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 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, 2006
Date of reporting period: March 31, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
Alliance World Dollar
Government Fund II
Annual Report
March 31, 2006
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
-----------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
-----------------------------
The Fund's Board of Directors approved amended and restated by-laws for the
Fund effective April 1, 2006. The by-laws are an exhibit to the Fund's most
recently filed report on Form N-SAR, which is on file with the SEC and may be
accessed via the SEC's website which is at www.sec.gov. A copy is also
available upon written request to the Secretary of the Fund.
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 AllianceBernsteinR 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 Investments, Inc. is an affiliate of AllianceBernstein L.P.,
the manager of the funds, and is a member of the NASD.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
May 18, 2006
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, 2006. 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 seeks high current income and secondarily, capital
appreciation. Under normal circumstances, the Fund will invest at least 65%
of its total assets in sovereign debt obligations issued or guaranteed by
foreign governments. Up to 35% of the Fund's investments may be comprised of
high-yielding, high-risk fixed-income securities issued by U.S. corporations.
For more information regarding the Fund's risks, please see "A Word About
Risk" on page 3 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 4 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, 2006.
The Fund outperformed its benchmark for both the six- and 12-month periods
ended March 31, 2006. Contributing positively to performance for both periods
were the Fund's overweight positions in Latin America, particularly Brazil and
Argentina. Brazil's stable growth, central bank easing and debt buy backs
helped support its bond prices, particularly towards the end of the year when
the Fund's exposure was increased. Argentina benefited during the year from a
completion of its debt restructuring and very strong economic growth. Both
Brazil and Argentina were top performers during the reporting period.
Detracting from the Fund's performance for the 12-month period was the Fund's
overweight exposure to Ecuador during the months of April and May of 2005.
Earlier in the period, an overweight position in Ecuador was favored based on
valuation, potential ratings upgrades and the country's ability to finance
itself. Political turmoil in April 2005, however, superseded the country's
positive fundamentals and caused Ecuador's bond prices to plummet. Detracting
from the Fund's performance for both the six- and 12-month periods was security
selection in Argentina. Although the Fund's country selection of Argentina
contributed positively to performance, the Fund's shorter-maturity bond
selection in the country detracted from performance as Argentina's
longer-duration bonds outperformed.
Market Review and Investment Strategy
The emerging market debt class posted the strongest returns within the
fixed-income sectors of the market for the annual period, returning 15.17%,
according to the JPM EMBI+. All 18 emerging market countries represented within
this index posted positive returns for the year. The emerging markets enjoyed
strong investor demand,
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 1
a favorable low global interest rate environment and strong global liquidity
throughout the period. Furthermore, world inflation worries eased somewhat and
growth indicators turned more positive, benefiting emerging market sovereign
debt. Strong capital inflows caused currencies to appreciate, which allowed
central banks in almost every emerging country to accumulate reserves--one of
the most important technical drivers supporting the sector. Improved export
demand and strong commodity prices, particularly oil, also helped some emerging
market countries. Emerging market spreads tightened to end the period at a near
record low of 192 basis points over Treasuries, representing a tightening of
192 basis points during the year.
For the annual reporting period, the Latin region returned 17.13%, outpacing
non-Latin countries, which returned 12.30%. Individual countries outperforming
for the annual period included Argentina at 27.93%, Venezuela at 25.97%, Brazil
at 21.67% and Ecuador at 20.05%. Underperforming countries for the period
included Bulgaria at 1.36%, Poland at 2.21% and the Ukraine at 3.71%.
During the period, Brazil, Venezuela, Argentina, Peru and Panama contributed
positively to the Fund. Brazil benefited from low inflation, a stronger
currency and aggressive interest rate cuts. Brazil's debt-to-GDP ratio declined
significantly as it began a schedule of $20 billion in debt buybacks. Venezuela
benefited from continued strong oil revenues and the potential of debt
buybacks. Argentina continued to be helped by both strong growth (9.1% in 2005)
and reserve accumulation ($8.4 billion in 2005).
The Fund's exposure to Peru was increased based on strong economic growth and
strong demand for its exports. Political uncertainty in Peru unexpectedly
increased late in the period, however. Ollanta Humala, the Nationalist
candidate for president, rose in the polls against the more business-friendly
candidate, Lourdes Flores. Despite this uncertainty, Peru was still favored due
to its strong long-term fundamentals and indications that Humala, if elected,
would maintain current monetary and fiscal policies. Furthermore, there are
institutional limitations in place that limit Humala's ability to change
economic policies, even if he wanted to.
A small position in Nigeria was also added to the Fund. Nigeria benefited from
a Paris Club deal which helped it eliminate approximately $30 billion in debt.
(The Paris Club is an informal organization consisting of a group of financial
officials representing 19 of the world's wealthiest nations.) Nigeria has
benefited from improved fiscal management, structural reforms and reserve
accumulation. In Panama, economic fundamentals improved on all fronts. Panama's
economy strengthened, helped by canal-related fees, services and expansion. The
country's fiscal account deficit also improved. Gains were led by tax
collections, which were up 16.4% in 2005 due to rapid economic growth and
fiscal reforms. Lastly, the Fund was defensively postured relative to U.S.
interest-rate risk, as U.S. rates were anticipated to rise during the year.
2 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
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 (NAV) 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 composed of dollar-denominated restructured
sovereign bonds; a large percentage of the Index is made up of Brady bonds. An
investor cannot invest directly in an index, and its results are not indicative
of the performance of any specific investment, including the Fund.
A Word About Risk
The Fund can invest in foreign securities, including in 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 Fund
to decline. Changes in interest rates have a greater effect on bonds with
longer maturities than on those with shorter maturities. 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. These high yield bonds involve a
greater risk of default and price volatility than other bonds. Investing in
non-investment grade securities presents special risks, including credit risk.
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.
The Fund maintains asset coverage of at least 300%. 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.
(Historical performance continued on next page)
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 3
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE FUND VS. ITS BENCHMARK --------------------------
PERIODS ENDED MARCH 31, 2006 6 Months 12 Months
-------------------------------------------------------------------------------
Alliance World Dollar Government Fund II (NAV) 4.04% 15.28%
JPM EMBI+ 3.85% 15.17%
The Fund's Market Price per share on March 31, 2006 was $12.59. The Fund's
Net Asset Value price per share on March 31, 2006 was $14.54. For additional
Financial Highlights, please see page 27.
GROWTH OF A $10,000 INVESTMENT IN THE FUND
3/31/96 TO 3/31/06
JPM EMBI+: $31,099
Alliance World Dollar Government Fund II (NAV): $23,201
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
Alliance World
Dollar Government
Fund II (NAV) JPM EMBI+
-------------------------------------------------------------------------------
3/31/96 $10,000 $10,000
3/31/97 $13,364 $12,623
3/31/98 $ 8,514 $ 9,430
3/31/99 $10,092 $11,599
3/31/00 $11,100 $14,849
3/31/01 $ 9,981 $15,112
3/31/02 $10,004 $14,941
3/31/03 $15,484 $20,945
3/31/04 $17,567 $23,450
3/31/05 $20,127 $27,002
3/31/06 $23,201 $31,099
This chart illustrates the total value of an assumed $10,000 investment in
Alliance World Dollar Government Fund II at net asset value (NAV) (from 3/31/96
to 3/31/06) as compared to the performance of the Fund's benchmark. The chart
assumes the reinvestment of dividends and capital gains distributions.
