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: 811-07732
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York,
New York 10105 (Address of principal
executive offices) (Zip code)
Mark R. Manley
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: March 31, 2004
Date of reporting period: September 30, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
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Closed End
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AllianceBernstein [LOGO](SM)
Investment Research and Management
Alliance World Dollar Government Fund II
Semi-Annual Report -- September 30, 2004
Investment Products Offered
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o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
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You may obtain a description of the Fund's proxy voting policies and
procedures, without charge, upon request by visiting Alliance Capital's web
site at www.alliancebernstein.com (click on Investors, then the "proxy voting
policies and procedures" link on the left side of the page), or by going to the
Securities and Exchange Commission's web site at www.sec.gov, or by calling
Alliance Capital at (800) 227-4618.
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. Alliance publishes full
portfolio holdings for the Fund monthly at www.alliancebernstein.com.
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.
November 18, 2004
Semi-Annual Report
This report provides management's discussion of fund performance for Alliance
World Dollar Government Fund II (the "Fund"), a closed-end fund that trades
under the New York Stock Exchange symbol "AWF", for the semi-annual reporting
period ended September 30, 2004.
Investment Objective and Policies
This closed-end fund is designed for investors who seek high current income
and, secondarily, capital appreciation. To achieve this objective, it invests
primarily in high yielding, high risk sovereign debt and U.S. corporate
fixed-income obligations that we expect to benefit from improving economic and
credit fundamentals. For more information regarding the Fund's risks, please
see the "Word About Risk" section 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 September 30, 2004.
Alliance World Dollar Government Fund II underperformed its benchmark, the JPM
EMBI+, for the semi-annual period, but outperformed its benchmark for the
annual period ended September 30, 2004.
Detracting from the Fund's performance during the semi-annual period was its
overweighted position in Ecuador, which was particularly hurt in the bond
market sell-off in April. Political noise and uncertainty regarding Ecuador's
International Monetary Fund (IMF) funding hurt the country's debt prices during
the period. Additionally, the Fund's overweighted position in Russia throughout
most of the period detracted from its performance, as Russian debt lagged other
emerging market country returns. Also detracting from performance was the
Fund's overall shorter duration positioning that dampened returns when the
emerging markets began to rally in July.
Contributing positively to performance were the Fund's holdings in Venezuela.
Performance was particularly enhanced in May when Venezuela was only one of
three emerging countries to post a positive return. Venezuela benefited from a
clarification of its political leadership and high oil prices during the
period. Also contributing positively to the Fund's performance was its increase
in Argentinian debt toward the end of the period, which benefited from positive
news regarding its final debt restructuring.
Market Review and Investment Strategy
The emerging market debt class, as represented by the JPM EMBI+, returned a
moderate 2.99% for the semi-annual period ended September 30, 2004. The
moderate return, however, masked several volatile months within the reporting
period. After very strong returns in 2003 and the beginning of 2004, the
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 1
semi-annual reporting period began with a sharp bond market sell-off. Early in
April, bond markets sold off dramatically after a surprisingly strong gain in
March U.S. payroll employment, sending emerging-market returns into negative
territory. Concerns that the Federal Reserve would begin tightening interest
rates sooner than expected also surfaced. For the first two months of the
period, April and May, emerging-market debt returns fell by 7.37%.
Later in the period, however, soft consumer confidence readings, weak inflation
data and lower payroll numbers allowed emerging market debt to rebound as the
U.S. economy hit a mid-year slowdown. The prospects of slower, more measured,
Federal Reserve tightenings moved emerging market debt back into positive
territory for the reporting period.
For the six-months ended September 30, 2004, the Latin region outpaced
non-Latin markets returning 4.50% and 0.71%, respectively, as measured by the
JPM EMBI+. During this time Latin countries benefited from export demand and
strong commodity prices, particularly oil. Sustained growth in the region
resulted in a decline in fiscal deficits, which improved the macroeconomic
fundamentals. Countries within the JPM EMBI+ that outperformed for the
semi-annual period included the oil producing countries Venezuela and Brazil.
During the six-month period ended September 30, 2004, Venezuela returned 13.70%
and Brazil returned 8.23%, as measured by the JPM EMBI+. Countries within the
JPM EMBI+ that underperformed for the six-month period were Russia, which
returned -1.08%, Ecuador at -0.82%, Bulgaria at -0.26% and the Ukraine at
-0.16%.
