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, 2005
Date of reporting period: March 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
[LOGO] AllianceBernstein(SM)
Investment Research and Management
Alliance World Dollar Government Fund II
Closed End
Annual Report--March 31, 2005
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,
and information regarding how the Fund voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30, without charge.
Simply visit AllianceBernstein's web site at www.alliancebernstein.com, or go to
the Securities and Exchange Commission's (the "Commission") web site at
www.sec.gov, or call AllianceBernstein at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
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 16, 2005
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, 2005. The Fund is a closed-end fund that trades under the New
York Stock Exchange symbol "AWF".
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. For more information regarding the Fund's risks, please see
"A Word About Risk" on page 4 and "Note E-Risks Involved in Investing in the
Fund" of the Notes to Financial Statements on page 21.
Investment Results
The table on page 5 shows the Fund's performance compared to its benchmark, 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, for the six- and 12-month periods ended March 31, 2005.
For the 12-month period ended March 31, 2005, the Fund performed in line with
its benchmark. Contributing positively to performance was its overweighted
exposure to Latin America. During the reporting period, the Latin region
benefited from several factors, most notably improving credit fundamentals,
strengthening currencies and export demand. Strong commodity prices,
particularly oil, also helped the economies of several Latin countries.
Offsetting this positive country selection was the Fund's security selection
which dampened its performance. The Fund was positioned too defensively relative
to U.S. interest rates. The Fund's duration was shortened during the spring and
summer of 2004, as interest rates were expected to rise and negatively impact
bond prices. A soft patch in the U.S. economy, however, delayed rate hikes by
the U.S. Federal Reserve (the "Fed") until June. As a result, the pace of
tightening, as announced by the Fed, was measured. Additionally, global
liquidity remained ample, muting the effects of rising U.S. official interest
rates. Emerging market debt, therefore, performed better than was originally
expected during the period under review.
Also detracting from the Fund's performance was an overweighted position in
Ecuador which was particularly hurt in the bond market sell-off during April and
May of 2004. Additionally, the Fund's Ecuador holdings were reduced in light of
that sell-off just prior to a rebound as a result of higher oil prices. This
further dampened the Fund's performance.
During the most recent six-month period, the Fund outperformed its benchmark due
to increased interest rate exposure, positive country selection, particularly
the Ukraine and Latin American region, and positive security selection.
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 1
Market Review and Investment Strategy
The emerging market debt class, as represented by the JPM EMBI+, posted a solid
return of 6.94% for the annual reporting period, despite market volatility at
both the beginning and end of the reporting period. Early in the reporting
period, bond markets sold off dramatically on a surprisingly strong gain in
payroll employment, sending emerging-market returns into negative territory.
Worries had surfaced that the Fed would begin tightening interest rates
sooner-than-expected. For the first two months of the period (April and May of
2004), emerging-market debt returns fell by 7.37%. By early summer, however,
investors' concerns regarding higher interest rates were eased after the Fed
signaled that it would take a measured approach to removing its exceptionally
accommodative policy stance. The Fed began to raise official rates in June at
measured 0.25% increments. By the end of the reporting period, the Fed had
raised rates a total of 1.75%.
Emerging market debt posted strong monthly returns throughout the middle of the
reporting period as early market volatility subsided. The strong gains were a
result of relatively low global interest rates, ample global liquidity, higher
commodity prices and improved economic fundamentals in emerging countries.
Between June 2004 and February 2005, emerging market debt posted an exceptional
return of 18.60%.
Late in the reporting period, market sentiment abruptly changed. Unlike the
second half of 2004 and beginning of 2005 when the market's mood had been
uncharacteristically sanguine in the context of rising rates, market sentiment
soured late in the first quarter of 2005 and bond prices fell. Fixed-income
markets were rattled primarily by two concerns: the fear that official rate
hikes could become more aggressive this year and fallout from General Motors'
profit warning. Late in the period, yields jumped after the Fed stated that
inflation pressures had increased in recent months. Inflation fears were further
stoked by sharply higher oil and commodities prices. At the end of the reporting
period, crude oil hit a new high of $57.
For the annual period, all emerging market debt countries posted positive
returns. The Latin region at 7.71% outpaced non-Latin markets at 5.80%, as
several Latin countries benefited from export demand and strong commodity
prices, particularly oil. Sustained growth in the Latin region and a resulting
decline in fiscal deficits also improved their macroeconomic fundamentals.
Countries outperforming for the annual period included Brazil at 11.56%, which
was upgraded by both Moody's Investor Services and Standard & Poor's rating
agencies, and oil producing Venezuela at 18.47% and Ecuador at 24.84%.
Underperforming for the period were South Africa at 0.74%, Mexico at 1.97% and
Colombia at 2.16%.
The Fund's allocations to its core emerging market countries (Russia, Colombia,
Ecuador, Venezuela, Mexico and Turkey) were maintained; however, the Fund's
individual country weightings were adjusted during the
--------------------------------------------------------------------------------
2 o Alliance World Dollar Government Fund II
period. Early in the reporting period the Fund's duration exposure was reduced
which positioned the Fund for the dampening effects of higher interest rates.
The Fund generally maintained an overweighted position in Russian debt early in
the period as credit statistics continued to improve and Russia benefited from
higher oil prices. In July 2004, however, the Fund's Russian holdings were
reduced as positive economic fundamentals were offset by administrative
paralysis and the Yukos affair. Russia's Justice Ministry had seized the assets
of Yukos, the country's largest oil producer, and was preparing to sell its main
oil-producing unit in Siberia to recover payment of back taxes. Furthermore,
there was a significant negative change in Russia's sovereign supply and demand
technicals.
Additionally, the Fund's exposure in Brazil was increased as growth in Brazil
exceeded even the most optimistic forecast, easing worries about debt
sustainability. Additionally, it was anticipated that Brazilian debt would
benefit from anticipated ratings upgrades. Subsequently, Brazil was upgraded by
Moody's from a B2 to a B1 rating. The Fund's position in the Ukraine was also
increased during the period due to strong economic growth and prospects for
rating upgrades. Toward the end of the reporting period, the Fund's Argentinean
debt was also increased due to significant indications that the new, final
restructuring offer would benefit investors. Lastly, Ecuador was quite volatile
during the period and created enormous challenges. Therefore, the Fund's
exposure to Ecuador was adjusted throughout the period.
