<PAGE>
LETTER TO SHAREHOLDERS THE SPAIN FUND
- - - --------------------------------------------------------------------------------
January 16, 1995
Dear Shareholder:
Spain's moderate economic recovery has continued to improve over the second half
of 1995, led upwards by investment spending and export growth. Domestic
consumption has remained subdued however, primarily due to a lack of consumer
confidence brought about by the continued high level of unemployment. This
gradual improvement in the economic background should be maintained in 1995,
with a decline in real government expenditure being compensated for by growing
private consumption.
Despite this relatively benign macroeconomic scenario, investors have become
increasingly concerned in recent weeks over a new outbreak of political
scandals. This again focuses attention on the durability and competence of the
current minority socialist-led government coalition.
As a result, the Spanish peseta has come under renewed pressure against its
major trading partners' currencies, particularly the deutschemark.
PRESSURE ON CURRENCY LEADS TO RATE INCREASE
In an attempt to ward off further attacks against the currency, which have been
exacerbated by recent problems in Mexico and other emerging markets, the Bank of
Spain raised short-term interest rates by 65 basis points during the first week
of January. Although some rise in rates had been anticipated during 1995 as the
economic recovery gathered pace, most observers were surprised by the move which
initially failed to stem the wave of speculation against the peseta.
The rate increase, however, appears a highly defensible move in the face of the
potential inflationary impact of a declining currency. This is especially true
in light of a relatively poor monthly inflation number in December of 1994, and
the prospect of a high monthly number for January when the one percentage point
rise in VAT becomes effective. As a result, investors will be focused on the
Spanish political situation and inflationary outlook in 1995.
EARLY ELECTION POSSIBLE
We believe that investors will be positively surprised on both counts.
Regarding the current political crisis, it appears probable that an early
election will be called in 1995, particularly as it will be increasingly
difficult for the Catalan regional party to be able to continue supporting the
socialists in the face of growing popular frustration with the present
administration.
Any early election will probably be won by the right wing Partido Popular, whose
albeit rather vague political agenda is likely to prove more pro-business than
that of the current administration. Consequently, any change in government
will probably result in a more positive environment for investors. Inflation is
also, in our opinion, likely to prove less problematic than most current
observers expect.
INFLATION EXPECTED TO PEAK IN JANUARY
Money growth is close to the central bank's target range and there has been a
clear slowdown in unit wage costs, which have plagued Spanish competitiveness
over the early part of the decade. A new legal framework was introduced in 1994
that enables companies to shed labor and redeploy the workforce at much lower
financial cost and with less political intervention. This should ensure that,
given the current high unemployment level, wage increases should not prove over
inflationary in 1995. Consequently, we anticipate that the "headline" rate of
year-on-year inflation should peak in January 1995 and subsequently decline
steadily over the course of the year.
After the difficulties of 1994, when the Spanish stock market underperformed the
European average, we believe 1995 should be a relatively strong performance year
for Spanish equities. The sharp decline in bond prices seen last year is
unlikely to recur, particularly in view of our relatively optimistic inflation
forecast. Consequently, we expect the stock market to be driven upwards by
earnings growth, and have constructed The Spain Fund's portfolio to seek to take
maximum advantage of what we expect to be a strong year for growth stocks.
<PAGE>
The Fund remains broadly fully invested, emphasizing companies where we
anticipate long-term, above-average profit growth.
INVESTMENT RESULTS
For the twelve months ended November 30, 1994, The Spain Fund achieved a total
return of +9.28% based on the net asset value. Over the same period, the
benchmark Madrid General Index returned 11.00%.
We appreciate your continued support of The Spain Fund and look forward to
reporting its progress to you in the coming months.