During the semi-annual reporting period ended September 30, 2004, we focused on
reducing the Fund's duration exposure, positioning the Fund for higher interest
rates. We continued to maintain allocations to the Fund's core emerging market
countries (Brazil, Russia, Colombia, Mexico, Peru, Turkey, Venezuela, and the
Ukraine); however, we adjusted the Fund's country weightings during the period.
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, however, we reduced the Fund's Russian holdings 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.
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2 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Additionally, we increased the Fund's exposure in Brazil as growth in Brazil
exceeded even our most optimistic forecast, easing worries about debt
sustainability. Additionally we anticipated that Brazilian debt would benefit
from anticipated ratings upgrades. Subsequently, Brazil was upgraded by Moody's
from a B2 to a B1 rating.
We also increased the Fund's position in the Ukraine during the period due to
strong economic growth and prospects for rating upgrades. Toward the end of the
semi-annual reporting period, we also increased the Fund's Argentinean debt due
to significant indications that a new, final restructuring offer would benefit
investors.
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ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 3
Historical Performance
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HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance shown below 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 Analytical Services Inc., Morningstar, Inc. and Bloomberg. Daily
market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transactions section of different newspapers each day. The
Fund's NYSE trading symbol is "AWF." Weekly comparative net asset value (NAV)
and market price information about the Fund is published each Monday in The
Wall Street Journal, each Sunday in The New York Times and each Saturday in
Barron's and other newspapers in a table called "Closed-End Funds."
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 any specific investment, including the Fund.
A Word About Risk
The Fund invests in fixed income foreign securities, including those of
emerging markets, which may magnify portfolio fluctuations due to changes in
foreign exchange rates and the possibility of substantial volatility due to
political and economic uncertainties in foreign countries. 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, 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.
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4 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Historical Performance
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HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE FUND VS. ITS BENCHMARK -------------------------
PERIODS ENDED SEPTEMBER 30, 2004 6 Months 12 Months
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Alliance World Dollar Government Fund II (NAV) 2.27% 13.81%
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J.P. Morgan Emerging Markets Bond Index Plus 2.99% 11.96%
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The Fund's Market Price per share on September 30, 2004 was $12.14. For
additional Financial Highlights, please see page 26.
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ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 5
Portfolio Summary
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PORTFOLIO SUMMARY
September 30, 2004 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $908.9
SECURITY TYPE BREAKDOWN*
85.9% Sovereign Debt Obligations
5.5% Corporate Debt Obligations [PIE CHART OMITTED]
8.6% Short-Term Investment
* All data is as of September 30, 2004. The Fund's security type breakdown is
expressed as a percentage of total investments and may vary over time.
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6 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Portfolio of Investments
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PORTFOLIO OF INVESTMENTS
September 30, 2004 (unaudited)
Principal
Amount
(000) U.S. $ Value
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SOVEREIGN DEBT OBLIGATIONS-86.0%
Argentina-4.2%
Republic of Argentina
1.98%, 8/03/12FRN $26,700 $ 19,758,000
11.75%, 6/15/15(a) 3,950 1,185,000
12.25%, 6/19/18(a) 6,994 2,063,123
15.50%, 12/19/08(a) 29,830 8,949,000
Series BGL5
11.375%, 1/30/17(a) 2,025 617,625
Series L-GP
6.00%, 3/31/23(a) 10,759 5,513,988