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 3
HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance on the following page represents past performance and does not
guarantee future results. Current performance may be lower or higher than the
performance information shown. Returns are annualized for periods longer than
one year. All fees and expenses related to the operation of the Fund have been
deducted. Performance assumes reinvestment of distributions and does not account
for taxes.
Alliance World Dollar Government Fund II 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 to various financial publications or independent organizations
such as Lipper Inc., Morningstar, Inc. and Bloomberg. For additional shareholder
information regarding this Fund, please see page 37.
Benchmark Disclosure
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 the
performance for any specific investment, including the Fund.
A Word About Risk
The Fund can invest in foreign securities, including emerging markets, which may
magnify fluctuations due to changes in foreign exchange rates and the
possibility of substantial volatility due to political and economic
uncertainties in foreign countries. Price fluctuation in the Fund's portfolio
securities may be caused by changes in the general level of interest rates or
changes in bond credit quality ratings. Please note, as interest rates rise,
existing bond prices fall and can cause the value of an investment in the
Portfolio to decline. Changes in interest rates have a greater negative effect
on bonds with longer maturities than on those with shorter maturities.
Investments in the Fund are not guaranteed because of fluctuation in the net
asset value of the underlying fixed-income related investments. Similar to
direct bond ownership, bond funds have the same interest rate, inflation and
credit risks that are associated with the underlying bonds owned by the Fund.
While the Fund invests principally in bonds and other fixed income securities,
in order to achieve its investment objectives, the Fund may at times use certain
types of investment derivatives, such as options, futures, forwards and swaps.
These instruments involve risks different from, and in certain cases, greater
than, the risks presented by more traditional investments. At the discretion of
the Fund's Adviser, the Fund may invest substantially all of its net assets in
bonds that are rated below investment grade ("junk bonds") and up to 50% in
securities that are not readily marketable.
(Historical Performance continued on next page)
--------------------------------------------------------------------------------
4 o Alliance World Dollar Government Fund II
HISTORICAL PERFORMANCE
(continued from previous page)
THE FUND VS. ITS BENCHMARK Returns
PERIODS ENDED MARCH 31, 2005 6 Months 12 Months
--------------------------------------------------------------------------------
Alliance World Dollar Government
Fund II (NAV) 4.56% 6.94%
--------------------------------------------------------------------------------
JPM EMBI+ 3.84% 6.94%
The Fund's Market Price per share on March 31, 2005 was $11.80. For additional
Financial Highlights, please see page 26.
See Historical Performance and Benchmark disclosures on page 4.
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 5
PORTFOLIO SUMMARY
March 31, 2005
PORTFOLIO STATISTICS
Net Assets ($mil): $916.8
SECURITY TYPE BREAKDOWN*
82.4% Sovereign Debt Obligations [PIE CHART OMITTED]
5.9% Corporate Debt Obligations
11.7% Short-Term
* All data are as of March 31, 2005. The Fund's security type breakdown is
expressed as a percentage of total investments and may vary over time.
--------------------------------------------------------------------------------
6 o Alliance World Dollar Government Fund II
PORTFOLIO OF INVESTMENTS
March 31, 2005
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-80.9%
Argentina-4.7%
Republic of Argentina
3.01%, 8/03/12 FRN .................... $ 28,582 $ 24,037,462
11.375%, 3/15/10(a) ................... 1,420 442,898
11.75%, 6/15/15(a) .................... 3,950 1,198,430
12.00%, 6/19/31(a) .................... 9,535 2,889,014
12.25%, 6/19/18(a) .................... 23,767 7,203,685
15.50%, 12/19/08(a) ................... 24,560 7,429,400
------------
43,200,889
------------
Brazil-16.9%
Federal Republic of Brazil
9.25%, 10/22/10 ....................... 2,785 2,924,250
10.50%, 7/14/14 ....................... 14,290 15,754,725
11.00%, 8/17/40 ....................... 55,971 62,211,766
12.00%, 4/15/10 ....................... 8,650 10,068,600
12.75%, 1/15/20 ....................... 17,880 21,992,400
14.50%, 10/15/09 ...................... 2,365 2,971,623
C-Bonds
8.00%, 4/15/14 ........................ 28,000 27,756,715
DCB FRN
Series L
3.125%, 4/15/12 ....................... 11,815 11,092,563
------------
154,772,642
------------
Bulgaria-0.4%
Republic of Bulgaria
8.25%, 1/15/15(b) ..................... 3,204 3,921,696
------------
Colombia-2.2%
Republic of Colombia
10.75%, 1/15/13 ....................... 3,057 3,416,198
11.75%, 2/25/20 ....................... 14,121 16,803,990
------------
20,220,188
------------
Republic of Ecuador
0.00%, 10/11/05 ....................... 6,665 6,466,316
8.00%, 8/15/30(b)(c) .................. 40,001 35,900,898
------------
42,367,214
------------
El Salvador-0.7%
Republic of El Salvador
7.625%, 9/21/34(b) .................... 2,290 2,347,250
8.50%, 7/25/11(b) ..................... 3,700 4,105,150
------------
6,452,400
------------
Indonesia-0.9%
Republic of Indonesia
6.75%, 3/10/14(b) ..................... 8,585 8,509,881
------------
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 7
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Jamaica-0.7%
Government of Jamaica
10.625%, 6/20/17 .................... $ 5,400 $ 5,697,000