Sincerely,
Dave H. Williams
Chairman
Mark H. Breedon
Vice President and Portfolio Manager
<PAGE>
TEN LARGEST EQUITY HOLDINGS
NOVEMBER 30, 1994 THE SPAIN FUND
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY U.S.$ VALUE PERCENT OF NET ASSETS
<S> <C> <C>
Compania Telefonica Nacional de Espana S.A. $ 8,290,062 8.3%
Repsol S.A. 5,929,706 5.9
Empresa Nacional de Electricidad S.A. 5,841,521 5.8
Centros Comerciales Continente S.A. 4,761,217 4.8
Banco Central Hispanoamericano S.A. 4,581,306 4.6
Banco Bilboa Vizcaya 4,556,947 4.6
Banco Intercontinental 4,152,530 4.2
Fomento de Construcciones Y Contratas S.A. 4,073,247 4.1
Corporacion Mapfre S.A. (ordinary & new shares) 4,038,991 4.0
Iberdrola I S.A. 3,955,966 3.9
$50,181,493 50.2%
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994 THE SPAIN FUND
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY SHARES U.S.$ VALUE
<S> <C> <C>
COMMON STOCKS AND OTHER INVESTMENTS--96.8%
UTILITIES--29.3%
ELECTRIC & GAS--19.5%
Electricas Reunidas de Zaragoza S.A. . . . . 131,562 $ 2,963,698
Empresa Nacional de Electricidad S.A.(a) . . 129,000 5,841,521
Empresa Nacional Hidroelectrica del
Ribagorzana S.A. . . . . . . . . . . . . . 47,750 845,946
Gas Natural S.A. . . . . . . . . . . . . . . 35,000 3,180,508
Gas y Electricidad S.A.. . . . . . . . . . . 32,000 1,431,954
Iberdrola I S.A. . . . . . . . . . . . . . . 589,362 3,955,966
Sevillana de Electricidad. . . . . . . . . . 265,000 1,284,994
-----------
19,504,587
-----------
TELEPHONE--8.3%
Compania Telefonica Nacional de Espana
S.A. (a) . . . . . . . . . . . . . . . . . 646,200 8,290,062
-----------
OTHER--1.5%
Aguas de Barcelona . . . . . . . . . . . . . 65,600 1,397,621
rights expiring 12/15/94*. . . . . . . . . . 65,600 27,552
-----------
1,425,173
-----------
29,219,822
-----------
FINANCIAL SERVICES--29.2%
BANKING--20.5%
Argentaria Corporation Bancaria de Espana
S.A. (a) . . . . . . . . . . . . . . . . . 61,250 2,385,381
Banco Bilbao Vizcaya (a)(d). . . . . . . . . 175,000 4,556,947
Banco Central Hispanoamericano S.A.. . . . . 198,000 4,581,306
Banco de Andalucia . . . . . . . . . . . . . 6,400 703,759
Banco de Castilla. . . . . . . . . . . . . . 1,500 576,730
Banco de Galicia . . . . . . . . . . . . . . 4,000 315,225
Banco de Santander S.A.. . . . . . . . . . . 43,428 1,784,159
Banco de Vasconia* . . . . . . . . . . . . . 6,200 177,070
Banco Intercontinental . . . . . . . . . . . 47,000 4,152,530
Banco Popular Espanol S.A. . . . . . . . . . 10,000 1,257,694
-----------
20,490,801
-----------
INSURANCE--4.0%
Corporacion Mapfre, S.A. . . . . . . . . . . 83,969 3,834,438
new shares*. . . . . . . . . . . . . . . . 5,658 204,553
-----------
4,038,991
-----------
REAL ESTATE--4.7%
Estacionamientos Subterraneos S.A. . . . . . 82,500 1,291,485
Filo S.A.. . . . . . . . . . . . . . . . . . 395,000 3,378,288
rights expiring 12/13/94*. . . . . . . . . 395,000 6,033
-----------
4,675,806
-----------
29,205,598
-----------
CONSUMER SERVICES--8.7%
ENTERTAINMENT & LEISURE TIME--0.1%
Grand Tibidabo S.A.* . . . . . . . . . . . . 132,660 121,563
-----------
PRINTING & PUBLISHING--3.8%
Grupo Anaya* . . . . . . . . . . . . . . . . 16,801 492,661
Midesa*. . . . . . . . . . . . . . . . . . . 135,140 1,542,789
rights expiring 12/15/94*. . . . . . . . . 135,140 151,183
Unidad Editorial S.A.
Series A*(b) . . . . . . . . . . . . . . . 1,511,470 1,647,159
-----------
3,833,792
-----------
OTHER--4.8%
Centros Comerciales Continente S.A.* (a) . . 215,000 4,761,217
-----------
8,716,572
-----------
CONSUMER STAPLES--6.3%
FOOD--4.5%
El Aguila S.A.*. . . . . . . . . . . . . . . 175,000 1,503,391
Grupo Forsforera S.A.* . . . . . . . . . . . 188,761 1,369,359
Natra S.A. . . . . . . . . . . . . . . . . . 70,134 321,335
Pascual Hermanos S.A.* . . . . . . . . . . . 563,381 1,342,265
-----------
4,536,350
-----------
TOBACCO--1.8%
Tabacalera S.A.