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38,086,736
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Brazil-18.0%
Federal Republic of Brazil
7.72%, 6/29/09 FRN 6,181 6,762,014
8.25%, 1/20/34 2,970 2,647,755
10.125%, 5/15/27 3,100 3,286,000
10.50%, 7/14/14 15,040 16,747,040
11.00%, 8/17/40 42,490 47,631,289
12.00%, 4/15/10 10,050 11,959,500
12.75%, 1/15/20 8,600 10,900,500
C-Bonds
8.00%, 4/15/14 47,527 46,994,207
DCB FRN
Series L
2.125%, 4/15/12 17,562 16,289,144
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163,217,449
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Bulgaria-1.0%
Republic of Bulgaria
8.25%, 1/15/15(b) 7,266 8,973,510
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Colombia-4.0%
Republic of Colombia
8.25%, 12/22/14 5,714 5,642,575
10.75%, 1/15/13 3,057 3,504,851
11.75%, 2/25/20 22,566 27,643,350
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36,790,776
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Ecuador-2.1%
Republic of Ecuador
8.00%, 8/15/30(b)(c) 22,955 18,708,325
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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 4,110,700
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6,457,950
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ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 7
Portfolio of Investments
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Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Indonesia-0.9%
Republic of Indonesia
6.75%, 3/10/14(b) $ 8,585 $ 8,381,106
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Jamaica-0.7%
Government of Jamaica
11.75%, 5/15/11(b) 4,610 5,370,650
12.75%, 9/01/07(b) 500 582,750
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5,953,400
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Mexico-15.3%
United Mexican States
8.125%, 12/30/19 13,100 15,065,000
11.375%, 9/15/16(d) 46,070 67,722,899
Series A
6.375%, 1/16/13 2,782 2,929,446
8.00%, 9/24/22 34,510 38,910,024
9.875%, 2/01/10 11,800 14,549,400
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139,176,769
-------------
Panama-3.0%
Republic of Panama
8.875%, 9/30/27 1,450 1,518,150
9.375%, 7/23/12-4/01/29 4,030 4,526,785
9.625%, 2/08/11 8,900 10,190,500
10.75%, 5/15/20 9,575 11,490,000
-------------
27,725,435
-------------
Peru-4.4%
Republic of Peru
8.375%, 5/03/16 8,112 8,436,480
8.75%, 11/21/33 1,430 1,426,425
9.125%, 2/21/12 15,427 17,162,538
9.875%, 2/06/15 11,071 12,731,650
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39,757,093
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Philippines-4.3%
Republic of Philippines
8.25%, 1/15/14 6,150 6,042,375
9.00%, 2/15/13 6,650 6,849,500
9.875%, 1/15/19 12,750 13,183,500
10.625%, 3/16/25 12,267 13,125,690
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39,201,065
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Russia-11.1%
Russian Federation
5.00%, 3/31/30(b)(c) 55,397 53,249,885
Russian Ministry of Finance
Series V
3.00%, 5/14/08 31,837 28,812,485
Series VII
3.00%, 5/14/11 24,180 19,194,084
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101,256,454
-------------
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8 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Portfolio of Investments
-------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
South Africa-0.7%
Republic of South Africa
7.375%, 4/25/12 $ 5,475 $ 6,173,063
-------------
Turkey-4.8%
Republic of Turkey
9.875%, 3/19/08 3,500 3,928,750
11.00%, 1/14/13 1,970 2,416,205
11.50%, 1/23/12 2,875 3,579,375
11.75%, 6/15/10 4,455 5,513,063
11.875%, 1/15/30 10,000 13,825,000
12.375%, 6/15/09 11,660 14,516,700
-------------
43,779,093
-------------
Ukraine-4.1%
Government of Ukraine
6.875%, 3/04/11(b) 3,900 3,822,000
7.65%, 6/11/13(b) 18,801 18,801,000
11.00%, 3/15/07(b) 13,114 14,293,942
-------------
36,916,942
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Uruguay-0.9%
Republic of Uruguay
7.875%, 1/15/33 9,968 8,048,994
-------------
Venezuela-5.8%
Republic of Venezuela
2.633%, 4/20/11 FRN 4,900 4,201,750
5.375%, 8/07/10 16,785 15,131,678
9.25%, 9/15/27 33,529 33,042,830
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52,376,258
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Total Sovereign Debt Obligations
(cost $685,353,122) 780,980,418
-------------
CORPORATE DEBT OBLIGATIONS-5.5%
Indonesia-0.6%
Freeport-McMoran Copper & Gold
10.125%, 2/01/10 4,800 5,430,000
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Kazakhstan-0.8%
Hurricane Finance
9.625%, 2/12/10(b) 3,500 3,780,000
Kazkommerts International BV
8.50%, 4/16/13(b) 3,000 3,045,000