12.75%, 9/01/07(b) .................. 500 563,250
------------
6,260,250
------------
Lebanon-0.7%
Lebanese Republic
7.875%, 5/20/11(b) .................. 2,475 2,413,125
10.125%, 8/06/08(b) ................. 2,480 2,628,800
11.625%, 5/11/16(b) ................. 1,114 1,247,680
------------
6,289,605
------------
Mexico-15.1%
United Mexican States
7.50%, 1/14/12 ...................... 7,400 8,169,600
8.125%, 12/30/19 .................... 49,800 57,070,799
11.375%, 9/15/16 .................... 11,110 15,887,300
Series A
6.375%, 1/16/13 ..................... 2,782 2,886,325
8.00%, 9/24/22 ...................... 35,510 40,303,849
9.875%, 2/01/10 ..................... 11,800 14,012,500
------------
138,330,373
------------
Panama-3.1%
Republic of Panama
8.875%, 9/30/27 ..................... 725 779,375
9.375%, 7/23/12-4/01/29 ............. 5,850 6,618,780
9.625%, 2/08/11 ..................... 8,677 9,826,703
10.75%, 5/15/20 ..................... 3,940 4,925,000
IRB VRN
3.715%, 7/17/14 ..................... 6,242 5,961,440
------------
28,111,298
------------
Peru-2.5%
Republic of Peru
8.375%, 5/03/16 ..................... 1,902 1,987,590
8.75%, 11/21/33 ..................... 4,500 4,680,000
9.125%, 2/21/12 ..................... 7,037 7,934,218
9.875%, 2/06/15 ..................... 7,240 8,362,200
------------
22,964,008
------------
Philippines-3.2%
Republic of Philippines
9.00%, 2/15/13 ...................... 4,775 4,918,250
9.50%, 2/02/30 ...................... 4,046 3,954,965
9.875%, 1/15/19 ..................... 12,750 13,279,125
10.625%, 3/16/25 .................... 6,638 7,102,660
------------
29,255,000
------------
--------------------------------------------------------------------------------
8 o Alliance World Dollar Government Fund II
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Russia-13.9%
Russian Federation
5.00%, 3/31/30(b)(c) .................. $ 80,910 $ 83,134,510
Russian Ministry of Finance
Series V
3.00%, 5/14/08 ........................ 26,162 24,069,040
Series VII
3.00%, 5/14/11 ........................ 24,180 20,100,834
------------
127,304,384
------------
Turkey-4.1%
Republic of Turkey
7.375%, 2/05/25 ....................... 2,142 2,013,480
11.00%, 1/14/13 ....................... 5,500 6,663,250
11.50%, 1/23/12 ....................... 2,278 2,779,160
11.75%, 6/15/10 ....................... 4,455 5,357,138
11.875%, 1/15/30 ...................... 15,793 21,162,620
------------
37,975,648
------------
Ukraine-2.6%
Government of Ukraine
6.875%, 3/04/11(b) .................... 7,400 7,603,500
7.65%, 6/11/13(b) ..................... 7,801 8,366,573
11.00%, 3/15/07(b) .................... 7,486 8,037,361
------------
24,007,434
------------
Uruguay-1.0%
Republic of Uruguay
7.875%, 1/15/33(d) .................... 10,117 8,751,474
------------
Venezuela-3.6%
Republic of Venezuela
3.693%, 4/20/11 FRN ................... 3,050 2,706,875
5.375%, 8/07/10 ....................... 11,850 10,546,500
8.50%, 10/08/14 ....................... 935 925,650
9.25%, 9/15/27 ........................ 18,983 18,821,645
------------
33,000,670
------------
Total Sovereign Debt Obligations
(cost $668,789,725) ................... 741,695,054
------------
CORPORATE DEBT OBLIGATIONS-5.8%
Hong Kong-0.3%
Noble Group Ltd.
6.625%, 3/17/15(b) .................... 3,355 3,116,949
------------
Indonesia-0.6%
Freeport-McMoran Copper & Gold
10.125%, 2/01/10 ...................... 4,800 5,328,000
------------
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 9
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Kazakhstan-1.0%
Hurricane Finance
9.625%, 2/12/10(b) .......................... $ 3,500 $ 3,815,000
Kazkommerts International BV
8.50%, 4/16/13(b) ........................... 3,000 3,030,000
TengizChevroil Finance Co.
6.124%, 11/15/14(b) ......................... 2,569 2,543,310
-----------
9,388,310
-----------
Mexico-2.0%
Innova S De. R.L., SA
9.375%, 9/19/13 ............................. 7,955 8,770,388
Monterrey Power SA De CV
9.625%, 11/15/09(b) ......................... 2,526 2,873,887
Vitro Envases
10.75%, 7/23/11(b) .......................... 6,900 7,038,000
-----------
18,682,275
-----------
People's Republic of China-0.2%
Chaoda Modern Agricultural Hldgs. Ltd.
7.75%, 2/08/10(b) ........................... 1,480 1,354,200
-----------
Romania-0.4%
MobiFon Holdings BV
12.50%, 7/31/10 ............................. 3,075 3,755,344
-----------
Russia-1.1%
Citigroup(JSC Severstal)
9.25%, 4/19/14(b) ........................... 2,256 2,314,430
Gazprom Oao
9.625%, 3/01/13(b) .......................... 500 570,000
Mobile Telesystems Finance
9.75%, 1/30/08(b) ........................... 5,390 5,739,290
Tyumen Oil
11.00%, 11/06/07(b) ......................... 1,075 1,198,625
-----------
9,822,345
-----------
Ukraine-0.2%
Kyivstar
10.375%, 8/17/09(b) ......................... 1,800 1,980,000
-----------
Total Corporate Debt Obligations
(cost $50,054,812) .......................... 53,427,423
-----------
WARRANTS(e)-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-
-----------
--------------------------------------------------------------------------------
10 o Alliance World Dollar Government Fund II
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENT-11.5%
Time Deposit-11.5%
Societe Generale
2.875%, 4/01/05
(cost $105,200,000) ..................... $ 105,200 $105,200,000
------------
Total Investments-98.2%
(cost $824,044,537) ..................... 900,322,477
Other assets less liabilities-1.8% ......... 16,515,158
------------
Net Assets-100% ............................ $916,837,635
------------
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.
Republic of Colombia
8.375%, 2/15/27 $ 4,250 3.02% 1/20/10 $138,597
Citigroup Global Markets, Inc.
Republic of Hungary
4.50%, 2/06/13 3,075 0.50 11/26/13 (64,760)
Citigroup Global Markets, Inc.
