
-------------------------------------------------------------------------------
PORTFOLIOS
PRINCIPAL IN FUND OTHER
NAME, AGE OF DIRECTOR, OCCUPATION(S) COMPLEX DIRECTORSHIP
ADDRESS DURING PAST OVERSEEN BY HELD BY
(YEARS OF SERVICE*) 5 YEARS DIRECTOR DIRECTOR
-------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin,#+, 62 Consultant. Formerly President of 98 None
P.O. Box 12 Save Venice, Inc. (preservation
Annandale, NY 12504 organization) from 2001-2002, a
(11) Senior Advisor from June 1999-
June 2000 and President of
Historic Hudson Valley (historic
preservation) from December
1989-May 1999. Previously,
Director of the National Academy
of Design and during 1988-1992,
he was Director and Chairman of
the Audit Committee of ACMC.
Dr. James M. Hester, #+,80 President of the Harry Frank 11 None
25 Cleveland Lane Guggenheim Foundation, with
Princeton, NJ 08540 which he has been associated
(11) since prior to 1999. He was
formerly President of New York
University and the New York
Botanical Garden, formerly Rector
of the United Nations University
and Vice Chairman of the Board
of the Federal Reserve Bank of
New York.
Clifford L. Michel,#+, 64 Senior Counsel to the law firm of 97 Placer
15 St. Bernard's Road Cahill Gordon & Reindel since Dome, Inc.
Gladstone, NJ 07934 February 2001 and a partner of
(11) that firm for more than twenty-five
years prior thereto. He is President
and Chief Executive Officer of
Wenonah Development Company
(investments) and a Director of
Placer Dome, Inc. (mining).
Donald J. Robinson,#+, 69 Senior Counsel to the law firm of 96 None
98 Hell's Peak Road Orrick, Herrington & Sutcliffe LLP
Weston, VT 05161 since prior to 1999. Formerly a
(8) senior partner and a member of
the Executive Committee of that
firm. He was also a member
and Chairman of the Municipal
Securities Rulemaking Board and
Trustee of the Museum of the City
of New York.
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 33
Management of the Fund
-------------------------------------------------------------------------------
PORTFOLIOS
PRINCIPAL IN FUND OTHER
NAME, AGE OF DIRECTOR, OCCUPATION(S) COMPLEX DIRECTORSHIP
ADDRESS DURING PAST OVERSEEN BY HELD BY
(YEARS OF SERVICE*) 5 YEARS DIRECTOR DIRECTOR
-------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTOR
Marc O. Mayer, ++, 46 Executive Vice President of 68 None
1345 Avenue of the ACMC since 2001; prior thereto,
Americas Chief Executive Officer of
New York, NY 10105 Sanford C. Bernstein & Co., LLC
(Elected on November 18, and its predecessor since prior to
2003) 1999.
# Member of the Audit Committee.
+ Member of the Nominating Committee.
++ Mr. Mayer is an "interested director", as defined in the 1940 Act, due to
his position as Executive Vice President of ACMC.
_______________________________________________________________________________
34 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Management of the Fund
-------------------------------------------------------------------------------
Officers of the Fund
Certain information concerning the Fund's Officers is listed below.
NAME, POSITION(S) PRINCIPAL OCCUPATION
ADDRESS* AND AGE HELD WITH FUND DURING PAST 5 YEARS**
--------------------------------------------------------------------------------------------------------------
Paul J. DeNoon, 42 Vice President Senior Vice President of Alliance Capital
Management Corporation ("ACMC")**,
with which he has been associated
since prior to 1999.
Mark R. Manley, 41 Secretary Senior Vice President and the Acting
General Counsel of ACMC**, with
which he has been associated since
prior to 1999.
Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global
Financial Officer Investor Services, Inc. ("AGIS") and a
Vice President of AllianceBernstein
Investment Research and Management,
Inc. ("ABIRM")**, with which he has
been associated since prior to 1999.