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6,825,000
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ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 9
Portfolio of Investments
-------------------------------------------------------------------------------
Contracts(e),
Shares or
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Mexico-2.3%
Innova S de. R.L., SA
9.375%, 9/19/13 $ 7,955 $ 8,651,063
12.875%, 4/01/07 2,787 2,800,600
Monterrey Power SA De CV
9.625%, 11/15/09(b) 2,526 2,978,231
Vitro Envases
10.75%, 7/23/11(b) 6,900 6,762,000
-------------
21,191,894
-------------
Romania-0.4%
MobiFon Holdings BV
12.50%, 7/31/10 3,075 3,597,750
-------------
Russia-1.2%
Mobile Telesystems Finance
9.75%, 1/30/08(b) 5,390 5,726,875
10.95%, 12/21/04 4,260 4,302,600
Tyumen Oil
11.00%, 11/06/07(b) 1,075 1,209,375
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11,238,850
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Ukraine-0.2%
Kyivstar
10.375% 8/17/09(b) 1,800 1,917,000
-------------
Total Corporate Debt Obligations
(cost $46,713,758) 50,200,494
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CALL OPTIONS PURCHASED(f)-0.0%
Brazil-0.0%
Federal Republic of Brazil
11.00%, 8/17/40
expiring Oct '04 @ 111.50 1,850,000 35,150
expiring Oct '04 @ 112.50 3,100,000 46,500
expiring Oct '04 @ 113.00 3,100,000 40,300
-------------
Total Call Options Purchased
(cost $156,965) 121,950
-------------
WARRANTS(f)-0.0%
Central Bank of Nigeria
Warrants, expiring 11/15/20 43,000 -0-
Republic of Venezuela
Warrants, expiring 4/15/20 25,000 -0-
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Total Warrants
(cost $0) -0-
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10 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Portfolio of Investments
-------------------------------------------------------------------------------
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS-8.6%
Time Deposit-8.6%
The Bank of New York
1.00%, 10/01/04 $ 4,000 $ 4,000,000
Societe Generale
1.75%, 10/01/04 74,400 74,400,000
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Total Short-Term Investments
(cost $78,400,000) 78,400,000
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Total Investments-100.1%
(cost $810,623,845) 909,702,862
Other assets less liabilities-(0.1%) (825,774)
-------------
Net Assets-100% $ 908,877,088
=============
CREDIT DEFAULT SWAP CONTRACTS (see Note C)
Notional Unrealized
Swap Counterparty & Amount Interest Termination Appreciation/
Referenced Obligation (000's) Rate Date (Depreciation)
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Buy Contracts:
--------------
Citigroup Global
Markets, Inc.
Republic of
Hungary
4.50%, 2/06/13 $ 3,075 0.50% 11/26/13 $(65,337)
Citigroup Global
Markets, Inc.
Republic of
Philippines
10.625%, 3/16/25 4,070 5.60 3/20/14 (95,772)
JP Morgan Chase
Republic of Ecuador
8.00%, 8/15/30 5,850 3.70 4/30/05 (159,058)
Sale Contracts:
---------------
Citigroup Global
Markets, Inc.
Federal Republic
of Brazil
12.25%, 3/06/30 11,000 6.35 8/20/05 643,592
Citigroup Global
Markets, Inc.
Federal Republic
of Brazil
12.25%, 3/06/30 6,750 4.40 5/20/06 439,575
Citigroup Global
Markets, Inc.
Republic of
Philippines
10.625%, 3/16/25 4,070 4.95 3/20/09 105,260
Citigroup Global
Markets, Inc.
United Mexican
States
8.30%, 8/15/31 11,150 2.05 5/20/09 595,890
Citigroup Global
Markets, Inc.
United Mexican
States
8.30%, 8/15/31 5,750 2.40 5/20/14 434,125
Credit Suisse
First Boston
Federal Republic
of Brazil
12.25%, 3/06/30 5,800 6.90 6/20/07 716,300
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 11
Portfolio of Investments
-------------------------------------------------------------------------------
CREDIT DEFAULT SWAP CONTRACTS (see Note C) (continued)
Notional Unrealized
Swap Counterparty & Amount Interest Termination Appreciation/
Referenced Obligation (000's) Rate Date (Depreciation)
-------------------------------------------------------------------------------
Sale Contracts:
---------------
continued
Morgan Stanley
Federal Republic
of Brazil
12.25%, 3/06/30 $5,120 3.80% 8/20/06 $ 186,453
Morgan Stanley
Federal Republic
of Brazil
10.125%, 5/15/27 7,200 17.75 2/13/08 3,289,390
REVERSE REPURCHASE AGREEMENTS (see Note C)
Interest
Broker Rate Maturity Amount
-------------------------------------------------------------------------------
JP Morgan Chase 0.25% 12/30/05 $ 23,805,022
(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 September 30, 2004, the aggregate market value of these securities
amounted to $164,059,599 or 18.1% of net assets.