Republic of Philippines
10.625%, 3/16/25 4,070 5.60 3/20/14 (185,474)
Sale Contracts:
Citigroup Global Markets, Inc.
Federal Republic of Brazil
12.25%, 3/06/30 6,750 4.40 5/20/06 365,100
Citigroup Global Markets, Inc.
Federal Republic of Brazil
12.25%, 3/06/30 11,000 6.35 8/20/05 333,911
Citigroup Global Markets, Inc.
Republic of Colombia
8.375%, 2/15/27 8,600 1.13 1/20/07 (78,785)
Citigroup Global Markets, Inc.
Republic of Philippines
10.625%, 3/16/25 4,070 4.95 3/20/09 200,417
Credit Suisse First Boston
Federal Republic of Brazil
12.25%, 3/06/30 5,800 6.90 6/20/07 654,530
Morgan Stanley
Federal Republic of Brazil
10.125%, 5/15/27 7,200 17.75 2/13/08 2,937,410
Morgan Stanley
Federal Republic of Brazil
12.25%, 3/06/30 5,120 3.80 8/20/06 162,361
--------------------------------------------------------------------------------.
Alliance World Dollar Government Fund II o 11
(a) Security is in default and is non-income producing.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At March 31, 2005, the aggregate market value of these securities
amounted to $204,353,365 or 22.3% of net assets.
(c) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at March 31, 2005.
(d) Pay-In-Kind Payments (PIK).
(e) Non-income producing security.
Glossary of Terms:
DCB - Debt Conversion Bonds
FRN - Floating Rate Note
IRB - Interest Rate Reduction Bond
VRN - Variable Rate Note
See notes to financial statements.
--------------------------------------------------------------------------------
12 o Alliance World Dollar Government Fund II
STATEMENT OF ASSETS & LIABILITIES
March 31, 2005
Assets
Investments in securities, at value
(cost $824,044,537).................................. $ 900,322,477
Cash.................................................... 1,203,682
Unrealized appreciation of swap contracts............... 4,792,326
Interest receivable..................................... 11,186,592
Receivable for investment securities sold............... 4,050,738
---------------
Total assets ........................................... 921,555,815
---------------
Liabilities
Unrealized depreciation of swap contracts............... 329,019
Payable for investment securities purchased............. 2,975,646
Advisory fee payable.................................... 874,443
Administrative fee payable.............................. 209,119
Accrued expenses........................................ 329,953
---------------
Total liabilities....................................... 4,718,180
---------------
Net Assets.............................................. $ 916,837,635
---------------
Composition of Net Assets
Capital stock, at par................................... $ 676,487
Additional paid-in capital.............................. 915,684,316
Undistributed net investment income..................... 573,240
Accumulated net realized loss on investment
transactions......................................... (80,837,655)
Net unrealized appreciation of investments.............. 80,741,247
---------------
$ 916,837,635
---------------
Net Asset Value Per Share
(based on 67,648,715 shares outstanding)............. $13.55
------
See notes to financial statements.
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 13
STATEMENT OF OPERATIONS
Year Ended March 31, 2005
Investment Income
Interest............................... $ 70,204,764
Expenses
Advisory fee........................... $ 9,008,460
Administrative......................... 1,351,269
Custodian.............................. 659,504
Printing............................... 172,419
Transfer agency........................ 108,617
Audit.................................. 67,300
Registration........................... 59,902
Legal.................................. 59,550
Directors' fees........................ 41,359
Miscellaneous.......................... 34,318
---------------
Total expenses before interest......... 11,562,698
Interest expense....................... 113,425
---------------
Total expenses......................... 11,676,123
---------------
Net investment income.................. 58,528,641
---------------
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain on:
Investment transactions............. 46,456,824
Swap contracts...................... 5,403,483
Written options..................... 2,896,593
Net change in unrealized appreciation/depreciation of:
Investments......................... (58,198,309)
Swap contracts...................... (1,397,377)
Written options..................... (54,435)
---------------
Net loss on investment transactions.... (4,893,221)
---------------
Net Increase in Net Assets
from Operations........................ $ 53,635,420
---------------
See notes to financial statements.
--------------------------------------------------------------------------------
14 o Alliance World Dollar Government Fund II
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
March 31, March 31,
2005 2004
--------------- ---------------
Increase (Decrease) in Net Assets
from Operations
Net investment income.................. $ 58,528,641 $ 72,980,949
Net realized gain on investment
transactions........................ 54,756,900 237,541,658
Net change in unrealized
appreciation/depreciation
of investments...................... (59,650,121) (60,240,788)
--------------- ---------------
Net increase in net assets
from operations..................... 53,635,420 250,281,819
Dividends to Shareholders from
Net investment income.................. (56,250,387) (87,373,144)
Common Stock Transactions
Tender offer resulting in the
redemption of 10,201,653
shares of Common Stock.............. -0- (132,891,565)
--------------- ---------------
Total increase (decrease).............. (2,614,967) 30,017,110
Net Assets
Beginning of period.................... 919,452,602 889,435,492
--------------- ---------------
End of period (including undistributed
net investment income and distributions
in excess of net investment income
of $573,240 and $(4,872,958),
respectively)....................... $ 916,837,635 $ 919,452,602
--------------- ---------------
See notes to financial statements.
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 15
NOTES TO FINANCIAL STATEMENTS
March 31, 2005
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 U.S. generally accepted accounting principles, which require management to
make certain estimates and assumptions that affect the reported amounts of
assets and liabilities in the financial statements and amounts of income and
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
Portfolio securities are valued at their current market value determined on the
basis of market quotations or, if market quotations are not readily available or
are deemed unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors.
In general, the market value of securities which are readily available and
deemed reliable are 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. 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 valuation, the last available closing settlement price is used;
securities traded in the over-the-counter market, ("OTC") (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 mortgage backed and asset backed securities, may be valued
on the basis of prices provided by a pricing service or at a price
--------------------------------------------------------------------------------
16 o Alliance World Dollar Government Fund II
obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, Alliance Capital Management, L.P. (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 (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not limited
to, information obtained by contacting the issuer, analysts, analysis of the
issuer's financial statements or other available documents. In addition, the
Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities.
2. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. The Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on income and/or capital gains earned or
repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation/depreciation as such income
and/or gains are earned.
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
U.S. generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences do not require such
reclassification.
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 17
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.
Under the terms of the Administration Agreement, the Fund pays the Adviser an
administrative fee at an annual rate of .15% 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, 2005, the Fund
reimbursed to AGIS $2,100.
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended March 31, 2005, were as follows:
Purchases Sales
--------------- ---------------
Investment securities (excluding
U.S. government securities)......... $ 1,196,268,537 $ 1,277,457,543
U.S. government securities............. -0- -0-
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation (excluding swap contracts) are as
follows:
Cost.................................................... $ 827,499,994
---------------
Gross unrealized appreciation........................... $ 77,742,898
Gross unrealized depreciation........................... (4,920,415)
---------------
Net unrealized appreciation............................. $ 72,822,483
---------------
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
--------------------------------------------------------------------------------
18 o Alliance World Dollar Government Fund II
Notes to Financial Statements
--------------------------------------------------------------------------------
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.
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, 2005, were as
follows:
Number of Premiums
Contracts Received
--------------- ---------------
Options outstanding at
March 31, 2004...................... 11,460,000 $ 203,415
Options written........................ 176,427,000 2,693,178
Options terminated in closing purchase
transactions........................ (104,012,000) (1,689,792)
Options expired........................ (83,875,000) (1,206,801)
--------------- ---------------
Options outstanding at
March 31, 2005...................... -0- $ -0-
--------------- ---------------
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.
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 19
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.
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. The Fund accrues for the interim payments on swap
contracts on a daily basis, with the net amount recorded within unrealized
appreciation/depreciation of 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.
Prior to April 1, 2003, these interim payments were reflected within interest
income/expense in 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.
--------------------------------------------------------------------------------
20 o Alliance World Dollar Government Fund II
At March 31, 2005, the Fund had Sale Contracts outstanding with Maximum Payout
Amounts aggregating $48,540,000, with net unrealized appreciation of $4,574,944
and terms ranging from 5 months to 4 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 $8,320,000 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 $40,220,000 as of March 31,
2005.
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
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, 2005, the average amount of reverse repurchase
agreements outstanding was $39,908,881 and the daily weighted average interest
rate was .47%. There were no outstanding reverse repurchase agreements at March
31, 2005.
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, 2005, 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, 2005 and 2004, 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
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 21
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.
Indemnification Risk--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.
NOTE F
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended March 31,
2005 and March 31, 2004 were as follows:
2005 2004
-------------- ---------------
Distributions paid from:
Ordinary income.................... $ 56,250,387 $ 87,373,144
-------------- ---------------
Total taxable distributions........... 56,250,387 87,373,144
-------------- ---------------
Total distributions paid.............. $ 56,250,387 $ 87,373,144
-------------- ---------------
As of March 31, 2005, the components of accumulated earnings/(deficit) on a tax
basis were as follows:
Undistributed ordinary income.......................... $ 5,805,680
Accumulated capital and other losses................... (77,680,541)(a)
Unrealized appreciation/(depreciation)................. 72,351,693(b)
---------------
Total accumulated earnings/(deficit)................... $ 476,832
(a) On March 31, 2005, the Fund had a net capital loss carryforward of
$77,680,541 of which $19,158,020 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 $49,733,626.
(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.
--------------------------------------------------------------------------------
22 o Alliance World Dollar Government Fund II
During the current fiscal year, permanent differences, primarily due to the tax
treatment of bond premium, the tax character of paydown gains/losses and the tax
treatment of swap income, resulted in an increase in undistributed 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, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of 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 the Adviser provide information to them.
The Adviser 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
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 the Adviser and the SEC and NYAG in connection with the
investigations mentioned above.
Numerous lawsuits have been filed against the Adviser 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. The lawsuits
are now pending in the United States District Court for the District of Maryland
pursuant to a ruling by the Judicial Panel on Multidistrict Litigation
transferring and centralizing all of the mutual fund cases involving market and
late trading in the District of Maryland. Management of the 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, the Adviser 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 memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser 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
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 23
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) The Adviser 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) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order contemplates that
the Adviser'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.
The Adviser and approximately twelve other investment management firms were
publicly mentioned in connection with the settlement by the SEC of charges that
an unaffiliated broker/dealer violated federal securities laws relating to its
receipt of compensation for selling specific mutual funds and the disclosure of
such compensation. The SEC has indicated publicly that, among other things, it
is considering enforcement action in connection with mutual funds' disclosure of
such arrangements and in connection with the practice of considering mutual fund
sales in the direction of brokerage commissions from fund portfolio
transactions. The SEC has issued subpoenas to the Adviser, and the NASD has
issued requests for information in connection with this matter and the Adviser
has provided documents and other information to the SEC and NASD and is
cooperating fully with the investigations. On March 11, 2005, discussions
commenced with the NASD that management believes will conclude these
investigations.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Capital Management Holding L.P., Alliance Capital
Management Corporation, AXA Financial, Inc., AllianceBernstein Investment
Research & Management, Inc., certain current and former directors of the
AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin Complaint
names certain of the AllianceBernstein mutual funds as nominal defendants. The
Fund was not named as a nominal defendant in the Aucoin Complaint. The Aucoin
Complaint was filed in the United States District Court
--------------------------------------------------------------------------------
24 o Alliance World Dollar Government Fund II
for the Southern District of New York by an alleged shareholder of an
AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things,
(i) that certain of the defendants improperly authorized the payment of
excessive commissions and other fees from fund assets to broker-dealers in
exchange for preferential marketing services, (ii) that certain of the
defendants misrepresented and omitted from registration statements and other
reports material facts concerning such payments, and (iii) that certain
defendants caused such conduct as control persons of other defendants. The
Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a)
of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach
of common law fiduciary duties, and aiding and abetting breaches of common law
fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages
and punitive damages, rescission of their contracts with the Adviser, including
recovery of all fees paid to the Adviser pursuant to such contracts, an
accounting of all fund-related fees, commissions and soft dollar payments, and
restitution of all unlawfully or discriminatorily obtained fees and expenses.