Series A . . . . . . . . . . . . . . . . . 60,899 1,755,532
-----------
6,291,882
-----------
<PAGE>
<CAPTION>
COMPANY SHARES U.S.$ VALUE
<S> <C> <C>
ENERGY--5.9%
Repsol S.A. (a). . . . . . . . . . . . . . . 205,973 $ 5,929,706
-----------
CAPITAL GOODS--5.3%
ENGINEERING & CONSTRUCTION--5.3%
Compania Levantia de Obras Publicas. . . . . 20,000 360,432
Fomento de Construcciones
Y Contratas S.A. . . . . . . . . . . . . . 41,158 4,073,247
Gines Navarro Construcciones S.A.(c)*. . . . 75,000 902,035
-----------
5,335,714
-----------
CONSUMER MANUFACTURING--5.1%
AUTO & RELATED--1.8%
F.A.S.A. Renault . . . . . . . . . . . . . . 46,590 1,778,870
-----------
BUILDING & RELATED--3.3%
Portland Valderrivas S.A.. . . . . . . . . . 19,590 1,558,776
Uralita S.A.*. . . . . . . . . . . . . . . . 166,150 1,719,179
-----------
3,277,955
-----------
5,056,825
-----------
BASIC INDUSTRIES--3.4%
MINING AND METALS--3.4%
Acerinox S.A.. . . . . . . . . . . . . . . . 12,375 1,346,609
Asturiana Del Zinc S.A.* . . . . . . . . . . 80,600 972,468
Tubacex - C.E. de Tubos por Extrusion S.A.*. 1,081,770 1,082,151
-----------
3,401,228
-----------
<CAPTION>
SHARES
PRINCIPAL
OR CURRENCY
AMOUNT
COMPANY (000) U.S.$ VALUE
<S> <C> <C>
HEALTH CARE--2.4%
Fabrica Espanola de Products Quimicos
y Farmaceuticos. . . . . . . . . . . . . . 27,000 $ 984,507
Indo Internacional S.A.. . . . . . . . . . . 19,119 715,390
Prim S.A.* . . . . . . . . . . . . . . . . . 92,026 713,277
-----------
2,413,174
-----------
OTHER--1.2%
Asesores Bursatiles Capital Fund N.V.*(b). . 25 632,139
Asesores Bursatiles
Capital Fund N.V.II*(b). . . . . . . . . . 25 544,171
-----------
1,176,310
-----------
Total Common Stocks and Other Investments
(cost $97,144,833) 96,746,831
-----------
CONVERTIBLE BOND--0.3%
El Aguila S.A. 10.00%, 12/02/97(c)
(cost $338,523). . . . . . . . . . . . . . ESP 3,833 292,698
-----------
TIME DEPOSIT--0.2%
Sumitomo Bank, Ltd.
Grand Cayman 5.8125%, 12/01/94
(amortized cost $200,000) US$ 200 200,000
-----------
CURRENCY CALL ACCOUNT--0.5%
Spanish Pesetas
(cost $490,892). . . . . . . . . . . . . . ESP 64,234 490,506
-----------
TOTAL INVESTMENTS--97.8%
(cost $98,174,248) 97,730,035
Other assets less liabilities--2.2% 2,155,851
-----------
NET ASSETS--100% $99,885,886
-----------
-----------
- - - --------------------------------------------------------------------------------
<FN>
* Non-income producing security.
(a) Securities (with an aggregate market value of $31,764,834), segregated to
collateralize a forward exchange currency contract.
(b) Restricted security, valued at fair value (see Notes A & F).
(c) Valued at fair value. (See Note A)
(d) Security represents an affiliated investment.
Glossary:
ESP - Spanish Pesetas.
See notes to financial statements.