(c) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at September 30, 2004.
(d) Position, or portion thereof, with an aggregate market value of
$24,412,169 has been segregated to collateralize reverse repurchase agreements.
(e) One contract relates to principal amount of $1.00.
(f) Non-income producing security.
Glossary of Terms:
DCB - Debt Conversion Bonds
FRN - Floating Rate Note
See notes to financial statements.
_______________________________________________________________________________
12 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Statement of Assets & Liabilities
-------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
September 30, 2004 (unaudited)
ASSETS
Investments in securities, at value (cost $810,623,845) $ 909,702,862
Cash 551,704
Due from broker 188,382
Unrealized appreciation of swap contracts 6,410,585
Interest receivable 12,191,373
Receivable for investment securities sold 8,587,664
-------------
Total assets 937,632,570
-------------
LIABILITIES
Unrealized depreciation of swap contracts 320,167
Reverse repurchase agreements 23,805,022
Payable for investment securities purchased 3,285,782
Advisory fee payable 837,403
Administrative fee payable 203,564
Accrued expenses 303,544
-------------
Total liabilities 28,755,482
-------------
Net Assets $ 908,877,088
=============
COMPOSITION OF NET ASSETS
Capital stock, at par $ 676,487
Additional paid-in capital 915,684,345
Distributions in excess of net investment income (2,293,317)
Accumulated net realized loss on investment transactions (110,359,862)
Net unrealized appreciation of investments 105,169,435
-------------
$ 908,877,088
=============
NET ASSET VALUE PER SHARE
(based on 67,648,715 shares outstanding) $13.44
======
See notes to financial statements.
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 13
Statement of Operations
-------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Six Months Ended September 30, 2004 (unaudited)
INVESTMENT INCOME
Interest $ 34,230,890
EXPENSES
Advisory fee $ 4,363,760
Administrative 654,564
Custodian 269,380
Printing 75,333
Transfer agency 68,342
Audit and legal 54,414
Registration 31,885
Directors' fees 20,843
Miscellaneous 19,784
------------
Total expenses before interest 5,558,305
Interest expense 81,534
------------
Total expenses 5,639,839
------------
Net investment income 28,591,051
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT TRANSACTIONS
Net realized gain on:
Investment transactions 17,080,036
Swap contracts 3,985,064
Written options 1,001,678
Net change in unrealized
appreciation/depreciation of:
Investments (35,397,232)
Swap contracts 229,734
Written options (54,435)
------------
Net loss on investment transactions (13,155,155)
------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 15,435,896
============
See notes to financial statements.
_______________________________________________________________________________
14 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Statement of Changes in Net Assets
-------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months
Ended
September 30, Year Ended
2004 March 31,
(unaudited) 2004
============= =============
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 28,591,051 $ 72,980,949
Net realized gain on
investment transactions 22,066,778 237,541,658
Net change in unrealized
appreciation/depreciation
of investments (35,221,933) (60,240,788)
------------- -------------
Net increase in net assets from
operations 15,435,896 250,281,819
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income (26,011,410) (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) (10,575,514) 30,017,110
NET ASSETS
Beginning of period 919,452,602 889,435,492
------------- -------------
End of period (including distributions
in excess of net investment income
of $2,293,317 and $4,872,958,
respectively) $ 908,877,088 $ 919,452,602
============= =============
See notes to financial statements.
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 15
Notes to Financial Statements
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
September 30, 2004 (unaudited)
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 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
_______________________________________________________________________________
16 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Notes to Financial Statements
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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
Notes to Financial Statements
-------------------------------------------------------------------------------
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 six months ended September 30,
2004, there was no reimbursement paid to AGIS.
