THE SPAIN FUND
ANNUAL REPORT
NOVEMBER 30, 1995
LETTER TO SHAREHOLDERS THE SPAIN FUND
_______________________________________________________________________________
January 15, 1996
Dear Shareholder:
Following a relatively dull third quarter the Spanish equity market moved ahead
strongly over the final quarter of 1995. Investor enthusiasm has been fueled by
a reduction in short-term interest rates across Europe and the announcement of
a general election to be held on March 3, 1996.
ELECTION OUTLOOK
It is the election campaign that is dominating investors' thinking going into
1996. The prospect of the first conservative administration since the
restoration of democracy in Spain is generating considerable excitement in the
business community. Current opinion polls show the conservative Partido Popular
with a sufficient share of the vote to win an outright victory. However, the
decision of Felipe Gonsalez to lead his party into the next election (he had
been widely expected to step down) will probably result in some revival of the
socialists' fortunes.
Our best guess at this time is that the Partido Popular will likely end up as
the largest single party but will require support from some of the regional
parties in order to command a majority in Parliament.
This would make some of the more sweeping reforms so clearly
necessary-particularly in the area of employment law-more difficult to achieve
and the price exacted from regional groups for their support would also be
high. However, we look forward to the elections as a potential watershed in the
Spanish political landscape and the first move towards a revival of a more
entrepreneurial and liberal society.
MARKET REACTION
Probably at least as important from the perspective of the stock market, an
election victory for the right would bring to power an administration with
greater credibility as cost cutters able to tackle the country's deficit
problem. Consequently, we would anticipate a revival of foreign interest in the
Spanish bond market; we have already seen an increase in foreign purchases of
Spanish bonds over the latter part of 1995. This should allow some reduction in
the extraordinarily high 'real' interest rates currently available to cash and
bond investors, which are around 5% for short-term and 6% for long-term money.
It has been the necessity to keep interest rates high in the face of a rising
public borrowing requirement that has led to an attrition in asset values
(especially property), declining consumer confidence and the relatively
lackluster equity market performance of the past five years.
However, lower rates should prove the catalyst for an expansion of price
earnings and cash flow multiples for the Spanish market. At a prospective 1996
cash flow multiple of only 4x, Spain is among the least expensive of the
world's equity markets. At the same time, expected corporate earnings growth of
around 12% for 1996 is above the world's average expected growth rate.
Of course, much of our positive outlook depends upon inflation remaining
subdued. With a current inflation rate of 4.3% year-on-year, we see little
upward pressure on prices at present and anticipate a decline to below 4% in
1996. If forecasters are to believe that Spain's notoriously high propensity to
inflation has been eliminated for the longer term, we must see another year of
wage restraint and firm action on the deficit. Until this happens, real
interest rates will remain higher in Spain than in the rest of Europe.
PORTFOLIO INVESTMENTS
The Spain Fund's broadly fully invested portfolio reflects our optimism for
future growth opportunities. We continue to emphasize growth stocks that should
be major beneficiaries of the multiple expansion that we would expect from a
decline in short-term interest rates.
In this regard, we maintain significant weighting in issues such as Alba, the
diversified financial, retail and media conglomerate; Continente, the
hypermarket group; and Viscofan, the sausage casings manufacturer that, despite
some recent earnings disappointments, we believe offers substantial recovery
potential.
We also look forward to further privatizations over the course of 1996, with
Repsol, Argentaria and Tabacalera as likely candidates.
INVESTMENT RESULTS
For the twelve months ended November 30, 1995, The Spain Fund achieved a total
return of +5.1% on a net asset value basis, which compares with the Madrid
1
THE SPAIN FUND
_______________________________________________________________________________
General Index return of +14.7% over the same period with net dividends
reinvested. Twelve-month performance versus the Index was restrained by the
portfolio's holdings in smaller capitalization companies, which significantly
underperformed large-cap companies.
Overall, our outlook is broadly optimistic for Spanish equities and we remain
hopeful that a change of government in March could provide the catalyst for a
significant stock market rally.