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994 THE SPAIN FUND
- - - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $98,174,248) . . $ 97,730,035
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,845
Receivable for investment security sold. . . . . . . . . . 1,621,849
Unrealized appreciation of forward exchange currency
contract . . . . . . . . . . . . . . . . . . . . . . . . 560,414
Foreign taxes receivable . . . . . . . . . . . . . . . . . 457,865
Interest receivable and other assets . . . . . . . . . . . 67,573
------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . 100,493,581
------------
LIABILITIES
Management fee payable . . . . . . . . . . . . . . . . . . 87,187
Accrued expenses . . . . . . . . . . . . . . . . . . . . . 520,508
------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . 607,695
------------
NET ASSETS (equivalent to $9.96 per share, based on
10,026,746 shares outstanding) . . . . . . . . . . . . . . $ 99,885,886
------------
------------
COMPOSITION OF NET ASSETS
Capital stock, at par. . . . . . . . . . . . . . . . . . . $ 100,267
Additional paid-in capital . . . . . . . . . . . . . . . . 106,918,079
Accumulated net realized loss on investments and
foreign currency transactions. . . . . . . . . . . . . . . (7,247,974)
Net unrealized appreciation of investments and
foreign currency denominated assets and liabilities. . . . 115,514
------------
$ 99,885,886
------------
------------
NET ASSET VALUE PER SHARE. . . . . . . . . . . . . . . . . . $9.96
-----
-----
- - - --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994 THE SPAIN FUND
- - - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $448,274). . . . . . . . . . . . . . . $2,478,808
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197,589 $ 2,676,397
----------
EXPENSES
Management fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,070,625
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430,530
Audit and legal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156,207
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,050
Transfer agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,926
Printing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,533
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,689
----------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,133,560
-----------
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542,837
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investment transactions . . . . . . . . . . . . . . . . . . . 2,582,610
Net realized loss on foreign currency transactions . . . . . . . . . . . . . . . . (2,813,917)
Net change in unrealized depreciation of investments . . . . . . . . . . . . . . . 8,887,582
Net change in unrealized appreciation of foreign currency denominated assets
and liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,480
-----------
Net gain on investments and foreign currency denominated assets and liabilities. . 8,831,755
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . $ 9,374,592
-----------
-----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1994 1993
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 542,837 $ 1,005,103
Net realized loss on investments and foreign currency transactions . . . . . . . . (231,307) (5,936,725)
Net change in unrealized appreciation of investments
and foreign currency denominated assets and liabilities. . . . . . . . . . . . . 9,063,062 18,855,217
----------- -----------
Net increase in net assets from operations . . . . . . . . . . . . . . . . . . . . 9,374,592 13,923,595
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,005,103) (1,673,184)
Distributions in excess of net investment income . . . . . . . . . . . . . . . . . (508,431) -0-
Net realized gain on investments and foreign currency transactions . . . . . . . . (3,096,153) (130,248)
CAPITAL STOCK TRANSACTIONS
Reinvestment of dividends resulting in issuance of common stock. . . . . . . . . . 63,476 17,272
----------- -----------
Total increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,828,381 12,137,435
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,057,505 82,920,070
----------- -----------
End of year (including undistributed net investment income of
$967,469 at November 30, 1993) . . . . . . . . . . . . . . . . . . . . . . . . . $99,885,886 $95,057,505
----------- -----------
----------- -----------
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994 THE SPAIN FUND
- - - --------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The Spain Fund, (the "Fund") was incorporated in the State of Maryland on June
30, 1987 as a non-diversified, closed-end management investment company.
The financial statements include the accounts of the Fund and its wholly-owned
subsidiary (Spain Shares Investments Maryland B.V.). The Fund is currently in
the process of dissolving and liquidating its wholly-owned subsidiary. The
following is a summary of significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Investments are stated at value. Investments for which market quotations are
readily available are valued at the closing price on the day of valuation or at
the last bid price quoted on such day if no such closing price is available. If
there are no quotations available for the day of valuation, the last available
closing price will be used. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by the
Board of Directors. Such securities have a value of $4,018,202 at November 30,
1994. In determining fair value, consideration is given to cost, operating and
other financial data. Securities which mature in 60 days or less are valued at
amortized cost, which approximates market value, unless this method does not
represent fair value. Foreign security and currency transactions may involve
certain considerations and risks not normally associated with those of domestic
origin as a result of, among others, the possibility of political and economic
instability and the level of government supervision and regulation of foreign
securities markets.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in Spanish pesetas are translated into U.S.
dollars at the mean of the quoted bid and asked price of the peseta against the
U.S. dollar on the valuation date. Purchases and sales of portfolio securities
are translated into U.S. dollars at the rates of exchange prevailing when
such securities were acquired or sold. Income and expenses are translated at
rates of exchange prevailing when earned or accrued. Net realized loss on
foreign currency transactions of $2,813,917 represents net foreign exchange
gains and losses from holding of foreign currencies, currency gains or losses
realized between the trade and settlement dates on security transactions,
foreign currency forward contracts and the difference between the amounts of
dividends, interest and foreign taxes recorded on the Fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized currency
gains and losses from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation of investments and foreign currency denominated assets
and liabilities.