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended September 30, 2004, were as follows:
Purchases Sales
============= =============
Investment securities (excluding
U.S. government securities) $ 804,667,169 $ 835,218,882
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding swap contracts)
are as follows:
Gross unrealized appreciation $ 101,456,443
Gross unrealized depreciation (2,377,426)
-------------
Net unrealized appreciation $ 99,079,017
=============
1. Option Transactions
For hedging and investment purposes, the Fund may purchase and write (sell) put
and call options on U.S. and foreign government securities and foreign
currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for
_______________________________________________________________________________
18 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Notes to Financial Statements
-------------------------------------------------------------------------------
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 six months ended September 30, 2004,
were as follows:
Number of Premiums
Contracts Received
============= =============
Options outstanding at
March 31, 2004 11,460,000 $ 203,415
Options written 43,840,000 798,263
Options terminated in closing purchase
transactions (29,690,000) (523,713)
Options expired (25,610,000) (477,965)
------------- -------------
Options outstanding at
September 30, 2004 -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.
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
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 19
Notes to Financial Statements
-------------------------------------------------------------------------------
a counterparty is generally limited to the net interim payment to be received
by the Fund, and/or the termination value at the end of the contract.
Therefore, the Fund considers the creditworthiness of each counterparty to a
swap contract in evaluating potential credit risk. Additionally, risks may
arise from unanticipated movements in interest rates or in the value of the
underlying securities.
The Fund accrues for the interim payments on swap contracts on a daily basis,
with the net amount recorded within unrealized appreciation/depreciation of
swap contracts on the statement of assets and liabilities. Once the interim
payments are settled in cash, the net amount is recorded as realized gain/loss
on swaps, in addition to realized gain/loss recorded upon the termination of
swap contracts on the statement of operations. Fluctuations in the value of
swap contracts are recorded as a component of net change in unrealized
appreciation/ depreciation of investments.
The Fund may enter into credit default swaps. The Fund may purchase credit
protection on the referenced obligation of the credit default swap ("Buy
Contract") or provide credit protection on the referenced obligation of the
credit default swap ("Sale Contract"). A sale/(buy) in a credit default swap
provides upon the occurrence of a credit event, as defined in the swap
agreement, for the Fund to buy/(sell) from/(to) the counterparty at the
notional amount (the "Notional Amount") and receive/(deliver) the principal
amount of the referenced obligation. If a credit event occurs, the maximum
payout amount for a Sale Contract is limited to the Notional Amount of the swap
contract ("Maximum Payout Amount"). During the term of the swap agreement, the
Fund receives/(pays) semi-annual fixed payments from/(to) the respective
counterparty, calculated at the agreed upon interest rate applied to the
Notional Amount. These interim payments are recorded within unrealized
appreciation/depreciation of swap contracts on the statement of assets and
liabilities.
Credit default swaps may involve greater risks than if a Fund had invested in
the referenced obligation directly. Credit default swaps are subject to general
market risk, liquidity risk, counterparty risk and credit risk. If the Fund is
a buyer and no credit event occurs, it will lose its investment. In addition,
if the Fund is a seller and a credit event occurs, the value of the referenced
obligation received by the Fund coupled with the periodic payments previously
received, may be less than the Maximum Payout Amount it pays to the buyer,
resulting in a loss to the Fund.
At September 30, 2004, the Fund had Sale Contracts outstanding with Maximum
Payout Amounts aggregating $56,840,000, with net unrealized appreciation of
$6,410,585 and terms ranging from 1 to 10 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
protect-
_______________________________________________________________________________
20 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Notes to Financial Statements
-------------------------------------------------------------------------------
tion, 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 $4,070,000 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 $52,770,000 as of September
30, 2004.
3. Reverse Repurchase Agreements
Under a reverse repurchase agreement, the Fund sells securities and agrees to
repurchase them at a mutually agreed upon date and price. At the time the Fund
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 six months ended September 30, 2004, the average amount of reverse
repurchase agreements outstanding was $43,130,177 and the daily weighted
average interest rate was .33%.