Since June 22, 2004, numerous additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants, and others may be filed.
The Adviser believes that these matters are not likely to have a material
adverse effect on the Fund or the Adviser's ability to perform advisory services
relating to the Fund.
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 25
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
Year Ended March 31,
-----------------------------------------------------------------
2005 2004(a) 2003 2002(b) 2001
-----------------------------------------------------------------
Net asset value,
beginning of period............... $ 13.59 $ 11.42 $ 10.58 $ 10.37 $ 10.83
-----------------------------------------------------------------
Income From Investment
Operations
Net investment income(c) ............ .87 .99 1.07 1.32 1.25
Net realized and unrealized
gain (loss) on investment
transactions...................... (.08) 2.36 .83 .19 (.62)
-----------------------------------------------------------------
Net increase in net asset
value from operations............. .79 3.35 1.90 1.51 .63
-----------------------------------------------------------------
Less: Dividends
Dividends from net
investment income................. (.83) (1.18) (1.06) (1.30) (1.09)
-----------------------------------------------------------------
Net asset value, end of period ...... $ 13.55 $ 13.59 $ 11.42 $ 10.58 $ 10.37
-----------------------------------------------------------------
Market value, end of period ......... $ 11.80 $ 12.91 $ 10.91 $ 10.32 $ 9.15
-----------------------------------------------------------------
Premium/(Discount)................... (12.92)% (5.00)% (4.47)% (2.46)% (11.76)%
Total Return
Total investment return
based on:(d)
Market value....................... (1.96)% 29.27% 17.72% 27.02% 12.05%
Net asset value.................... 6.94% 30.01% 20.20% 16.22% 7.73%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)................... $916,838 $919,453 $889,435 $823,753 $807,476
Ratio to average net assets of:
Expenses........................... 1.30% 1.29% 1.49% 1.88% 1.90%
Expenses, excluding
interest expense................ 1.28% 1.25% 1.35% 1.29% 1.28%
Net investment income.............. 6.50% 7.65% 10.53% 12.69% 11.31%
Portfolio turnover rate.............. 147% 158% 121% 178% 203%
See footnote summary on page 27.
--------------------------------------------------------------------------------
26 o Alliance World Dollar Government Fund II
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.
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 27
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, 2005, 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. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit precedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. 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, 2005, 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, 2005, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the 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 9, 2005
--------------------------------------------------------------------------------
28 o Alliance World Dollar Government Fund II
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 open market plus
the cost of any shares issued by the Fund.
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 29
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.
--------------------------------------------------------------------------------
30 o Alliance World Dollar Government Fund II
SUPPLEMENTAL PROXY INFORMATION
(unaudited)
The Special Meeting of Shareholders of Alliance World Dollar Government Fund,
Inc. was held on March 24, 2005. A description of the proposal and number of
shares voted at the meeting are as follows:
Authority
Voted For Withheld
--------------------------------------------------------------------------------
1. Election of Directors Class One Nominee
(term expires 2007):
Director Nominee
Michael J. Downey 59,642,316.9428 1,285,834.2180
Class Two Nominees
(terms expire 2008):
Director Nominee
William H. Foulk Jr. 59,652,129.9428 1,276,021.2180
John H. Dobkin 59,669,716.9121 1,258,434.2487
James M. Hester 59,634,056.5508 1,294,094.6100
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 31
BOARD OF DIRECTORS
William H.Foulk, Jr.(1), Chairman
Marc O.Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Michael J. Downey(1)
Dr. James M. Hester(1)
OFFICERS
Philip L. Kirstein, Senior Vice President & Independent Compliance Officer
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 Registered Public Accounting Firm
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 and the Governance and Nominating Committee.
(2) The management of and investment decisions for the Fund are made by the
Global Fixed Income: Emerging Market Investment Team, the members of which
are jointly and primarily responsible for the day-to-day management of the
Fund. Mr. DeNoon is the senior-most member of the Team.
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 therein, is transmitted to
the shareholders of Alliance World Dollar Government Fund II for their
information. 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.
Annual Certifications - As required, on April 21, 2005, the Fund submitted
to the New York Stock Exchange ("NYSE") the annual certification of the
Fund's Chief Executive Officer certifying that he is not aware of any
violation of the NYSE's Corporate Governance listing standards. The Fund
also has included the certifications of the Fund's Chief Executive Officer
and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley
Act of 2002 as exhibits to the Fund's Form N-CSR filed with the Securities
and Exchange Commission for the annual period.
--------------------------------------------------------------------------------
32 o Alliance World Dollar Government Fund II
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, ADDRESS, OCCUPATION(S) COMPLEX DIRECTORSHIP
DATE OF BIRTH, DURING PAST OVERSEEN BY HELD BY
(YEAR ELECTED*) 5 YEARS DIRECTOR DIRECTOR
---------------------------------------------------------------------------------------------
INTERESTED DIRECTOR
Marc O. Mayer, + Executive Vice President of 63 None
1345 Avenue of the ACMC since 2001; prior thereto,
Americas Chief Executive Officer of
New York, NY 10105 Sanford C. Bernstein & Co., LLC
10/2/57 and its predecessor since prior to
(2003) 2000.
DISINTERESTED DIRECTORS
William H. Foulk, Jr.,33 Investment adviser and an 111 None
2 Sound View Drive independent consultant. He was
Suite 100 formerly Senior Manager of
Greenwich, CT 06830 Barrett Associates, Inc., a
Chairman of the Board registered investment adviser,
9/7/32 with which he had been
(1992) 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,34,** Formerly Executive Vice President 92 None
500 SE Mizner Blvd., and Chief Insurance Officer of
Boca Raton, FL 33432 The Equitable Life Assurance
11/7/30 Society of the United States;
(1992) 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,35 Independent consultant. Until 96 None
P.O. Box 167 December 1994 he was Senior
Spring Lake, NJ 07762 Vice President of Alliance Capital
10/23/29 Management Corporation
(1992) ("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.