See Historical Performance and Benchmark disclosures on page 3.
4 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
PORTFOLIO SUMMARY
March 31, 2006
PORTFOLIO STATISTICS
Net Assets ($mil): $983.8
SECURITY TYPE BREAKDOWN*
O 79.0% Sovereign Debt Obligations
O 11.6% Corporate Debt Obligations [PIE CHART OMITTED]
O 9.4% Short-Term
* All data are as of March 31, 2006. The Fund's security type breakdown is
expressed as a percentage of total investments and may vary over time.
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 5
PORTFOLIO OF INVESTMENTS
March 31, 2006
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-81.3%
Argentina-4.6%
Republic of Argentina
Zero Coupon, 12/15/35 $ 23,602 $2,124,182
4.889%, 8/03/12(b) 40,298 37,390,106
8.28%, 12/31/33(c) 5,771 5,670,356
------------
45,184,644
Brazil-16.1%
Federal Republic of Brazil
7.125%, 1/20/37(c) 29,261 28,675,779
8.00%, 1/15/18 9,038 9,770,078
8.25%, 1/20/34 27,633 30,451,565
8.875%, 10/14/19 7,260 8,385,300
10.50%, 7/14/14 10,110 12,586,950
12.00%, 4/15/10 8,650 10,553,000
12.75%, 1/15/20 31,478 46,823,524
DCB FRN
Series L
5.25%, 4/15/12(b) 10,806 10,806,228
------------
158,052,424
Bulgaria-0.4%
Republic of Bulgaria
8.25%, 1/15/15(d) 3,204 3,745,476
Colombia-2.6%
Republic of Colombia
10.75%, 1/15/13 8,057 9,982,623
11.75%, 2/25/20 10,919 15,532,278
------------
25,514,901
Costa Rica-0.4%
Republic of Costa Rica
8.05%, 1/31/13(d) 1,669 1,798,348
8.11%, 2/01/12(d) 1,964 2,111,300
------------
3,909,648
Dominican Republic-0.2%
Dominican Republic
9.50%, 9/27/11(d) 2,101 2,258,352
Ecuador-1.4%
Republic of Ecuador
9.00%, 8/15/30(d)(e) 9,300 9,369,751
9.375%, 12/15/15(d) 3,834 4,044,870
------------
13,414,621
6 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
El Salvador-0.9%
Republic of El Salvador
7.625%, 9/21/34(d) $ 2,290 $2,490,375
7.65%, 6/15/35(d) 1,691 1,771,323
8.50%, 7/25/11(d) 3,700 4,108,850
------------
8,370,548
Indonesia-1.8%
Republic of Indonesia
6.75%, 3/10/14(d) 8,585 8,542,075
6.875%, 3/09/17(d) 3,954 3,894,690
7.25%, 4/20/15(d) 2,480 2,539,520
8.50%, 10/12/35(d) 2,048 2,283,520
------------
17,259,805
Lebanon-1.2%
Lebanese Republic
7.875%, 5/20/11(d) 2,475 2,574,000
10.125%, 8/06/08(d) 7,501 8,082,328
11.625%, 5/11/16(d) 1,114 1,420,350
------------
12,076,678
Malaysia-1.0%
Malaysia
8.75%, 6/01/09 9,420 10,301,552
Mexico-13.2%
United Mexican States
7.50%, 1/14/12 7,400 7,992,000
8.125%, 12/30/19 42,200 49,627,199
11.375%, 9/15/16 11,110 15,653,990
Series A
6.375%, 1/16/13 2,782 2,851,550
8.00%, 9/24/22 34,632 40,484,807
9.875%, 2/01/10 11,800 13,452,000
------------
130,061,546
Nigeria-1.8%
Central Bank of Nigeria
6.25%, 11/15/20(e) 17,250 17,272,425
Panama-3.1%
Republic of Panama
6.70%, 1/26/36 4,263 4,252,343
7.125%, 1/29/26 4,794 4,913,850
7.25%, 3/15/15 600 636,000
8.875%, 9/30/27 6,113 7,427,295
9.375%, 7/23/12-4/01/29 6,285 7,517,445
9.625%, 2/08/11 5,206 5,986,900
30,733,833
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 7
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Peru-2.9%
Republic of Peru
7.35%, 7/21/25 $ 2,097 $2,059,254
8.375%, 5/03/16 3,191 3,462,235
8.75%, 11/21/33 20,733 23,117,295
9.875%, 2/06/15 157 185,260
------------
28,824,044
Philippines-5.0%
Republic of Philippines
7.75%, 1/14/31 5,528 5,562,550
8.375%, 2/15/11 684 740,430
8.875%, 3/17/15 17,505 19,675,620
9.00%, 2/15/13 4,775 5,168,938
9.875%, 1/15/19 12,750 15,331,875
10.625%, 3/16/25 2,055 2,666,363
------------
49,145,776
Russia-12.1%
Russian Federation
5.00%, 3/31/30(d)(e) 37,641 41,174,609
11.00%, 7/24/18(d) 4,340 6,223,560
Russian Ministry of Finance
Series V
3.00%, 5/14/08 70,752 66,952,617
Series VII
3.00%, 5/14/11 5,870 5,173,231
------------
119,524,017
Turkey-4.7%
Republic of Turkey
6.875%, 3/17/36 18,028 17,442,090
7.375%, 2/05/25 2,142 2,219,648
11.00%, 1/14/13 5,500 6,897,000
11.50%, 1/23/12 5,183 6,478,750
11.75%, 6/15/10 5,823 7,002,158
11.875%, 1/15/30 3,935 6,079,575
------------
46,119,221
Ukraine-0.5%
Government of Ukraine
7.65%, 6/11/13(d) 1,170 1,225,575
11.00%, 3/15/07(d) 3,743 3,876,016
------------
5,101,591
Uruguay-1.5%
Republic of Uruguay
5.875%, 1/15/33(f) 4,246 4,394,725
7.50%, 3/15/15 3,691 3,847,868
8.00%, 11/18/22 2,296 2,399,320
9.25%, 5/17/17 3,488 4,054,800
------------
14,696,713
8 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
Venezuela-5.9%
Republic of Venezuela
5.614%, 4/20/11(b)(d) $ 3,050 $3,066,775
8.50%, 10/08/14 1,731 1,938,720
9.25%, 9/15/27(c) 17,171 21,807,170
10.75%, 9/19/13 19,646 24,498,562
13.625%, 8/15/18 4,499 6,905,965
------------
58,217,192
Total Sovereign Debt Obligations
(cost $725,434,607) 799,785,007
CORPORATE DEBT OBLIGATIONS-12.0%
Brazil-0.4%
Banco BMG, SA
9.15%, 1/15/16(d) 3,300 3,378,375
Cayman Islands-0.1%
C&M Finance Ltd.