Vincent S. Noto, 39 Controller Vice President of AGIS**, with which
he has been associated since prior to
1999.
* The address for each of the Fund's Officers is 1345 Avenue of the Americas,
New York, NY 10105.
** ACMC, ABIRM and AGIS are affiliates of the Fund.
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 35
AllianceBernstein Family of Funds
-------------------------------------------------------------------------------
ALLIANCEBERNSTEIN FAMILY OF FUNDS
--------------------------------------------
Wealth Strategies Funds
--------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy*
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy**
--------------------------------------------
Blended Style Funds
--------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
--------------------------------------------
Growth Funds
--------------------------------------------
Domestic
Growth Fund
Health Care Fund
Mid-Cap Growth Fund
Premier Growth Fund
Small Cap Growth Fund
Technology Fund
Global & International
All-Asia Investment Fund
Global Research Growth Fund
Global Small Cap Fund
Greater China '97 Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Biotechnology Portfolio
Premier Portfolio
Technology Portfolio
--------------------------------------------
Value Funds
--------------------------------------------
Domestic
Balanced Shares
Disciplined Value Fund
Growth & Income Fund
Real Estate Investment Fund
Small Cap Value Fund
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
--------------------------------------------
Taxable Bond Funds
--------------------------------------------
Americas Government Income Trust
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Quality Bond Portfolio
Short Duration Portfolio
U.S. Government Portfolio
--------------------------------------------
Municipal Bond Funds
--------------------------------------------
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
--------------------------------------------
Intermediate Municipal Bond Funds
--------------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
--------------------------------------------
Closed-End Funds
--------------------------------------------
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
We also offer Exchange Reserves,+ which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our web site at
www.alliancebernstein.com or call us at (800) 227-4618 for a current
prospectus. Please read the prospectus carefully before you invest or send
money.
* Formerly Growth Investors Fund.
** Formerly Conservative Investors Fund.
+ An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
_______________________________________________________________________________
36 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Summary of General Information
-------------------------------------------------------------------------------
SUMMARY OF GENERAL INFORMATION
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
organizations 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 Divi-dend Reinvestment Plan, please call Equiserve
Trust Company, N.A. at (800) 219-4218.
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 37
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
AllianceBernstein [LOGO](SM)
Investment Research and Management
SM This service mark used under license from
the owner, Alliance Capital Management L.P.
WDGIIAR0304
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and principal accounting officer.
A copy of the registrant's code of ethics is filed herewith as Exhibit 11(a)(1).
(b) During the period covered by this report, no amendments were made to the
provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers to
the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial
experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table sets forth the aggregate fees billed by the
independent auditors for the Fund's last two fiscal years for professional
services rendered for: (i) the audit of the Fund's annual financial statements
included in the Fund's annual report to stockholders; (ii) assurance and related
services that are reasonably related to the performance of the audit of the
Fund's financial statements and are not reported under (i), which include advice
and education on accounting and auditing issues, quarterly press release review
and preferred stock maintenance testing (for those Funds that issue preferred
stock); (iii) tax compliance, tax advice and tax return preparation; and (iv)
aggregate non-audit services provided to the Fund, the Fund's Adviser and
entities that control, are controlled by or under common control with the
Adviser that provide ongoing services to the Fund ("Service Affiliates"), which
include conducting an annual internal control report pursuant to Statement on
Auditing Standards No. 70. No other services were provided to the Fund during
this period.