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 33
PORTFOLIOS
PRINCIPAL IN FUND OTHER
NAME, ADDRESS, OCCUPATION(S) COMPLEX DIRECTORSHIP
DATE OF BIRTH, DURING PAST OVERSEEN BY HELD BY
(YEAR ELECTED*) 5 YEARS DIRECTOR DIRECTOR
---------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin,# Consultant. Formerly President of 94 None
P.O. Box 12 Save Venice, Inc. (preservation
Annandale, NY 12504 organization) from 2001-2002, a
2/19/42 Senior Advisor from June 1999-
(1992) 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.
Michael J. Downey, # Consultant since January 2004. 63 Asia Pacific
c/o Alliance Capital Formerly managing partner of Fund, Inc.
Management L.P. Lexington Capital, LLC (investment and The
attn: Philip L. Kirstein advisory firm) from December 1997 Merger Fund
1345 Avenue of the until December 2003. Prior thereto,
Americas Chairman and CEO of Prudential
New York, NY 10105 Mutual Fund Management from 1987
1/25/44 to 1993.
(2005)
Dr. James M. Hester, # Formerly President of the Harry 11 None
25 Cleveland Lane Frank Guggenheim Foundation,
Princeton, NJ 08540 New York University and the New
4/19/24 York Botanical Garden, Rector of
(1992) the United Nations University and
Vice Chairman of the Board of the
Federal Reserve Bank of New York.
* There is no stated term of office for the Fund's Directors.
** Ms. Block was an "interested person", as defined in the 1940 Act, until
October 21, 2004 by reason of her ownership of 116 American Depositary Shares
of AXA having a value of approximately $2,396. AXA is a controlling person of
ACMC. Ms. Block received shares of The Equitable Companies Incorporated as
part of the demutualization of The Equitable Life Assurance Society of the
United States, which were subsequently converted through a corporate action
into 116 American Depositary Shares of AXA.
# Member of the Audit Committee and the Governance and Nominating Committee.
+ Mr. Mayer is an "interested person", as defined in the 1940 Act, due to his
position as Executive Vice President of ACMC.
--------------------------------------------------------------------------------
34 o Alliance World Dollar Government Fund II
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* POSITION(S) PRINCIPAL OCCUPATION
AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS**
--------------------------------------------------------------------------------
Marc O. Mayer, President See biography above.
10/2/57
Philip L. Kirstein, Senior Vice President Senior Vice President and Independent
5/29/45 and Independent Compliance Officer-Mutual Funds
Compliance Officer of ACMC** with which he has been associated
since October 2004. Prior thereto, he was Of
Counsel to Kirkpatrick & Lockhart, LLP from
October 2003 to October 2004, and
General Counsel and First Vice President
of Merrill Lynch Investment Managers,
L.P. since prior to 1999 until March 2003.
Paul J. DeNoon, Vice President Senior Vice President of ACMC**, with 4/18/62
which he has been associated since prior to 2000.
Mark R. Manley, Secretary Senior Vice President, Deputy General
10/23/62 Counsel and Chief Compliance Officer of ACMC**,
with which he has been associated since
prior to 2000.
Mark D. Gersten, Treasurer and Chief Senior Vice President of Alliance Global
10/4/50 Financial Officer Investor Services, Inc. ("AGIS")**, and Vice
President of AllianceBernstein Investment
Research and Management, Inc. ("ABIRM")**,
with which he has been associated since prior
to 2000.
Vincent S. Noto, Controller Vice President of AGIS**, with which
12/14/64 he has been associated since prior to 2000.
* 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
--------------------------------------------------------------------------------
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
Mid-Cap Growth Fund
Large Cap Growth Fund*
Small Cap Growth Portfolio
Global & International
All-Asia Investment Fund
Global Health Care Fund*
Global Research Growth Fund
Global Technology Fund*
Greater China '97 Fund
International Growth Fund*
International Research Growth Fund*
New Europe Fund
--------------------------------------------------------------------------------
Value Funds
--------------------------------------------------------------------------------
Domestic
Balanced Shares
Focused Growth & Income Fund*
Growth & Income Fund
Real Estate Investment Fund
Small/Mid-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.
You should read the prospectus carefully before you invest.
* Prior to December 15, 2004, these Funds were named as follows: Global Health
Care Fund was Health Care Fund; Large Cap Growth Fund was Premier Growth
Fund; Global Technology Fund was Technology Fund; and Focused Growth & Income
Fund was Disciplined Value Fund. Prior to February 1, 2005, Small/Mid-Cap
Value Fund was named Small Cap Value Fund. Prior to May 16, 2005,
International Growth Fund was named Worldwide Privatization Fund and
International Research Growth Fund was named International Premier Growth
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, 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
NOTES
--------------------------------------------------------------------------------
38 o Alliance World Dollar Government Fund II
NOTES
--------------------------------------------------------------------------------
Alliance World Dollar Government Fund II o 39
Privacy Notice
Alliance, the AllianceBernstein Family of Funds and AllianceBernstein Investment
Research and Management, Inc. (collectively, "Alliance" or "we") understand the
importance of maintaining the confidentiality of our customers' nonpublic
personal information. In order to provide financial products and services to our
customers efficiently and accurately, we may collect nonpublic personal
information about our customers from the following sources: (1) information we
receive from account documentation, including applications or other forms (which
may include information such as a customer's name, address, social security
number, assets and income) and (2) information about our customers' transactions
with us, our affiliates and others (including information such as a customer's
account balances and account activity).
It is our policy not to disclose nonpublic personal information about our
customers (or former customers) except to our affiliates, or to others as
permitted or required by law. From time to time, Alliance may disclose nonpublic
personal information that we collect about our customers (or former customers),
as described above, to non-affiliated third party providers, including those
that perform processing or servicing functions and those that provide marketing
services for us or on our behalf pursuant to a joint marketing agreement that
requires the third party provider to adhere to Alliance's privacy policy. We
have policies and procedures to safeguard nonpublic personal information about
our customers (or former customers) which include: (1) restricting access to
such nonpublic personal information and (2) maintaining physical, electronic and
procedural safeguards that comply with federal standards to safeguard such
nonpublic personal information.