8.10%, 2/01/16(d) 1,405 1,405,493
Hong Kong-0.4%
Noble Group Ltd.
6.625%, 3/17/15(d) 4,731 4,181,986
Indonesia-0.5%
Freeport-McMoran Copper & Gold
10.125%, 2/01/10 4,800 5,172,000
Jamaica-0.3%
Digicel Ltd.
9.250%, 9/01/12(c)(d) 2,884 3,049,830
Kazakhstan-0.6%
Kazkommerts International BV
8.50%, 4/16/13(d) 3,000 3,202,500
TengizChevroil Finance Co.
6.124%, 11/15/14(d) 2,569 2,556,155
------------
5,758,655
Mexico-1.3%
America Movil SA de CV
6.375%, 3/01/35 923 869,928
Innova S De. R.L., SA
9.375%, 9/19/13 7,955 8,909,600
Monterrey Power SA de CV
9.625%, 11/15/09(d) 2,526 2,795,060
------------
12,574,588
Panama-0.3%
AES El Savador Trust
6.75%, 2/01/16(d) 3,100 3,012,713
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 9
Shares or
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
People's Republic of China-0.4%
Choada Modern Agricultural Holdings Ltd.
7.75%, 2/08/10(d) $ 3,808 $3,808,000
Peru-0.4%
Southern Copper Corp.
6.375%, 7/27/15 4,524 4,406,955
Romania-0.4%
MobiFon Holdings BV
12.50%, 7/31/10 3,075 3,513,188
Russia-6.6%
Aries Vermogensverwaltng
9.60%, 10/25/14(d) 21,750 27,174,451
Citigroup (JSC Severstal)
9.25%, 4/19/14(d) 2,256 2,431,291
Evraz Group, SA
8.25%, 11/10/15(d) 3,933 3,972,330
Gazprom Oao
9.625%, 3/01/13(d) 16,100 19,059,180
Gazstream, SA
5.625%, 7/22/13(d) 1,898 1,867,059
Mobile Telesystems Finance
9.75%, 1/30/08(d) 5,390 5,666,370
Russian Standard Finance
7.50%, 10/07/10(d) 3,412 3,339,495
Tyumen Oil
11.00%, 11/06/07(d) 1,075 1,150,250
------------
64,660,426
Ukraine-0.3%
Kyivstar
7.75%, 4/27/12(d) 900 903,375
10.375%, 8/17/09(d) 1,800 1,953,000
2,856,375
Total Corporate Debt Obligations
(cost $115,143,743) 117,778,584
WARRANTS(g)-0.0%
Central Bank of Nigeria
Warrants, expiring 11/15/20 9,500 209,000
Republic of Venezuela
Warrants, expiring 4/15/20 25,000 -0-
Total Warrants
(cost $0) 209,000
10 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Principal
Amount
(000) U.S. $ Value
-------------------------------------------------------------------------------
SHORT-TERM INVESTMENT-9.7%
Time Deposit-9.7%
Societe Generale
4.82%, 4/03/06
(cost $95,400,000) $ 95,400 $95,400,000
Total Investments-103.0%
(cost $935,978,350) 1,013,172,591
Other assets less liabilities-(3.0%) (29,384,927)
------------
Net Assets-100% $983,787,664
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 Columbia
8.375%, 2/15/27 $ 4,250 3.02% 1/20/10 $(301,641)
Citigroup Global Markets, Inc.
Republic of Hungary
4.50%, 2/06/13 3,075 0.50 11/26/13 940
Citigroup Global Markets, Inc.
Republic of Philippines
10.625%, 3/16/25 4,070 5.60 3/20/14 (725,430)
JPMorgan Chase & Co.
Republic of Hungary
4.75%, 2/03/15 11,300 0.30 10/20/15 240,043
Sale Contracts:
Citigroup Global Markets, Inc.
Federal Republic of Brazil
12.25%, 3/06/30 19,047 1.98 4/20/07 500,688
Citigroup Global Markets, Inc.
Federal Republic of Brazil
12.25%, 3/06/30 18,840 3.09 8/20/10 1,312,449
Citigroup Global Markets, Inc.
Federal Republic of Brazil
12.25%, 3/06/30 6,750 4.40 5/20/06 147,895
Citigroup Global Markets, Inc.
Republic of Columbia
8.375%, 2/15/27 8,600 1.13 1/20/07 79,074
Citigroup Global Markets, Inc.
Republic of Philippines
10.625%, 3/16/25 4,070 4.95 3/20/09 419,409
Credit Suisse First Boston
Federal Republic of Brazil
12.25%, 3/06/30 5,800 6.90 6/20/07 563,019
Credit Suisse First Boston
Republic of Venezuela
9.25%, 9/15/27 13,570 3.17 10/20/15 1,230,448
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 11
Notional
Swap Counterparty & Amount Interest Termination Unrealized
Referenced Obligation (000's) Rate Date Appreciation
---------------------------------------------------------------------------------------
Sale Contracts (continued):
Deutsche Bank AG London
Federal Republic of Brazil
12.25%, 3/06/30 $ 19,047 1.90% 4/20/07 $478,076
JPMorgan Chase & Co.
Gazprom Oao
5.875%-10.50%
4/25/07-6/1/15 12,210 1.04 10/20/10 83,730
Morgan Stanley
Federal Republic of Brazil
10.125%, 5/15/27 7,200 17.75 2/13/08 2,378,369
Morgan Stanley
Federal Republic of Brazil
12.25%, 3/06/30 5,120 3.80 8/20/06 91,749
REVERSE REPURCHASE AGREEMENTS (see Note C)
Interest
Broker Rate Maturity Amount
-------------------------------------------------------------------------------
UBS AG LONDON 1.60% 12/29/06 $5,527,701
UBS AG LONDON 4.10 12/29/06 20,964,958
UBS AG LONDON 4.40 4/06/06 2,527,941
UBS AG LONDON 4.60 12/29/06 22,575,723
-----------
$51,596,323
(a) Variable rate coupon, rate shown as of March 31, 2006.
(b) Floating rate security, stated interest rate in effect at March 31, 2006.
(c) Security or a portion of the security has been pledged as collateral for
reverse repurchase agreements. At the period end, the value of securities
pledged amounted to $52,868,895.
(d) Securities are 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, 2006, the aggregate market value of these securities
amounted to $211,508,576 or 21.5% of net assets.
(e) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at March 31, 2006.
(f) Pay-In-Kind Payment (PIK).