The exchange rate for the Spanish Peseta at November 30, 1994 was US$ .007636 to
ESP 1.00.
3. TAXES
It is the Fund's policy to meet the requirements of the U.S. Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to its
shareholders. Therefore, no provisions for federal income or excise taxes are
required. Withholding taxes on foreign interest and dividends have been
provided for in accordance with the Spanish tax rates.
4. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Security transactions are accounted for on the date securities are
purchased or sold. Realized and unrealized gains and losses from security and
currency transactions are calculated on the identified cost basis.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles.
6. CHANGE IN ACCOUNTING FOR DISTRIBUTION TO SHAREHOLDERS
Effective November 1, 1993, the Fund adopted statement of position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies.
Accordingly, the Fund changed the classification of distributions to
shareholders to better disclose the differences between financial statement
amounts and distributions determined in accordance with income tax regulations.
As a result of permanent book-to-tax differences, a reclassification was made to
decrease paid-in capital by $2,642,505.
<PAGE>
NOTE B: MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under an Investment Management and Administration Agreement, the Fund pays
Alliance Capital Management, L.P. (the "Investment Manager") a fee, calculated
weekly and paid monthly, at an annualized rate of 1.10% of the Fund's average
weekly net assets up to $50 million, 1.00% of the Fund's average weekly net
assets on the next $50 million, and .90% of the Fund's average weekly net assets
over $100 million.
Brokerage commissions paid on securities transactions for the year ended
November 30, 1994 amounted to $146,717, none of which was paid to affiliated
brokers.
Effective November 29, 1994 the Fund and the Investment Manager entered into a
sub-advisory agreement with Privanza Banco Personal, S.A. (the "Sub-Advisors")
at the annual rate of .25 of 1% of average weekly net assets payable by the
Investment Manager. An officer of the Fund is a director of the Sub-Advisor.
- - - --------------------------------------------------------------------------------
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $22,094,373 and $28,174,101, respectively, for the year ended
November 30, 1994.
The Fund enters into forward exchange currency contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The gain or loss arising from the difference between the original
contracts and the closing of such contracts is included in net realized gains or
losses on foreign currency transactions. Fluctuations in the value of forward
exchange currency contracts are recorded for financial reporting purposes as
unrealized gains or losses by the Fund. Risks may arise from the potential
inability of the counterparty to meet the terms of the contract and from
unanticipated movements in the value of a foreign currency relative to the U.S.
dollar. At November 30, 1994, the Fund had an outstanding forward exchange
currency contract with First National Bank of Chicago to sell 4,000,000,000
Spanish Pesetas expiring on December 19, 1994, with a cost of $31,070,374. The
market value of the forward exchange currency contract at November 30, 1994 was
$30,509,960 resulting in an unrealized appreciation of $560,414.
At November 30, 1994, the cost of securities for federal income tax purposes was
$98,527,954. Accordingly, gross unrealized appreciation of investments was
$12,079,254 and gross unrealized depreciation of investments was $12,877,173
resulting in net unrealized depreciation of $797,919 (excluding foreign
currency). At November 30, 1994 the Fund had a capital loss carryforward of
$6,894,268 which expires in the year 2001. No capital gain distribution is
expected to be paid to shareholders until future net gains have been realized in
excess of such carry forward.
- - - --------------------------------------------------------------------------------
NOTE D: CAPITAL STOCK
There are 100,000,000 shares of $.01 par value common stock authorized. During
the years ended November 30, 1994 and 1993, the Fund issued 5,687 and 1,993
shares in connection with the Fund's Dividend Reinvestment Plan, respectively.
Of the 10,026,746 shares outstanding at November 30, 1994, the Investment
Manager owned 9,454 shares.