Sincerely,
Dave H. Williams
Chairman and President
Mark H. Breedon
Vice President and Portfolio Manager
2
TEN LARGEST EQUITY HOLDINGS
NOVEMBER 30, 1995 THE SPAIN FUND
_______________________________________________________________________________
COMPANY U.S. $VALUE PERCENTOFNETASSETS
- -------------------------------------------------------------------------------
Compania Telefonica Nacional de Espana, S.A. $ 7,534,737 7.2%
Repsol, S.A. 5,862,844 5.6
Endesa 5,855,338 5.6
Banco Bilboa Vizcaya 5,854,993 5.6
Corporacion Financiera Alba, S.A. 5,583,255 5.3
Corporacion Mapfre, S.A. 5,047,377 4.8
Iberdrola I, S.A. 4,973,738 4.7
Banco Intercontinental 4,458,408 4.2
Argentaria Corporacion Bancaria de Espana, S.A. 4,095,127 3.9
Viscofan Envolturas Celulosicas 3,967,607 3.8
$53,233,424 50.7%
3
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 THE SPAIN FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- ----------------------------------------------------------------------
COMMON STOCKS AND OTHER INVESTMENTS96.0%
FINANCIAL SERVICES31.0%
BANKING23.0%
Argentaria Corporacion Bancaria de Espana,
S.A. (a) 104,593 $ 4,095,127
Banco Bilboa Vizcaya (a)(b) 177,500 5,854,993
Banco Central Hispanoamericano, S.A. 100,000 2,048,938
Banco de Andalucia 6,400 882,869
Banco de Castilla 1,500 663,491
Banco de Galicia 4,000 357,692
Banco de Santander, S.A. 83,428 3,892,666
Banco de Vasconia 6,200 264,130
Banco Intercontinental (a) 47,000 4,458,408
Banco Popular Espanol, S.A. 10,000 1,679,724
-----------
24,198,038
INSURANCE5.0%
Corporacion Mapfre, S.A. (a) 89,627 5,047,377
Mapfre Vida de Seguros, S.A. 3,324 187,462
-----------
5,234,839
REAL ESTATE3.0%
Estacionamientos Subterraneos, S.A. 82,500 1,499,579
Filo, S.A. 395,000 1,679,561
-----------
3,179,140
-----------
32,612,017
UTILITIES28.4%
ELECTRIC & GAS21.2%
Electricas Reunidas de Zaragoza, S.A. 151,562 3,234,547
Endesa (a) 109,000 5,855,338
Fuerzas Electricidad de Cataluna, S.A.
Series A 289,000 1,880,787
Gas Natural, S.A. 20,000 2,840,112
Gas y Electricidad, S.A. 32,000 1,643,695
Iberdrola I, S.A. 589,362 4,973,738
Sevillana de Electricidad 265,000 1,879,424
-----------
22,307,641
TELEPHONE7.2%
Compania Telefonica Nacional de Espana, S.A. 546,200 7,534,737
-----------
29,842,378
CONSUMER STAPLES8.0%
FOOD5.3%
El Aguila, S.A.* 175,000 1,120,424
Natra, S.A. 70,134 455,288
Viscofan Envolturas Celulosicas (a) 380,503 3,967,607
-----------
5,543,319
TOBACCO2.7%
Tabacalera, S.A. Series A (a) 75,899 2,851,573
-----------
8,394,892
ENERGY5.6%
Repsol, S.A. (a) 185,973 5,862,844
MULTI INDUSTRY5.3%
Corporacion Financiera Alba, S.A. 99,000 5,583,255
CAPITAL GOODS5.2%
ENGINEERING & CONSTRUCTION4.1%
Compania Levantia de Obras Publicas 20,000 304,298
Cubiertas Y Mzov, S.A. 10,000 545,302
Dragados Y Construcciones, S.A. 93,000 1,211,227
Fomento de Construcciones Y Contratas, S.A. 29,158 2,214,629
-----------
4,275,456
MACHINERY1.1%
Zardoya Otis, S.A. 11,000 1,142,537
-----------
5,417,993
CONSUMER SERVICES5.1%
ENTERTAINMENT & LEISURE TIME0.0%