(g) 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
March 31, 2006
Assets
Investments in securities, at value (cost $935,978,350) $1,013,172,591
Unrealized appreciation of swap contracts 7,525,889
Receivable for investment securities sold 5,373,369
Interest receivable 15,179,410
-------------
Total assets 1,041,251,259
-------------
Liabilities
Due to custodian 1,873,533
Unrealized depreciation of swap contracts 1,027,071
Reverse repurchase agreements 51,596,323
Payable for investment securities purchased 1,728,955
Advisory fee payable 860,162
Administrative fee payable 5,521
Accrued expenses 372,030
-------------
Total liabilities 57,463,595
-------------
Net Assets $983,787,664
-------------
Composition of Net Assets
Capital stock, at par $676,487
Additional paid-in capital 915,684,316
Undistributed net investment income 2,535,446
Accumulated net realized loss on investment transactions (18,801,644)
Net unrealized appreciation of investments 83,693,059
-------------
$983,787,664
-------------
Net Asset Value Per Share - 100 million shares of capital
stock authorized, $.01 par value
(based on 67,648,715 shares outstanding) $14.54
-------------
See notes to financial statements.
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 13
STATEMENT OF OPERATIONS
Year Ended March 31, 2006
Investment Income
Interest $72,577,286
Expenses
Advisory fee $9,123,453
Administrative 763,168
Custodian 620,055
Printing 124,998
Legal 119,079
Audit 78,026
Transfer agency 73,119
Registration 60,000
Directors' fees 36,200
Miscellaneous 41,032
-------------
Total expenses before interest 11,039,130
Interest expense 739,942
-------------
Total expenses 11,779,072
-------------
Net investment income 60,798,214
-------------
Realized and Unrealized Gain (Loss)
on Investment Transactions
Net realized gain (loss) on:
Investment transactions 63,515,335
Swap contracts (856,502)
Written options 1,188,246
Net change in unrealized
appreciation/depreciation of:
Investments 916,301
Swap contracts 2,035,511
-------------
Net gain on investment transactions 66,798,891
-------------
Net Increase in Net Assets
from Operations $127,597,105
-------------
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,
2006 2005
------------- -------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $60,798,214 $58,528,641
Net realized gain on investment
transactions 63,847,079 54,756,900
Net change in unrealized
appreciation/depreciation
of investments 2,951,812 (59,650,121)
------------- -------------
Net increase in net assets from
operations 127,597,105 53,635,420
Dividends to Shareholders from
Net investment income (60,647,076) (56,250,387)
------------- -------------
Total increase (decrease) 66,950,029 (2,614,967)
Net Assets
Beginning of period 916,837,635 919,452,602
------------- -------------
End of period (including undistributed
net investment income of $2,535,446
and $573,240, respectively) $983,787,664 $916,837,635
------------- -------------
See notes to financial statements.
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 15
NOTES TO FINANCIAL STATEMENTS
March 31, 2006
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, AllianceBernstein, L.P. (prior to February
16 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
24, 2006 known as 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 amortizes premiums and
accretes discounts as adjustments to interest income.
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 .90% of the Fund's average weekly net
assets. Prior to October 1, 2005, the Fund paid the Adviser an advisory fee at
an annual rate of 1.00% of the Fund's average weekly net assets. Such fee is
accrued daily and paid monthly.
Pursuant to the Administration Agreement in effect until October 1, 2005, the
Fund paid the Adviser an administrative fee of .15% of the Fund's average
weekly net assets. Effective that date pursuant to an Amended Administration
Agreement, the Fund reimburses the Adviser for its costs, including legal and
accounting costs, in serving as Administrator of the Fund; provided, however,
that the reimbursement may not exceed the prior fee of .15% of average weekly
net assets. For the fiscal year ended March 31, 2006, the Fund paid the Adviser
$763,168 for its administrative services, representing 0.08% of the Fund's
average weekly net assets.
Under the terms of a Shareholder Inquiry Agency Agreement with
AllianceBernstein Investor Services, Inc. (prior to February 24, 2006 known as
Alliance Global Investor Services, Inc.) ("ABIS"), a wholly-owned subsidiary of
the Adviser, the Fund reimburses ABIS for costs relating to servicing phone
inquiries on behalf of the Fund. During the year ended March 31, 2006, the Fund
reimbursed ABIS $880 for such costs.
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended March 31, 2006, were as follows:
Purchases Sales
------------ ------------
Investment securities (excluding
U.S. government securities) $765,908,492 $706,116,034
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation (excluding written options and swap
contracts) are as follows:
Cost $937,065,632
Gross unrealized appreciation $79,598,199
Gross unrealized depreciation (3,490,163)
Net unrealized appreciation $76,108,036
18 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
1. Option Transactions
For hedging and investment purposes, the Fund may purchase and write (sell) put
and call options on U.S. and foreign government securities and foreign
currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
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's 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, 2006, were as
follows:
Number of Premiums
Contracts Received
------------ ------------
Options outstanding at
March 31, 2005 -0- $ -0-
Options written 103,280,000 1,188,246
Options terminated in closing purchase
transactions (27,778,000) (337,763)
Options expired (75,502,000) (850,483)
Options outstanding at
March 31, 2006 -0- $ -0-
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 19
2. Swap Agreements
The Fund may enter into swaps to hedge its exposure to interest rates and
credit risk or for investment purposes. A swap is an agreement that obligates
two parties to exchange a series of cash flows at specified intervals based
upon or calculated by reference to changes in specified prices or rates for a
specified amount of an underlying asset. The payment flows are usually netted
against each other, with the difference being paid by one party to the other.
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of a counterparty is generally limited to the net interim payment
to be received by the Fund, and/or the termination value at the end of the
contract. Therefore, the Fund considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.
The Fund accrues for the interim payments on swap contracts on a daily basis,
with the net amount recorded within unrealized appreciation/depreciation of
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) interim 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
20 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Fund coupled with the periodic payments previously received, may be less than
the Maximum Payout Amount it pays to the buyer, resulting in a loss to the Fund.
At March 31, 2006, the Fund had Sale Contracts outstanding with Maximum Payout
Amounts aggregating $120,254,000, with net unrealized appreciation of
$7,284,906 and terms ranging from 2 months to 9 years, as reflected in the
portfolio of investments.
In certain circumstances, the Fund may hold Sale Contracts on the same
referenced obligation and with the same counterparty it has purchased credit
protection, which may reduce its obligation to make payments on Sale Contracts,
if a credit event occurs. The Fund had Buy Contracts outstanding with a
Notional Amount of $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 $111,934,000 as of March
31, 2006.
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, 2006, the average amount of reverse repurchase
agreements outstanding was $36,003,480 and the daily weighted average interest
rate was 2.03%.
NOTE D
Capital Stock
During the years ended March 31, 2006 and March 31, 2005, 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
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 21
(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 U.S. companies
and 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.
Leverage Risk--The Fund may utilize leverage through the investment techniques
of reverse repurchase agreements and dollar rolls. Reverse repurchase
agreements and dollar rolls are speculative techniques and are considered
borrowings by the Fund.
The effect of leverage can realize shareholders higher returns than if the Fund
were not leveraged, and the use of leverage techniques can add to net asset
value (NAV). However, the risks of such techniques are potentially a higher
volatility of the NAV of the Common Stock, potentially more volatility in the
market value of the Common Stock and the relatively greater effect on the NAV
of the Common Stock caused by favorable or adverse changes in the currency
exchange rates. In addition, changes in the interest rate environment can
increase or decrease shareholder returns. The Fund maintains asset coverage of
at least 300%.