<PAGE>
NOTE E: QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NET REALIZED AND
UNREALIZED GAIN NET INCREASE
(LOSS) ON (DECREASE)
INVESTMENTS AND IN NET ASSETS
NET INVESTMENT FOREIGN CURRENCY RESULTING FROM
INCOME (LOSS) TRANSACTIONS OPERATIONS MARKET PRICE
--------------- ---------------- --------------- ON NYSE
TOTAL PER TOTAL PER TOTAL PER --------------
QUARTER ENDED (000) SHARE (000) SHARE (000) SHARE HIGH LOW
- - - ------------- ----- ----- ----- ----- ---- ----- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
November 30, 1994. . . . . . . $ (341) $(.03) $(3,067) $(.31) $(3,408) $(.34) $10.50 $8.88
August 31, 1994. . . . . . . . 450 .04 (983) (.10) (533) (.06) $10.75 $8.63
May 31, 1994 . . . . . . . . . (297) (.03) (975) (.09) (1,272) (.12) $11.13 $9.00
February 28, 1994. . . . . . . 731 .07 13,857 1.38 14,588 1.45 $12.75 $9.25
------ ----- ------- ----- ------- -----
$ 543 $ .05 $ 8,832 $ .88 $ 9,375 $ .93
------ ----- ------- ----- ------- -----
------ ----- ------- ----- ------- -----
November 30, 1993. . . . . . . $ (488) $(.05) $(6,980) $(.70) $(7,468) $(.75) $11.625 $9.375
August 31, 1993. . . . . . . . 618 .06 12,796 1.28 13,414 1.34 $11.250 $8.750
May 31, 1993 . . . . . . . . . 193 .02 2,867 .29 3,060 .31 $ 9.750 $7.875
February 28, 1993. . . . . . . 682 .07 4,236 .42 4,918 .49 $ 9.375 $7.875
------ ----- ------- ----- ------- -----
$1,005 $ .10 $12,919 $1.29 $13,924 $1.39
------ ----- ------- ----- ------- -----
------ ----- ------- ----- ------- -----
</TABLE>
- - - --------------------------------------------------------------------------------
NOTE F: RESTRICTED SECURITIES
<TABLE>
<CAPTION>
DATE
ACQUIRED SHARES COST
-------- --------- ----------
<S> <C> <C> <C>
Asesores Bursatiles Capital Fund N.V.. . . 10/29/90 25 $1,115,170
Asesores Bursatiles Capital Fund N.V. II . 5/24/94 25 404,688
Unidad Editorial S.A. Series A . . . . . . 12/12/89 462,750 513,710
Unidad Editorial S.A. Series A . . . . . . 9/30/92 1,048,720 1,330,964
</TABLE>
The securities shown above are restricted as to sale and have been valued at
fair value in accordance with the policy described in Note A.
The value of these securities at November 30, 1994 was $2,823,469, representing
2.8% of net assets. In connection with its investment in Asesores Bursatiles
Capital Fund N.V. II the Fund may be required to invest up to an additional
2,250,000 Netherlands Guilders(US $1,280,670) upon the request of Asesores
Bursatiles Capital Fund.
<PAGE>
FINANCIAL HIGHLIGHTS THE SPAIN FUND
- - - --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
------------------------------------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year . . . . . . . . 9.49 $ 8.28 $11.65 $12.26 $14.40
----- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income. . . . . . . . . . . . . . . .05 .10 .16 .15 .15
Net realized and unrealized gain (loss) on
investments and foreign currency transactions. . .88 1.29 (3.16) .53 (1.31)
----- ------ ------ ------ ------
Net increase (decrease) in net asset value from
operations . . . . . . . . . . . . . . . . . . . .93 1.39 (3.00) .68 (1.16)
----- ------ ------ ------ ------
LESS:DISTRIBUTIONS
Dividends from net investment income . . . . . . . (.10) (.17) (.15) (.14) (.13)
Distributions in excess of net investment income . (.05) -0- -0- -0- -0-
Distributions from net realized gains on
investments and foreign currency transactions. . (.31) (.01) (.22) (1.15) (.85)
----- ------ ------ ------ ------
Total dividends and distributions. . . . . . . . . (.46) (.18) (.37) (1.29) (.98)
----- ------ ------ ------ ------
Net asset value, end of year . . . . . . . . . . . 9.96 $ 9.49 $ 8.28 $11.65 $12.26
----- ------ ------ ------ ------
----- ------ ------ ------ ------
Market value, end of year. . . . . . . . . . . . . 9.13 $ 9.63 $ 8.38 $13.25 $12.63
----- ------ ------ ------ ------
----- ------ ------ ------ ------
TOTAL RETURN(a)
Total investment return based on:
Market value . . . . . . . . . . . . . . . . . . (1.29)% 17.31% (34.82)% 17.62% (53.49)%
----- ------ ------ ------ ------
----- ------ ------ ------ ------
Net asset value. . . . . . . . . . . . . . . . . 9.28% 16.99% (26.71)% 6.49% (11.79)%
----- ------ ------ ------ ------
----- ------ ------ ------ ------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted). . . . . . $99,886 $95,058 $82,920 $116,665 $122,685
Ratio of expenses to average net assets. . . . . . 2.09% 2.24% 2.34% 1.98% 2.22%
Ratio of net investment income to average net
assets . . . . . . . . . . . . . . . . . . . . . .53% 1.10% 1.50% 1.33% 1.14%
Portfolio turnover rate. . . . . . . . . . . . . . 22% 65% 43% 35% 41%
- - - --------------------------------------------------------------------------------
<FN>