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 September 30, 2004, the Adviser owned 7,200
shares. During the year ended March 31, 2004, the Fund repurchased 10,201,653
shares of its outstanding common stock for $13.02 per share pursuant to a
tender offer. The Fund incurred tender offering costs of $66,049 which were
charged to additional paid-in capital. During the six months ended September
30, 2004 and the year ended March 31, 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 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
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 21
Notes to Financial Statements
-------------------------------------------------------------------------------
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 to be paid for the year ending March 31,
2005 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended March 31, 2004
and March 31, 2003 were as follows:
2004 2003
============= =============
Distributions paid from:
Ordinary income $ 87,373,144 $ 82,323,739
------------- -------------
Total taxable distributions 87,373,144 82,323,739
------------- -------------
Total distributions paid $ 87,373,144 $ 82,323,739
============= =============
As of March 31, 2004, the components of accumulated earnings/(deficit) on a tax
basis were as follows:
Undistributed ordinary income $ 2,695,800
Accumulated capital and other losses (127,414,167)(a)
Unrealized appreciation/(depreciation) 133,560,278(b)
-------------
Total accumulated earnings/(deficit) $ 8,841,911
=============
(a) On March 31, 2004, the Fund had a net capital loss carryforward of
$127,414,167 of which $68,891,646 expires in the year 2010 and $58,522,521
expires in the year 2011. To the extent future capital gains are offset by
capital loss carryforwards, such gains will not be distributed. During the
fiscal year, the fund utilized capital loss carryforwards of $225,624,007.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales, the difference between book and tax amortization methods
for premium and the difference between book and tax treatment of swap income.
NOTE G
Legal Proceedings
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of the New York Attorney General ("NYAG")
have been investigating practices in the mutual fund industry identified
_______________________________________________________________________________
22 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Notes to Financial Statements
-------------------------------------------------------------------------------
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 funds 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 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
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 23
Notes to Financial Statements
-------------------------------------------------------------------------------
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 in connection with
this matter and the Adviser has provided documents and other information to the
SEC and is cooperating fully with its investigation.
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 Aucoin Complaint was filed in the United States District Court
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.
_______________________________________________________________________________
24 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Notes to Financial Statements
-------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
Six Months
Ended
September Year Ended March 31,
30, 2004 ---------------------------------------------------------------
(unaudited) 2004(a) 2003 2002(b) 2001 2000
----------- ----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $13.59 $11.42 $10.58 $10.37 $10.83 $8.52
INCOME FROM INVESTMENT
OPERATIONS
Net investment income(c) .42 .99 1.07 1.32 1.25 1.16
Net realized and unrealized
gain (loss) on investment
transactions (.19) 2.36 .83 .19 (.62) 2.29
Net increase in net asset
value from operations .23 3.35 1.90 1.51 .63 3.45
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from
net investment income (.38) (1.18) (1.06) (1.30) (1.09) (1.10)
Tax return of capital -0- -0- -0- -0- -0- (.04)
Total dividends and distributions (.38) (1.18) (1.06) (1.30) (1.09) (1.14)
Net asset value, end of period $13.44 $13.59 $11.42 $10.58 $10.37 $10.83
Market value, end of period $12.14 $12.91 $10.91 $10.32 $9.15 $9.19
Premium/(Discount) (9.67)% (5.00)% (4.47)% (2.46)% (11.76)% (15.14)%
TOTAL RETURN
Total investment return based on:(d)
Market value (2.75)% 29.27% 17.72% 27.02% 12.05% 11.15%
Net asset value 2.27% 30.01% 20.20% 16.22% 7.73% 44.16%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $908,877 $919,453 $889,435 $823,753 $807,476 $843,390
Ratio to average net assets of:
Expenses 1.29%(e) 1.29% 1.49% 1.88% 1.90% 1.51%
Expenses, excluding
interest expense 1.27%(e) 1.25% 1.35% 1.29% 1.28% 1.30%
Net investment income 6.55%(e) 7.65% 10.53% 12.69% 11.31% 12.33%
Portfolio turnover rate 100% 158% 121% 178% 203% 217%
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.
(e) Annualized.
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 27
Board of Directors
-------------------------------------------------------------------------------
BOARD OF DIRECTORS
William H.Foulk, Jr.(1), Chairman
Marc O.Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Dr. James M. Hester(1)
Donald J. Robinson(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, RI 02940-3011
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 Governance and Nominatimg Committee.
(2) Mr. DeNoon is the person primarily responsible for the day-to-day
management of the Fund's investment portfolio.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its Common Stock in the open market.
This report, including the financial statements herein, is transmitted to the
shareholders of Alliance World Dollar Government Fund II for their information.