To the extent that the current interest rate on the Fund's indebtedness
approaches the net return on the leveraged portion of the Fund's investment
portfolio, then the benefit to the shareholders will be reduced. If the rate on
indebtedness were to exceed the net return on the same portion of the
portfolio, then this would result in a lower rate of return for the
shareholders. Similarly, the use of leverage in a declining market can advance
the decrease of the Fund's NAV more so than if the Fund were not leveraged,
which would likely be reflected in a greater decline in the market price for
shares of Common Stock than if the Fund were not leveraged. In extreme cases,
if the Fund's current investment income were not sufficient to meet interest
payments on indebtedness or if the Fund failed to maintain the asset coverage
required by the 1940 Act, then it could be necessary for the Fund to liquidate
certain investments at a time when it may be disadvantageous to do so, thereby
reducing its NAV.
22 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
NOTE F
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended March 31,
2006 and March 31, 2005 were as follows:
2006 2005
------------ ------------
Distributions paid from:
Ordinary income $60,647,076 $56,250,387
Total taxable distributions 60,647,076 56,250,387
Total distributions paid $60,647,076 $56,250,387
As of March 31, 2006, the components of accumulated earnings/(deficit) on a tax
basis were as follows:
Undistributed ordinary income $9,291,039
Accumulated capital and other losses (17,972,214)(a)
Unrealized appreciation/(depreciation) 76,108,036(b)
Total accumulated earnings/(deficit) $67,426,861
(a) On March 31, 2006, the Fund had a net capital loss carryforward of
$17,972,214 which will expire 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 $59,708,327.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales, the difference between book and tax amortization methods
for premium and the difference between book and tax treatment of swap income.
During the current fiscal year, permanent differences, primarily due to the tax
treatment of bond premium, 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 the New York Attorney General ("NYAG")
have been investigating practices in the mutual fund industry identified as
"market timing" and "late trading" of mutual fund shares. Certain other
regulatory authorities have also been conducting investigations into these
practices within the industry and have requested that 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
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 23
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 (the "Mutual Fund MDL").
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 Discontinuation dated September 1, 2004 ("NYAGOrder"). 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 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
24 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Fund is a closed-end fund, it will not have its advisory fee reduced pursuant
to the terms of the agreements mentioned above.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commission") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), and various other defendants not affiliated with the Adviser. The
WVAG Complaint was filed in the Circuit Court of Marshall County, West Virginia
by the Attorney General of the State of West Virginia. The WVAG Complaint makes
factual allegations generally similar to those in certain of the complaints
related to the lawsuits discussed above. On May 31, 2005, defendants removed
the WVAG Complaint to the United States District Court for the Northern
District of West Virginia. On July 12, 2005, plaintiff moved to remand. On
October 19, 2005, the WVAG Complaint was transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commission signed a "Summary Order to Cease and Desist, and Notice
of Right to Hearing" addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the SEC Order and the NYAG Order. On January 26, 2006, the Adviser,
Alliance Holding, and various unaffiliated defendants filed a Petition for Writ
of Prohibition and Order Suspending Proceedings in West Virginia state court
seeking to vacate the Summary Order and for other relief. On April 11, 2006,
the Court dismissed the Writ and later granted defendants a 30-day stay to file
an appeal. The Adviser intends to vigorously defend against the allegations in
the WVAG Complaint.
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 defendant in the Aucoin Complaint.
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 25
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.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiff's claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. Plaintiffs have moved for leave to
amend their consolidated complaint.
On October 19, 2005, the District Court granted in part, and denied in part,
defendants' motion to dismiss the Aucoin Complaint and as a result the only
claim remaining is plaintiffs' Section 36(b).
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.
26 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
Year Ended March 31,
-----------------------------------------------------------
2006 2005 2004(a) 2003 2002
-----------------------------------------------------------
Net asset value,
beginning of period $13.55 $13.59 $11.42 $10.58 $10.37
Income From Investment
Operations
Net investment income(b) .90 .87 .99 1.07 1.32
Net realized and unrealized
gain (loss) on investment
transactions .99 (.08) 2.36 .83 .19
Net increase in net asset
value from operations 1.89 .79 3.35 1.90 1.51
Less: Dividends
Dividends from net
investment income (.90) (.83) (1.18) (1.06) (1.30)
Net asset value, end of period $14.54 $13.55 $13.59 $11.42 $10.58
Market value, end of period $12.59 $11.80 $12.91 $10.91 $10.32
Discount (13.41)% (12.92)% (5.00)% (4.47)% (2.46)%
Total Return
Total investment return based on:(c)
Market value 14.62% (1.96)% 29.27% 17.72% 27.02%
Net asset value 15.28% 6.94% 30.01% 20.20% 16.22%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $983,788 $916,838 $919,453 $889,435 $823,753
Ratio to average net assets of:
Expenses 1.23% 1.30% 1.29% 1.49% 1.88%
Expenses, excluding
interest expense 1.15% 1.28% 1.25% 1.35% 1.29%
Net investment income 6.33% 6.50% 7.65% 10.53% 12.69%
Portfolio turnover rate 79% 147% 158% 121% 178%
See footnote summary on page 28.
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 27
(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) Based on average shares outstanding.
(c) 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.
28 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Alliance World Dollar Government Fund II
We have audited the accompanying statement of assets and liabilities of
Alliance World Dollar Government Fund II (the "Fund"), including the portfolio
of investments, as of March 31, 2006, and the related statement of operations
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 audits included consideration of internal
control over financial reporting as a basis for designing audit procedures 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 also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of March 31, 2006 by correspondence with
the custodian and others, or by other appropriate auditing procedures where
replies from others were not received. 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 at March 31, 2006, 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, 2006
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 29
TAX INFORMATION
(unaudited)
0.9% of the ordinary income dividends paid by the Fund during the fiscal year
ended March 31, 2006, qualify as "interest related dividends" for non-U.S.
shareholders.
30 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
ADDITIONAL INFORMATION
(unaudited)
Supplemental Proxy Information
The Annual Meeting of Stockholders of the Alliance World Dollar Government Fund
II, Inc. was held on March 29, 2006.
A description of each proposal and number of shares voted at the meeting are as
follows:
Abstain/
Authority
Voted for Withheld
-------------------------------------------------------------------------------------------------------
1. To elect a Class Two director:
(term expires in 2008) D. James Guzy 60,315,635 1,332,648
2. To elect Class Three directors:
(terms expire in 2009) Marc O. Mayer 60,353,864 1,294,419
Marshall C. Turner, Jr. 60,363,765 1,284,519
ALLIANCE WORLD DOLLAR GOVERNMENT FUND II o 31
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
David H. Dievler(1)
John H. Dobkin(1)
Michael J. Downey(1)
D. James Guzy(1)
Marshall C. Turner, Jr.(1)
OFFICERS
Philip L. Kirstein, Senior Vice President & Independent Compliance Officer
Paul J. DeNoon(2), Vice President
Emilie D. Wrapp, Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Vincent S. Noto, Controller
Administrator
AllianceBernstein, 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
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI02940-3010
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, the Governance and Nominating Committee,
and the Independent Directors Committee.