(a) 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 year 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 years 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 years. Conversely, total investment return
based on net asset value will be lower than total investment return based
on market value in years 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 years. Total investment return calculated for
a period of less than one year is not annualized.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS THE SPAIN FUND
- - - --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF THE SPAIN FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Spain Fund, Inc. (the "Fund")
at November 30, 1994, 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 generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at November 30, 1994 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations were not received, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
January 23, 1995
<PAGE>
ADDITIONAL INFORMATION THE SPAIN FUND
- - - --------------------------------------------------------------------------------
Shareholders whose shares are registered in their own names may elect to be
participants in the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
pursuant to which dividends and capital gain distributions to shareholders will
be paid in or reinvested in additional shares of the Fund (the "Dividend
Shares"). State Street Bank and Trust Company (the "Agent") will act as agent
for participants under the Plan. Shareholders whose shares are held in the name
of a broker or nominee should contact such broker or nominee to determine
whether or how they may participate in the Plan.
A shareholder who has elected to participate in the Plan may withdraw from the
Plan at any time. There will be no penalty for withdrawal from the Plan and
shareholders who have previously withdrawn from the Plan may rejoin it at any
time. Changes in elections must be in writing and should include the
shareholder's name and address as they appear on the share certificate. An
election to withdraw from the Plan will, until such election is changed, be
deemed to be an election by a shareholder to take all subsequent distributions
in cash. An election will only be effective for a distribution declared and
having a record date of at least ten days after the date on which the election
is received.
Commencing not more than five business days before the dividend payment date,
purchases of the Fund's shares may be made by the Agent, on behalf of the
participants in the Plan, from time to time to satisfy dividend reinvestments
under the Plan. Such purchases by the Agent on or before the dividend payment
date may be made on the New York Stock Exchange (the "Exchange") or elsewhere at
any time when the price plus estimated commissions of the Fund's Common Stock on
the Exchange is lower than the Fund's most recently calculated net asset value
per share.
If the Agent determines on the dividend payment date that the shares purchased
as of such date are insufficient to satisfy the dividend reinvestment
requirements, the Agent, on behalf of the participants in the Plan, will obtain
the necessary additional shares as follows. To the extent that outstanding
shares are not available at a cost of less than per share net asset value, the
Agent, on behalf of the participants in the Plan, will accept payment of the
dividend, or the remaining portion thereof, in authorized but unissued shares of
the Fund on the dividend payment date. Such shares will be issued at a per
share price equal to the higher of (1) the net asset value per share on the
payment date, or (2) 95% of the closing market price per share on the payment
date. If the closing sale or offer price, plus estimated commissions, of the
Common Stock on the Exchange on the payment date is less than the Fund's net
asset value per share on such day, then the Agent will purchase additional
outstanding shares on the Exchange or elsewhere. If before the Agent has
completed such purchases, the market price plus commissions exceeds the net
asset value of the Fund's shares, the average per share purchase price paid by
the Agent may exceed the net asset value of the Fund's shares, resulting in the
acquisition of fewer shares than if shares had been issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificated form in the name of
the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan.
There will be no brokerage charges with respect to shares issued directly by the
Fund to satisfy the dividend reinvestment requirements. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Agent's open market purchases of shares. In each case, the cost
per share of shares purchased for each shareholder's account will be the average
cost, including brokerage commissions, of any shares purchased in the open
market plus the cost of any shares issued by the Fund.