All Fees for
Non-Audit Services
Provided to the
Audit-Related Fund, the Adviser
Audit Fees Fees Tax Fees and Service Affiliates
2003: $51,000 $8,500 $11,600 $700,012
2004: $51,000 $13,125 $18,900 $935,707
Beginning with audit and non-audit service contracts entered into on or
after May 6, 2003, the Fund's Audit Committee policies and procedures require
the pre-approval of all audit and non-audit services provided to the Fund by the
Fund's independent auditors. The Fund's Audit Committee policies and procedures
also require pre-approval of all
audit and non-audit services provided to the Adviser and Service Affiliates to
the extent that these services are directly related to the operations or
financial reporting of the Fund. Accordingly, all of the amounts in the table
for Audit Fees, Audit-Related Fees and Tax Fees for 2004 are for services
pre-approved by the Fund's Audit Committee. The amounts of the Fees for
Non-Audit Services provided to the Fund, the Adviser and Service Affiliates in
the table for the Fund, that were subject to pre-approval by the Audit Committee
for 2004 were $394,025 (comprising $375,125 of audit related fees and $18,900 of
tax fees). The Audit Committee of the Fund has considered whether the provision
of any non-audit services not pre-approved by the Audit Committee provided by
the Fund's independent auditor to the Adviser and Service Affiliates is
compatible with maintaining the auditor's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
The audit committee members are as follows:
Ruth Block Dr. James M. Hester
David H. Dievler Clifford L. Michel
John H. Dobkin Donald J. Robinson
William H. Foulk, Jr.
ITEM 6. SCHEDULE OF INVESTMENTS.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant has adopted the following proxy voting policies and procedures of
its investment adviser, Alliance Capital Management L.P.
July 2003
ALLIANCE CAPITAL MANAGEMENT L.P.
Statement of Policies and Procedures for
Voting Proxies on Behalf of Discretionary Client Accounts
Introduction
As a registered investment adviser, Alliance Capital Management L.P. ("Alliance
Capital", "we" or "us") has a fiduciary duty to act solely in the best interests
of our clients. As part of this duty, we recognize that we must vote client
securities in a timely manner and make voting decisions that are in the best
interests of our clients.
This statement is intended to comply with Rule 206(4)-6 of the Investment
Advisers Act of 1940. It sets forth our policies and procedures for voting
proxies for our discretionary investment advisory clients, including investment
companies registered under the Investment Company Act of 1940. This statement is
applicable to Alliance Capital's growth and value investment groups investing on
behalf of clients in both US and global securities.
PROXY POLICIES
This statement is designed to be responsive to the wide range of subjects that
can have a significant effect on the investment value of the securities held in
our clients' accounts. These policies are not exhaustive due to the variety of
proxy voting issues that we may be required to consider. Alliance Capital
reserves the right to depart from these guidelines in order to avoid voting
decisions that we believe may be contrary to our clients' best interests. In
reviewing proxy issues, we will apply the following general policies:
Elections of Directors: Unless there is a proxy fight for seats on the Board or
we determine that there are other compelling reasons for withholding votes for
directors, we will vote in favor of the management proposed slate of directors.
That said, we believe that directors have a duty to respond to shareholder
actions that have received significant shareholder support. We may withhold
votes for directors that fail to act on key issues such as failure to implement
proposals to declassify boards, failure to implement a majority vote
requirement, failure to submit a rights plan to a shareholder vote and failure
to act on tender offers where a majority of shareholders have tendered their
shares. In addition, we will withhold votes for directors who fail to attend at
least seventy-five percent of board meetings within a given year without a
reasonable excuse. Finally, we may withhold votes for directors of non-U.S.
issuers where there is insufficient information about the nominees disclosed in
the proxy statement.
Appointment of Auditors: Alliance Capital believes that the company remains in
the best position to choose the auditors and will generally support management's
recommendation. However, we recognize that there may be inherent conflicts when
a company's independent auditor performs substantial non-audit related services
for the company. Therefore, we may vote against the appointment of auditors if
the fees for non-audit related services are disproportionate to the total audit
fees paid by the company or there are other reasons to question the independence
of the company's auditors.
Changes in Capital Structure: Changes in a company's charter, articles of
incorporation or by-laws are often technical and administrative in nature.