(2) The day-to-day management of, and investment decisions for, the Fund's
portfolio are made by the Global Fixed Income Emerging Market Investment Team.
While all members of the team work jointly to determine the majority of the
investment strategy including stock selection for the Fund, Mr. Paul J. DeNoon,
Fernando Grisales, Michael Mon, Douglas Peebles and Matthew Sheridan, members
of the Global Fixed Income Emerging Market Investment Team, are primarily
responsible for the day-to-day management of the Fund's 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 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 20, 2006, 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 106 SCB Partners,
1345 Avenue of the AllianceBernstein L.P. (the Inc. and SCB,
Americas "Adviser") since 2001 and Executive Inc.
New York, NY 10105 Managing Director of AllianceBernstein
10/2/57 Investments, Inc. ("ABI") since 2003;
(2003) prior thereto he was head of
AllianceBernstein Institutional
Investments, a unit of AllianceBernstein,
from 2001-2003. Prior thereto, Chief
Executive Officer of Sanford C.
Bernstein & Co., LLC (institutional
research and brokerage arm of
Bernstein & Co. LLC ("SCB & Co."))
and its predecessor since prior to
2001.
DISINTERESTED DIRECTORS
William H. Foulk, Jr., # Investment adviser and an 108 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 2001. 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.
David H. Dievler, # Independent consultant. Until 107 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 Save 106 Municipal Art
P.O. Box 12 Venice, Inc. (preservation organization) Society (New
Annandale, NY 12504 from 2001-2002, a Senior Advisor from York City)
2/19/42 June 1999-June 2000 and President of
(1992) 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. 106 Asia Pacific
c/o AllianceBernstein L.P. Formerly managing partner of Fund, Inc.
Attn: Philip L. Kirstein Lexington Capital, LLC (investment and The
1345 Avenue of the advisory firm) from December 1997 Merger Fund
Americas until December 2003. Prior thereto,
New York, NY 10105 Chairman and CEO of Prudential
1/26/44 Mutual Fund Management from 1987
(2005) to 1993.
D. James Guzy, # Chairman of the Board of PLX 106 Intel
P.O. Box 128 Technology (semi-conductors) and of Corporation,
Glenbrook, NV 89413 SRC Computers Inc., with which Cirrus Logic
3/7/36 he has been associated since prior to Corporation,
(2005) 2001. He is also President of the Arbor Novellus
Company (private family investments). Corporation,
Micro Component
Technology, the
Davis Selected
Advisors Group
of Mutual Funds,
and LogicVision
Marshall C. Turner, Jr.,# Principal of Turner Venture Associates 106 Toppan
220 Montgomery Street (venture capital and consulting) since Photomasks,
Penthouse 10 prior to 2001. He is Chairman and CEO, Inc., the George
San Francisco, CA 94104 DuPont Photomasks, Inc., Austin Texas, Lucas Educational
10/10/41 2003-2005, and President and CEO Foundation, and
(2005) since company acquired, and name Chairman of the
changed to Toppan Photomasks, Inc. in Board of the
2005 (semi-conductor manufacturing Smithsonian's
services). National Museum
of Natural History
* There is no stated term of office for the Fund's Directors.
# Member of the Audit Committee, the Independent Directors 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 the Adviser.
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 of the
Compliance Officer AllianceBernstein Funds, 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 of Merrill Lynch
Investment Managers, L.P. since prior
to 2001 until March 2003.
Paul J. DeNoon, Vice President Senior Vice President of the Adviser**,
4/18/62 with which he has been associated
since prior to 2001.
Emilie D. Wrapp, Secretary Senior Vice President, Assistant
11/13/55 General Counsel and Assistant
Secretary of ABI**, with which she has
been associated since prior to 2001.
Mark D. Gersten, Treasurer and Chief Senior Vice President of
10/4/50 Financial Officer AllianceBernstein Investor Services, Inc.
("ABIS")**, and Vice President of ABI**,
with which he has been associated
since prior to 2001.
Vincent S. Noto, Controller Vice President of ABIS**, with which
12/14/64 he has been associated since prior to 2001.
* The address for each of the Fund's officers is 1345 Avenue of the Americas,
New York, NY 10105.
** The Adviser, ABI and ABIS 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
Global Health Care Fund
Global Research Growth Fund
Global Technology Fund
Greater China '97 Fund
International Growth Fund*
International Research Growth 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
------------------------------------------
Global Government Income Trust*
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Intermediate Bond Portfolio*
Short Duration Portfolio
U.S. Government Portfolio
------------------------------------------
Municipal Bond Funds
------------------------------------------
National Michigan
Insured National Minnesota
Arizona New Jersey
California New York
Insured California Ohio
Florida Pennsylvania
Massachusetts 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
------------------------------------------
Retirement Strategies Funds
------------------------------------------
2000 Retirement Strategy
2005 Retirement Strategy
2010 Retirement Strategy
2015 Retirement Strategy
2020 Retirement Strategy
2025 Retirement Strategy
2030 Retirement Strategy
2035 Retirement Strategy
2040 Retirement Strategy
2045 Retirement Strategy
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 May 16, 2005, International Growth Fund was named Worldwide
Privatization Fund and International Research Growth Fund was named
International Premier Growth Fund. On June 24, 2005, All-Asia Investment Fund
merged into International Research Growth Fund. On July 8, 2005, New Europe
Fund merged into International Research Growth Fund. Prior to February 1,
2006, Global Government Income Trust was named Americas Government Income
Trust and Intermediate Bond Portfolio was named Quality Bond Portfolio.
** 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
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
Computershare 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
NOTES
40 o ALLIANCE WORLD DOLLAR GOVERNMENT FUND II
Privacy Notice
AllianceBernstein, the AllianceBernstein Family of Funds and AllianceBernstein
Investments, Inc. (collectively, "AllianceBernstein" 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, AllianceBernstein 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
AllianceBernstein'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
INVESTMENTS
AWDGFII-0151-0306
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 12(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 related to accounting
and auditing issues and quarterly press release review (for those Funds that
issue quarterly press releases), 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, Inc. 2005 $54,000 $ 6,890 $17,704
2006 $56,000 $ 4,960 $8,800
(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 Audit
All Fees for 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, Inc. 2005 $1,320,622 [ $269,594 ]
( $251,890 )
( $17,704 )
2006 $484,715 [ $13,760 ]
( $4,960 )
( $8,800 )
(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:
David H. Dievler William H. Foulk, Jr
John H. Dobkin Michael J. Downey
D. James Guzy Marshall C. Turner, Jr.
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.
October 2005
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. Finally,
because we believe that good corporate governance requires shareholders to have
a meaningful voice in the affairs of the company, we will support non-binding
shareholder proposals that request that companies amend their by-laws to
provide that director nominees be elected by an affirmative vote of a majority
of the votes cast.