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO] AllianceBernstein(SM)
Investment Research and Management
(SM) This service mark used under license from the owner, Alliance Capital
Management L.P.
WDGIIAR0305
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 material 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.
(a) - (c) The following table sets forth the aggregate fees billed by the
independent registered public accounting firm Ernst & Young LLP, 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 and quarterly press release review, and preferred stock
maintenance testing (for those Funds that issue preferred stock); and (iii) tax
compliance, tax advice and tax return preparation.
Audit-Related
Audit Fees Fees Tax Fees
---------- ------------- --------
Alliance World Dollar Government Fund II, 2004 $51,000 $13,125 $18,900
Inc.
2005 $54,000 $ 6,890 $17,704
(d) Not applicable.
(e) (1) 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 registered public accounting firm. 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.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in
the table under Item 4 (a) - (c) are for services pre-approved by the Fund's
Audit Committee.
(f) Not applicable.
(g) The following table sets forth the 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,
which include conducting an annual internal control report pursuant to Statement
on Auditing Standards No. 70 ("Service Affiliates"):
Total Amount of
Foregoing Column
Pre-approved by the
All Fees for Audit Committee
Non-Audit Services (Portion Comprised of
Provided to the Audit Related Fees)
Portfolio, the Adviser (Portion Comprised of
and Service Affiliates Tax Fees)
---------------------- ---------------------
Alliance World Dollar Government Fund II, 2004 $ 935,707 $410,150
Inc. ($382,250)
($ 18,900)
2005 $1,320,622 $269,594
($251,890)
($ 17,704)
(h) 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 registered public accounting firm 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 Michael J. Downey
David H. Dievler William H. Foulk, Jr
John H. Dobkin Dr. James M. Hester
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
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.
ALLIANCE CAPITAL MANAGEMENT L.P.
Statement of Policies and Procedures for Proxy Voting
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. We recognize that this duty requires us to vote client
securities in a timely manner and make voting decisions that are in the best
interests of our clients. Consistent with these obligations, we will disclose
our clients' voting records only to them and as required by mutual fund vote
disclosure regulations. In addition, the proxy committees may, after careful
consideration, choose to respond to surveys regarding past votes.
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
applies to Alliance Capital's growth and value investment groups investing on
behalf of clients in both US and non-US securities.
Proxy Policies
This statement is designed to be responsive to the wide range of proxy voting
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:
Corporate Governance: Alliance Capital's proxy voting policies recognize 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. We will
vote for proposals providing for equal access to the proxy materials so that
shareholders can express their views on various proxy issues. We also support
the appointment of a majority of independent directors on key committees and
separating the positions of chairman and chief executive officer.
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 or 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 nonaudit related services
for the company. While we will recognize that there may be special circumstances
that could lead to high non-audit fees in some years, we would normally consider
non-audit fees in excess of 70% to be disproportionate. Therefore, we may vote
against the appointment of auditors if the fees for non-audit related services
exceed 70% of the total audit fees paid by the company or there are other
reasons to question the independence of the company's auditors.
Changes in Legal and 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.
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 antitakeover 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 that do not exceed 2.99 times the sum of an executive officer's base
salary plus bonus that are triggered by a change in control to a shareholder
vote. 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
these policies and new types of corporate governance issues, and decide how we
should vote on proposals not covered by these policies. When a proxy vote cannot
be clearly decided by an application of our stated policy, the proxy committee
will evaluate the proposal. In addition, the committees, in conjunction with the
analyst that covers the company, may contact corporate management and interested
shareholder groups and others as necessary to discuss proxy issues. Members of
the committee include senior investment
personnel and representatives of the Legal and Compliance Department. The
committees may also evaluate proxies where we face a potential conflict of
interest (as discussed below). Finally, the committees monitor adherence to
these policies.
Conflicts of Interest
Alliance Capital recognizes that there may be a potential conflict of interest
when we vote a proxysolicited by an issuer whose retirement plan we manage, or
we administer, who distributes Alliance Capital sponsored mutual funds, or with
whom we or an employee has another business or personal relationship that may
affect how we vote on the issuer's proxy. Similarly, Alliance may have a
potential material conflict of interest when deciding how to vote on a proposal
sponsored or supported by a shareholder group that is a client. 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 material conflict
of interests, including: (i) on an annual basis, the proxy committees will take
reasonable steps to evaluate the nature of Alliance Capital's and our employees'
material business and personal relationships (and those of our affiliates) with
any company whose equity securities are held in client accounts and any client
that has sponsored or has material interest in a proposal upon which we will be
eligible to vote; (ii) 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 (including personal relationships) and any
contact that they have had with any interested party regarding a proxy vote;
(iii) 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 (iv) 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. Because under certain circumstances Alliance Capital
considers the recommendation of third party research services, the proxy
committees will take reasonable steps to verify that any third party research
service is in fact independent based on all of the relevant facts and
circumstances. This includes reviewing the third party research service's
conflict management procedures and ascertaining, among other things, whether the
third party research service (i) has the capacity and competency to adequately
analyze proxy issues; and (ii) can make such recommendations in an impartial
manner and in the best interests of our clients.
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 benefit to the client
of exercising the vote does not outweigh the cost of voting, which is 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 addition, voting proxies of issuers in non-US markets may give rise to a
number of administrative issues that may prevent Alliance Capital from voting
such proxies. For example, Alliance Capital may receive meeting notices without
enough time to fully consider the proxy or after the cut-off date for voting.
Other markets require Alliance Capital to provide local agents with power of
attorney prior to implementing Alliance Capital's voting instructions. Although
it is Alliance Capital's policy to seek to vote all proxies for securities held
in client accounts for which we have proxy voting authority, in the case of
non-US issuers, we vote proxies on a best efforts basis.
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 & Chief Compliance Officer, 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.
There have been no purchases of equity securities by the Fund or by affiliated
parties for the reporting period.
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 this item.
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 over
financial reporting during the second fiscal quarter of the period 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: May 27, 2005
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: May 27, 2005
By: /s/ Mark D. Gersten
-------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: May 27, 2005