Absent a compelling reason to the contrary, Alliance Capital will cast its votes
in accordance with the company's management on such proposals. However, we will
review and analyze on a case-by-case basis any non-routine proposals that are
likely to affect the structure and operation of the company or have a material
economic effect on the company. For example, we will generally support proposals
to increase authorized common stock when it is necessary to implement a stock
split, aid in a restructuring or acquisition or provide a sufficient number of
shares for an employee savings plan, stock option or executive compensation
plan. However, a satisfactory explanation of a company's intentions must be
disclosed in the proxy statement for proposals requesting an increase of greater
than one hundred percent of the shares outstanding. We will oppose increases in
authorized common stock where there is evidence that the shares will be used to
implement a poison
pill or another form of anti-takeover device, or if the issuance of new shares
could excessively dilute the value of the outstanding shares upon issuance.
Corporate Restructurings, Mergers and Acquisitions: Alliance Capital believes
proxy votes dealing with corporate reorganizations are an extension of the
investment decision. Accordingly, we will analyze such proposals on a
case-by-case basis, weighing heavily the views of the research analysts that
cover the company and the investment professionals managing the portfolios in
which the stock is held.
Proposals Affecting Shareholder Rights: Alliance Capital believes that certain
fundamental rights of shareholders must be protected. We will generally vote in
favor of proposals that give shareholders a greater voice in the affairs of the
company and oppose any measure that seeks to limit those rights. However, when
analyzing such proposals we will weigh the financial impact of the proposal
against the impairment of shareholder rights.
Corporate Governance: Alliance Capital recognizes the importance of good
corporate governance in ensuring that management and the board of directors
fulfill their obligations to the shareholders. We favor proposals promoting
transparency and accountability within a company. For example, we will vote for
proposals providing for equal access to proxies, a majority of independent
directors on key committees, and separating the positions of chairman and chief
executive officer.
Anti-Takeover Measures: Alliance Capital believes that measures that impede
takeovers or entrench management not only infringe on the rights of shareholders
but may also have a detrimental effect on the value of the company. We will
generally oppose proposals, regardless of whether they are advanced by
management or shareholders, the purpose or effect of which is to entrench
management or dilute shareholder ownership. Conversely, we support proposals
that would restrict or otherwise eliminate anti-takeover measures that have
already been adopted by corporate issuers. For example, we will support
shareholder proposals that seek to require the company to submit a shareholder
rights plan to a shareholder vote. We will evaluate, on a case-by-case basis,
proposals to completely redeem or eliminate such plans. Furthermore, we will
generally oppose proposals put forward by management (including blank check
preferred stock, classified boards and supermajority vote requirements) that
appear to be intended as management entrenchment mechanisms.
Executive Compensation: Alliance Capital believes that company management and
the compensation committee of the board of directors should, within reason, be
given latitude to determine the types and mix of compensation and benefit awards
offered. Whether proposed by a shareholder or management, we will review
proposals relating to executive compensation plans on a case-by-case basis to
ensure that the long-term interests of management and shareholders are properly
aligned. We will analyze the proposed plans to ensure that shareholder equity
will not be excessively diluted, the option exercise price is not below market
price on the date of grant and an acceptable number of employees are eligible to
participate in such programs. We will generally oppose plans that permit
repricing of underwater stock options without shareholder approval. Other
factors such as the company's performance and industry practice will generally
be factored into our analysis. We will support proposals to submit severance
packages triggered by a change in control to a shareholder vote and proposals
that seek additional disclosure of executive compensation. Finally, we will
support shareholder proposals requiring companies to expense stock options
because we view them as a large corporate expense.
Social and Corporate Responsibility: Alliance Capital will review and analyze on
a case-by-case basis proposals relating to social, political and environmental
issues to determine whether they will have a financial impact on shareholder
value. We will vote against proposals that are unduly burdensome or result in
unnecessary and excessive costs to the company. We may abstain from voting on
social proposals that do not have a readily determinable financial impact on
shareholder value.