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 non-audit
related services for the company. Although we recognize that there may be
special circumstances that could lead to high levels of non-audit fees in some
years, we would normally consider non-audit fees in excess of 70% of total fees
paid to the auditing firm to be disproportionate. Therefore, absent unique
circumstances, we may vote against the appointment of auditors if the fees for
non-audit related services exceed 70% of the total fees paid by the company to
the auditing firm 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.
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 our research analysts that
cover the company and our 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
corporate transactions such as 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 excessively or inappropriately dilute
shareholder ownership. Conversely, we support proposals that would restrict or
otherwise eliminate anti-takeover or anti-shareholder 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 the
authorization of blank check preferred stock, classified boards and
supermajority vote requirements) that appear to be anti-shareholder or 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 to company employees. 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. In general, we will analyze the proposed
plans to ensure that shareholder equity will not be excessively diluted. With
regard to stock award or option plans, we consider whether the option exercise
prices are below the market price on the date of grant and whether an
acceptable number of employees are eligible to participate in such programs. We
will generally oppose plans that have below market value exercise prices on the
date of issuance or 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 requiring managements to submit severance packages that
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 that should be appropriately
accounted for.
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 proxy solicited 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. Additionally, we have implemented
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 third party research services 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. Absent compelling reasons to the contrary, Alliance Capital
believes that the benefit to the client of exercising the vote does not
outweigh the cost of voting (i.e. not being able to sell the shares during this
period). Accordingly, if share blocking is required we generally 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.
Loaned Securities
Many clients of Alliance Capital have entered into securities lending
arrangements with agent lenders to generate additional revenue. Alliance
Capital will not be able to vote securities that are on loan under these types
of arrangements. However, under rare circumstances, for voting issues that may
have a significant impact on the investment, we may request that clients recall
securities that are on loan if we determine that the benefit of voting
outweighs the costs and lost revenue to the client or fund and the
administrative burden of retrieving the securities.
Proxy Voting Records
You may obtain 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
web site at www.sec.gov, or call AllianceBernstein at (800) 227-4618.
ITEM 8 PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) (1) The management of and investment decisions for the Fund's portfolio are
made by the Global Fixed Income: Emerging Markets Investment Team.
The following table lists the five members of the team with the most
significant responsibility for the day-to-day management of the Fund's
portfolio, the length of time that each person has been involved in the
management of the Fund, and each person's principal occupation during the past
five years:
Employee; Year; Title Principal Occupation During the Past Five
(5) Years
-------------------------------------------------------------------------------
Paul DeNoon; principally Senior Vice President of ACMC with which
responsible for the Fund since he has been associated in a substantially
August 2002-Senior Vice President similar capacity to his current position
of ACMC and Director of Emerging since prior to 2001, and Director of
Market Debt Emerging Market Debt.
Fernando Grisales; since January Assistant Vice President of ACMC, with
2005-Assistant Vice President of which he has been associated since
ACMC October 2001. He provided trade support
to Alliance's Bernstein Private Wealth
Group from October 2001 until June 2003.
From June 2003 until January 2005, he
worked as a portfolio assistant for the
Global Fixed Income Team and became an
Assistant Portfolio Manager for the
Global Fixed Income: Emerging Markets
Investment Team in January 2005.
Michael L. Mon; since August 2002- Vice President of ACMC with which he has
Vice President of ACMC been associated in a substantially
similar capacity to his current position
since prior to 2001.
Douglas J. Peebles; since August Executive Vice President of ACMC, with
2002-Executive Vice President of which he has been associated in a
ACMC, Chief Investment Officer substantially similar capacity to his
and Co-Head of Fixed Income current position since prior to 2001,
and Chief Investment Officer and Co-Head
of Fixed Income.
Matthew Sheridan; since October Vice President of ACMC, with which he has
2005-Vice President of ACMC been associated in a substantially similar
capacity to his current position since
prior to 2001.
(a) (2) The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of the
Fund's fiscal year ended March 31, 2006.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
Total Assets of
Number of Registered
Total Number Total Assets of Registered Investment
of Registered Registered Investment Companies
Investment Investment Companies Managed Managed with
Portfolio Companies Companies with Performance- Performance-based
Manager Managed Managed based Fees Fees
-------------------------------------------------------------------------------------------------
Matthew Sheridan 4 635,546,781 NONE NONE
Michael Mon 8 1,615,130,891 NONE NONE
Paul DeNoon 16 2,893,298,272 NONE NONE
Fernando Grisales NONE NONE NONE NONE
Douglas Peebles NONE NONE NONE NONE
POOLED INVESTMENT VEHICLES
Total Assets of
Number of Pooled
Total Number Total Assets of Pooled Investment
of Pooled Pooled Investment Vehicles
Investment Investment Vehicles Managed Managed with
Portfolio Vehicles Vehicles with Performance- Performance-based
Manager Managed Managed based Fees Fees
-------------------------------------------------------------------------------------------------
Matthew Sheridan 6 767,897,420 NONE NONE
Michael Mon 1 1,875,079 1 1,875,079
Paul DeNoon 6 7,841,698,582 NONE NONE
Fernando Grisales NONE NONE NONE NONE
Douglas Peebles NONE NONE NONE NONE
OTHER ACCOUNTS
Total Number Number of Other Total Assets of
of Other Total Assets of Accounts Managed Other Accounts
Portfolio Accounts Other Accounts with Performance- with Performance-
Manager Managed Managed based Fees based Fees
-------------------------------------------------------------------------------------------------
Matthew Sheridan 2 127,813,696 NONE NONE
Michael Mon 10 618,085,446 1 115,112,449
Paul DeNoon NONE NONE NONE NONE
Fernando Grisales NONE NONE NONE NONE
Douglas Peebles NONE NONE NONE NONE
Investment Professional Conflict of Interest Disclosure
As an investment adviser and fiduciary, Alliance owes its clients and
shareholders an undivided duty of loyalty. We recognize that conflicts of
interest are inherent in our business and accordingly have developed policies
and procedures (including oversight monitoring) reasonably designed to detect,
manage and mitigate the effects of actual or potential conflicts of interest in
the area of employee personal trading, managing multiple accounts for multiple
clients, including AllianceBernstein Mutual Funds, and allocating investment
opportunities. Investment professionals, including portfolio managers and
research analysts, are subject to the above-mentioned policies and oversight
monitoring to ensure that all clients are treated equitably. We place the
interests of our clients first and expect all of our employees to meet their
fiduciary duties.
Employee Personal Trading. Alliance has adopted a Code of Business
Conduct and Ethics that is designed to detect and prevent conflicts of interest
when investment professionals and other personnel of Alliance own, buy or sell
securities which may be owned by, or bought or sold for, clients. Personal
securities transactions by an employee may raise a potential conflict of
interest when an employee owns or trades in a security that is owned or
considered for purchase or sale by a client, or recommended for purchase or
sale by an employee to a client. Subject to the reporting requirements and
other limitations of its Code of Business Conduct and Ethics, Alliance permits
its employees to engage in personal securities transactions, and also allows
them to acquire investments in the AllianceBernstein Mutual Funds through
direct purchase, 401K/profit sharing plan investment and/or notionally in
connection with deferred incentive compensation awards. Alliance's Code of
Ethics and Business Conduct requires disclosure of all personal accounts and
maintenance of brokerage accounts with designated broker-dealers approved by
Alliance. The Code also requires preclearance of all securities transactions
and imposes a one-year holding period for securities purchased by employees to
discourage short-term trading.