Grand Tibidabo, S.A. * 132,660 59,207
PRINTING & PUBLISHING3.3%
Grupo Anaya* 16,801 364,010
Midesa 128,654 1,195,353
Midesa* rights expiring 12/24/95 128,654 119,535
Unidad Editorial, S.A. Series A * (c) 1,511,470 1,750,336
-----------
3,429,234
4
THE SPAIN FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $VALUE
- ----------------------------------------------------------------------
RETAIL1.8%
Centros Comerciales Continente, S.A. * 82,500 $ 1,851,043
------------
5,339,484
CONSUMER MANUFACTURING2.1%
BUILDING & RELATED2.1%
Portland Valderrivas, S.A. (a) 19,590 1,227,211
Uralita, S.A. 97,150 985,418
------------
2,212,629
HEALTHCARE2.1%
Fabrica Espanol de Productos Quimicos Y
Farmaceuticos 30,375 948,953
Indo Internacional, S.A. 19,119 674,873
Prim, S.A. 92,026 560,066
------------
2,183,892
BASIC INDUSTRIES1.3%
MINING AND METALS0.8%
Acerinox, S.A. 8,250 826,777
OTHER0.5%
Cristaleria Espanola, S.A. 9,000 516,332
------------
1,343,109
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $VALUE
- ----------------------------------------------------------------------
OTHER INVESTMENTS1.9%
Asesores Bursatiles Capital Fund N.V. * (c) 25 $ 680,906
Asesores Bursatiles Capital Fund N.V. II * (c) 25 1,358,836
------------
2,039,742
Total Common Stocks And Other Investments
(cost $94,847,039) 100,832,235
CONVERTIBLE BOND0.3%
El Aguila, S.A. 10.00%, 12/02/97 (d)
(cost $338,524) ESP 3,833 342,136
TIME DEPOSIT0.2%
First National Bank of Chicago
5.94%, 12/01/95
(cost $200,000) US$ 200 200,000
TOTAL INVESTMENTS -96.5%
(cost $95,385,563) 101,374,371
Other assets less liabilities-3.5% 3,637,100
NET ASSETS100% $105,011,471
* Non-income producing security.
(a) Securities (with an aggregate market value of $26,526,315) segregated to
collateralize forward exchange currency contracts.
(b) Security represents investment in an affiliate.
(c) Restricted security, valued at fair value. (See Notes A and F.)
(d) Illiquid security, valued at fair value. (See Note A.)
Glossary:
ESP - Spanish Pesetas.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995 THE SPAIN FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $95,385,563) $101,374,371
Foreign cash, at value (cost $1,236,241) 1,225,073
Cash 86,375
Receivable for investment securities sold 2,367,694
Foreign taxes receivable 266,921
Unrealized appreciation of forward exchange currency contract 191,558
Interest receivable and other assets 65,105
Total assets 105,577,097
LIABILITIES
Management fee payable 91,163
Accrued expenses 474,463
Total liabilities 565,626
COMMITMENTS (see Note F)
NET ASSETS $105,011,471
COMPOSITION OF NET ASSETS
Capital stock, at par $ 100,267
Additional paid-in capital 106,918,079
Undistributed net investment income 300,802
Accumulated net realized loss on investments (8,439,469)
Net unrealized appreciation on investments and foreign
currency denominated assets and liabilities 6,131,792
-------------
$105,011,471
NET ASSET VALUE PER SHARE(based on 10,026,746 shares outstanding) $10.47
See notes to financial statements.