Proxy Voting Procedures
Proxy Voting Committees
Our growth and value investment groups have formed separate proxy voting
committees to establish general proxy policies for Alliance Capital and consider
specific proxy voting matters as necessary. These committees periodically review
new types of corporate governance issues, evaluate proposals not covered by
these policies and recommend how we should generally vote on such issues. In
addition, the committees, in conjunction with the analyst that covers the
company, contact management and interested shareholder groups as necessary to
discuss proxy issues. Members of the committees include senior investment
personnel and representatives of the Corporate Legal Department. The committees
may also evaluate proxies where we face a potential conflict of interest (as
discussed below). Finally, the committees monitor adherence to guidelines,
industry trends and review the policies contained in this statement from time to
time.
Conflicts of Interest
Alliance Capital recognizes that there may be a potential conflict of interest
when we vote a proxy solicited by an issuer whose retirement plan we manage,
whose retirement plan we administer, or with whom we have another business or
personal relationship that may affect how we vote on the issuer's proxy. We
believe that centralized management of proxy voting, oversight by the proxy
voting committees and adherence to these policies ensures that proxies are voted
with only our clients' best interests in mind. That said, we have implemented
additional procedures to ensure that our votes are not the product of a conflict
of interests, including: (i) requiring anyone involved in the decision making
process to disclose to the chairman of the appropriate proxy committee any
potential conflict that they are aware of and any contact that they have had
with any interested party regarding a proxy vote; (ii) prohibiting employees
involved in the decision making process or vote administration from revealing
how we intend to vote on a proposal in order to reduce any attempted influence
from interested parties; and (iii) where a material conflict of interests
exists, reviewing our proposed vote by applying a series of objective tests and,
where necessary, considering the views of a third party research service to
ensure that our voting decision is consistent with our clients' best interests.
For example, if our proposed vote is consistent with our stated proxy voting
policy, no further review is necessary. If our proposed vote is contrary to our
stated proxy voting policy but is also contrary to management's recommendation,
no further review is necessary. If our proposed vote is contrary to our stated
proxy voting policy or is not covered by our policy, is consistent with
management's recommendation, and is also consistent with the views of an
independent source, no further review is necessary. If our proposed vote is
contrary to our stated proxy voting policy or is not covered by our policy, is
consistent with management's recommendation and is contrary to the views of an
independent source, the proposal is reviewed by the appropriate proxy committee
for final determination.
Proxies of Certain Non-US Issuers
Proxy voting in certain countries requires "share blocking." Shareholders
wishing to vote their proxies must deposit their shares shortly before the date
of the meeting (usually one-week) with a designated depositary. During this
blocking period, shares that will be voted at the meeting cannot be sold until
the meeting has taken place and the shares are returned to the clients'
custodian banks. Alliance Capital may determine that the value of exercising the
vote does not outweigh the detriment of not being able to transact in the shares
during this period. Accordingly, if share blocking is required we may abstain
from voting those shares. In such a situation we would have determined that the
cost of voting exceeds the expected benefit to the client.
Proxy Voting Records
Clients may obtain information about how we voted proxies on their behalf by
contacting their Alliance Capital administrative representative. Alternatively,
clients may make a written request for proxy voting information to: Mark R.
Manley, Senior Vice President & Assistant General Counsel, Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, NY 10105.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last provided
disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule
14A in its proxy statement filed with the Commission on February 23, 2004.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures (as
defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended)
are effective at the reasonable assurance level based on their evaluation of
these controls and procedures as of a date within 90 days of the filing date of
this document.
(b) There were no significant changes in the registrant's internal controls that
could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 11. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
Exhibit No. DESCRIPTION OF EXHIBIT
----------- ----------------------
11 (a) (1) Code of ethics that is subject to the
disclosure of Item 2 hereof
11 (b) (1) Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
11 (b) (2) Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
11 (c) Certification of Principal Executive Officer
and Principal Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): Alliance World Dollar Government Fund II, Inc.
By: /s/Marc O. Mayer
---------------------------
Marc O. Mayer
President
Date: June 7, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/Marc O. Mayer
---------------------------
Marc O. Mayer
President
Date: June 7, 2004
By: /s/Mark D. Gersten
----------------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: June 7, 2004