Shareholders participating in the Plan may receive benefits not available to
shareholders not participating in the Plan. If the market price plus
commissions of the Fund's shares is above the net asset value, participants in
the Plan will receive shares of the Fund at a discount of up to 5% from the
current market value. However, if the market price plus commissions is below
the net asset value, participants will receive distributions in shares with a
net asset value greater than the value of any cash distribution they would have
received on their shares. There may be insufficient shares available in the
market to make distributions in shares at prices below the net asset value.
Also, since the Fund does not redeem its shares, the price on resale may be more
or less than the net asset value.
<PAGE>
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
In the case of foreign participants whose dividends are subject to United States
income tax withholding and in the case of any participants subject to 31%
federal backup withholding, the Agent will reinvest dividends after deduction of
the amount required to be withheld.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent to
written notice of the change sent to participants in the Plan at least 90 days
before the record date for such dividend or distribution. The Plan may also be
amended or terminated by the Agent on at least 90 days' written notice to
participants in the Plan; however, the Fund reserves the right to amend the Plan
to include a service charge payable to the Agent by the participants. All
correspondence concerning the Plan should be directed to the Agent at State
Street Bank and Trust Company, P.O. Box 366, Boston, Massachusetts 02101.
Since the filing of the most recent amendment to the Fund's registration
statement with the Securities and Exchange Commission, there have been (i) no
material changes in the Fund's investment objectives or policies, (ii) no
changes to the Fund's charter or by-laws that would delay or prevent a change of
control of the Fund, (iii) no material changes in the principal risk factors
associated with investment in the Fund, and (iv) no change in the person
primarily responsible for the day-to-day management of the Fund's portfolio, who
is Mark H. Breedon, Vice President of the Fund.
<PAGE>
BOARD OF DIRECTORS
DAVE H. WILLIAMS, CHAIRMAN
ANGEL CORCOSTEGUI
H.R.H. PILAR DE BORBON Y BORBON
INMACULADA DE HABSBURGO-LORENA
ENRIQUE L. FEVRE
JOSE LUIS FEITO HIGUERUELA
MARILYN PERRY
FRANCISCO GOMEZ ROLDAN
JAIME CARVAJAL URQUIJO
JUAN MANUEL SAINZ DE VICUNA
REBA W. WILLIAMS
CARLOS DELALAUX ZULUETA
OFFICERS
DAVID H. DIEVLER, PRESIDENT
NORMAN S. BERGEL, VICE PRESIDENT
MARK H. BREEDON, VICE PRESIDENT
RICHARD HEARN, VICE PRESIDENT
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
EDMUND P. BERGAN, JR., SECRETARY
PATRICK J. FARRELL, CONTROLLER
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
40 Water Street
Boston, MA 02109
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036-2798
DIVIDEND PAYING AGENT, TRANSFER AGENT AND REGISTRAR
STATE STREET BANK & TRUST COMPANY
225 Franklin Street
Boston, MA 02110
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.
This report, including the financial statements herein is transmitted to the
shareholders of The Spain Fund, Inc. 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.
<PAGE>
THE SPAIN FUND, INC.
Summary of General Information
SHAREHOLDER INFORMATION
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction section of newspapers under the designation
SpainFd. The Fund's NYSE trading symbol is "SNF". Weekly comparative net asset
value (NAV) and market price information about the Fund is published each Monday
in THE WALL STREET JOURNAL and each Saturday in THE NEW YORK TIMES and BARRON'S,
and other newspapers in a table called "Closed End Funds". Additional
information about the Fund is available by calling 1-800-221-5672.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
A Dividend Reinvestment Plan is available to shareholders in the Fund, which
provides automatic reinvestment of dividends and capital gain distributions in
additional Fund shares. The Plan also allows you to make optional cash
investments in Fund shares through the Plan Agent. A brochure describing the
Plan is available from the Plan Agent, State Street Bank and Trust Company, by
calling 1-800-219-4218.
If you wish to participate in the Plan and your shares are held in your name,
simply complete and mail the enrollment form in the brochure. If your shares are
held in the name of your brokerage firm, bank or other nominee, you should ask
them whether or how you can participate in the Plan.
<PAGE>
ANNUAL REPORT
NOVEMBER 30, 1994
SPNAR