Managing Multiple Accounts for Multiple Clients. Alliance has
compliance policies and oversight monitoring in place to address conflicts of
interest relating to the management of multiple accounts for multiple clients.
Conflicts of interest may arise when an investment professional has
responsibilities for the investments of more than one account because the
investment professional may be unable to devote equal time and attention to
each account. The investment professional or investment professional teams for
each client may have responsibilities for managing all or a portion of the
investments of multiple accounts with a common investment strategy, including
other registered investment companies, unregistered investment vehicles, such
as hedge funds, pension plans, separate accounts, collective trusts and
charitable foundations. Among other things, Alliance's policies and procedures
provide for the prompt dissemination to investment professionals of initial or
changed investment recommendations by analysts so that investment professionals
are better able to develop investment strategies for all accounts they manage.
In addition, investment decisions by investment professionals are reviewed for
the purpose of maintaining uniformity among similar accounts and ensuring that
accounts are treated equitably. No investment professional that manages client
accounts carrying performance fees is compensated directly or specifically for
the performance of those accounts. Investment professional compensation
reflects a broad contribution in multiple dimensions to long-term investment
success for our clients and is not tied specifically to the performance of any
particular client's account, nor is it directly tied to the level or change in
level of assets under management.
Allocating Investment Opportunities. Alliance has policies and
procedures intended to address conflicts of interest relating to the allocation
of investment opportunities. These policies and procedures are designed to
ensure that information relevant to investment decisions is disseminated
promptly within its portfolio management teams and investment opportunities are
allocated equitably among different clients. The investment professionals at
Alliance routinely are required to select and allocate investment opportunities
among accounts. Portfolio holdings, position sizes, and industry and sector
exposures tend to be similar across similar accounts, which minimizes the
potential for conflicts of interest relating to the allocation of investment
opportunities. Nevertheless, investment opportunities may be allocated
differently among accounts due to the particular characteristics of an account,
such as size of the account, cash position, tax status, risk tolerance and
investment restrictions or for other reasons.
Alliance's procedures are also designed to prevent potential
conflicts of interest that may arise when Alliance has a particular financial
incentive, such as a performance-based management fee, relating to an account.
An investment professional may perceive that he or she has an incentive to
devote more time to developing and analyzing investment strategies and
opportunities or allocating securities preferentially to accounts for which
Alliance could share in investment gains.
To address these conflicts of interest, Alliance's policies and
procedures require, among other things, the prompt dissemination to investment
professionals of any initial or changed investment recommendations by analysts;
the aggregation of orders to facilitate best execution for all accounts; price
averaging for all aggregated orders; objective allocation for limited
investment opportunities (e.g., on a rotational basis) to ensure fair and
equitable allocation among accounts; and limitations on short sales of
securities. These procedures also require documentation and review of
justifications for any decisions to make investments only for select accounts
or in a manner disproportionate to the size of the account.
(a) (3) Portfolio Manager Compensation
Alliance's compensation program for investment professionals is
designed to be competitive and effective in order to attract and retain the
highest caliber employees. The compensation program for investment
professionals is designed to reflect their ability to generate long-term
investment success for our clients, including shareholders of the
AllianceBernstein Mutual Funds. Investment professionals do not receive any
direct compensation based upon the investment returns of any individual client
account, nor is compensation tied directly to the level or change in level of
assets under management. Investment professionals' annual compensation is
comprised of the following:
(i) Fixed base salary: This is generally the smallest portion of
compensation. The base salary is a relatively low, fixed salary within a
similar range for all investment professionals. The base salary is determined
at the outset of employment based on level of experience, does not change
significantly from year-to-year and hence, is not particularly sensitive to
performance.
(ii) Discretionary incentive compensation in the form of an annual
cash bonus: Alliance's overall profitability determines the total amount of
incentive compensation available to investment professionals. This portion of
compensation is determined subjectively based on qualitative and quantitative
factors. In evaluating this component of an investment professional's
compensation, Alliance considers the contribution to his/her team or discipline
as it relates to that team's overall contribution to the long-term investment
success, business results and strategy of Alliance. Quantitative factors
considered include, among other things, relative investment performance (e.g.,
by comparison to competitor or peer group funds or similar styles of
investments, and appropriate, broad-based or specific market indices), and
consistency of performance. There are no specific formulas used to determine
this part of an investment professional's compensation and the compensation is
not tied to any pre-determined or specified level of performance. Alliance
also considers qualitative factors such as the complexity and risk of
investment strategies involved in the style or type of assets managed by the
investment professional; success of marketing/business development efforts and
client servicing; seniority/length of service with the firm; management and
supervisory responsibilities; and fulfillment of Alliance's leadership criteria.
(iii) Discretionary incentive compensation in the form of awards
under Alliance's Partners Compensation Plan ("deferred awards"): Alliance's
overall profitability determines the total amount of deferred awards available
to investment professionals. The deferred awards are allocated among
investment professionals based on criteria similar to those used to determine
the annual cash bonus. There is no fixed formula for determining these
amounts. Deferred awards, for which there are various investment options, vest
over a four-year period and are generally forfeited if the employee resigns or
Alliance terminates his/her employment. Investment options under the deferred
awards plan include many of the same AllianceBernstein Mutual Funds offered to
mutual fund investors, thereby creating a close alignment between the financial
interests of the investment professionals and those of Alliance's clients and
mutual fund shareholders with respect to the performance of those mutual
funds. Alliance also permits deferred award recipients to allocate
up to 50% of their award to investments in Alliance's publicly traded
equity securities.(1)
(iv) Contributions under Alliance's Profit Sharing/401(k) Plan: The
contributions are based on Alliance's overall profitability. The amount and
allocation of the contributions are determined at the sole discretion of
Alliance.
(a) (4) The dollar range of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers as of the Fund's fiscal year
ended March 31, 2006 is set forth below:
DOLLAR RANGE OF EQUITY
SECURITIES IN THE FUND
Paul DeNoon None
Fernando Grisales None
Michael Mon None
Douglas Peebles None
Matthew Sheridan None
ITEM 9. 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 10. 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
(1) Prior to 2002, investment professional compensation also included
discretionary long-term incentive in the form of restricted grants of Alliance
Capital's Master Limited Partnership Units.
ITEM 11. 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 changes in the registrant's internal controls over financial
reporting that occurred during the second fiscal quarter of the period that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
-------------------------------------------------------------------------------
12 (a) (1) Code of Ethics that is subject to the disclosure
of Item 2 hereof
12 (b) (1) Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
12 (b) (2) Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
12 (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 29, 2006
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 29, 2006
By: /s/ Mark D. Gersten
---------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: May 29, 2006