The financial information included herein is taken from the records of the
Fund. This is not a prospectus, circular or representation intended for use in
the purchase of shares of the Fund or any securities mentioned in this report.
_______________________________________________________________________________
28 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
AllianceBernstein Family of Funds
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ALLIANCEBERNSTEIN FAMILY OF FUNDS
--------------------------------------------
Wealth Strategies Funds
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Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy
--------------------------------------------
Blended Style Funds
--------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
--------------------------------------------
Growth Funds
--------------------------------------------
Domestic
Growth Fund
Health Care Fund*
Mid-Cap Growth Fund
Premier Growth Fund*
Small Cap Growth Fund
Technology Fund*
Global & International
All-Asia Investment Fund
Global Research Growth Fund
Global Small Cap Fund
Greater China '97 Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Biotechnology Portfolio
Premier Portfolio
Technology Portfolio
--------------------------------------------
Value Funds
--------------------------------------------
Domestic
Balanced Shares
Disciplined Value Fund*
Growth & Income Fund
Real Estate Investment Fund
Small Cap Value Fund
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
--------------------------------------------
Taxable Bond Funds
--------------------------------------------
Americas Government Income Trust
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Quality Bond Portfolio
Short Duration Portfolio
U.S. Government Portfolio
--------------------------------------------
Municipal Bond Funds
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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
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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 or send
money.
* Effective December 15, 2004, these Funds will be renamed as follows: Health
Care Fund to Global Health Care Fund; Premier Growth Fund to Large Cap Growth
Fund; Technology Fund to Global Technology Fund; and Disciplined Value Fund to
Focused Growth & Income 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.
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 29
Summary of General Information
-------------------------------------------------------------------------------
SUMMARY OF GENERAL INFORMATION
Shareholder Information
The daily net asset value of the Fund's shares is available from the Fund's
Transfer Agent by calling (800) 426-5523. The Fund also distributes its daily
net asset value (NAV) to various financial publications or independent
organizations such as Lipper Analytical Services, Inc., Morningstar, Inc. and
Bloomberg. Daily market prices for the Fund's shares are published in the New
York Stock Exchange Composite Transactions Section of different newspapers each
day. The Fund's NYSE trading symbol is "AWF." Weekly comparative net asset
value and market price information about the Fund is published each Monday in
The Wall Street Journal, each Sunday in The New York Times and each Saturday in
Barron's and other newspapers in a table called "Closed-End Funds."
Dividend Reinvestment Plan
If your shares are held in your own name, you will automatically be a
participant in the Plan unless you elect to receive cash. If your shares are
held in nominee or street name through a broker or nominee who provides this
service, you will also automatically be a participant in the Plan. If your
shares are held in the name of a broker or nominee who does not provide this
service, you will need to instruct them to participate in the Plan on your
behalf or your distributions will not be reinvested. In such case, you will
receive your distributions in cash.
For questions concerning shareholder account information, or if you would like
a brochure describing the Dividend Reinvestment Plan, please call Equiserve
Trust Company, N.A. at (800) 219-4218.
_______________________________________________________________________________
30 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
NOTES
_______________________________________________________________________________
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 31
NOTES
_______________________________________________________________________________
32 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
AllianceBernstein [LOGO](SM)
Investment Research and Management
(SM) This service mark used under license from the owner, Alliance Capital
Management L.P.
WDGIISR0904
ITEM 2. CODE OF ETHICS.
Not Applicable when filing a Semi-Annual report to shareholders.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable when filing a Semi-Annual report to shareholders.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not Applicable when filing a Semi-Annual report to shareholders.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable when filing a Semi-Annual report to shareholders.
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.
Not Applicable when filing a Semi-Annual report to shareholders.
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 the requirements of Item 7(d)(2)(ii)(G) of Schedule
14A in its proxy statement filed with the Commission on February 23, 2004.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures (as
defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended)
are effective at the reasonable assurance level based on their evaluation of
these controls and procedures as of a date within 90 days of the filing date of
this document.
(b) There were no significant changes in the registrant's internal controls that
could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 11. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
11 (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: November 29, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Marc O. Mayer
-----------------
Marc O. Mayer
President
Date: November 29, 2004
By: /s/ Mark D. Gersten
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: November 29, 2004