6
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1995 THE SPAIN FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends(net of foreign taxes withheld
of $476,781) $2,748,954
Interest 239,999 $2,988,953
EXPENSES
Management fee 1,057,756
Custodian 376,302
Professional 212,967
Transfer agency 156,008
Directors' fees and expenses 122,634
Printing 80,198
Registration 22,342
Miscellaneous 62,755
Total expenses 2,090,962
Net investment income 897,991
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized loss on investment transactions-unaffiliated
issuers (2,521,817)
Net realized loss on foreign currency transactions (597,189)
Net realized gain on investment transactions-affiliated issuer 1,330,322
Net change in unrealized depreciation of investments 6,433,021
Net change in unrealized appreciation of foreign currency
denominated assets and liabilities (416,743)
Net gain on investments and foreign currency denominated
assets and liabilities 4,227,594
NET INCREASE IN NET ASSETS FROM OPERATIONS $5,125,585
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS THE SPAIN FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1995 1994
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 897,991 $ 542,837
Net realized loss on investments and foreign
currency transactions (1,788,684) (231,307)
Net change in unrealized appreciation of
investments and foreign currency denominated
assets and liabilities 6,016,278 9,063,062
Net increase in net assets from operations 5,125,585 9,374,592
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income -0- (1,005,103)
Distributions in excess of net investment income -0- (508,431)
Net realized gain on investments and foreign
currency transactions -0- (3,096,153)
CAPITAL STOCK TRANSACTIONS
Reinvestment of dividends resulting in issuance
of common stock -0- 63,476
Total increase 5,125,585 4,828,381
NET ASSETS
Beginning of year 99,885,886 95,057,505
End of year (including undistributed net
investment income of $300,802 at
November 30, 1995) $105,011,471 $99,885,886
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1995 THE SPAIN FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The Spain Fund Inc., (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 $4,132,214 at November 30,
1995. 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. Purchases and sales of portfolio securities are translated at the
rates of exchange prevailing when such securities were acquired or sold. Income
and expenses are translated at rates of exchange prevailing when accrued. Net
realized loss on foreign currency transactions of $597,189 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, 1995 was 123.235 ESP
to U.S. $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.
To reflect reclassification arising from permanent book/tax differences for the
year ended November 30, 1995, a reclassification was made to decrease
accumulated net realized loss on investments and foreign currency transactions
and decrease undistributed net investment income by $597,189.
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 tax regulations, which may differ from generally accepted
accounting principles.
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE SPAIN FUND
_______________________________________________________________________________
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.
Effective November 29, 1994, the Fund and the Investment Manager entered into a
sub-advisory agreement with Privanza Banco Personal, S.A. (the 'Sub-Adviser').
Under this agreement the subadviser received a fee at the annual rate of .25 of
1% of the Fund's average weekly net assets. All amounts paid to the subadviser
are payable by the Investment Manager from its fee.
Banco Bilbao Vizcaya, an affiliate of the subadviser, serves as subcustodian of
the Fund. Fees paid to the subcustodian are payable by the custodian from its
fee. For the year ended November 30, 1995, the Fund earned $37,755 of interest
income on cash balances maintained at the subcustodian. For the year ended
November 30, 1995, the Fund received dividend income of $176,278 from common
stock of Banco Bilbao Vizcaya owned by the Fund.
Brokerage commissions paid on securities transactions for the year ended
November 30, 1995 amounted to $160,547 of which $1,448 was paid to Banco Bilbao
Vizcaya.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $37,246,314 and $39,171,225, respectively, for the year ended
November 30, 1995.
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 a contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. At
November 30, 1995, the Fund had an outstanding forward exchange currency
contract with Brown Brothers Harriman & Co. to sell 3,169,000,000 Spanish
Pesetas expiring on December 29, 1995, for $25,835,011. The market value of the
forward exchange currency contract at November 30, 1995 was $25,643,453
resulting in an unrealized appreciation of $191,558.
At November 30, 1995, the cost of securities for federal income tax purposes
was $95,637,460. Accordingly, gross unrealized appreciation of investments was
$18,437,134 and gross unrealized depreciation of investments was $12,700,223
resulting in net unrealized appreciation of $5,736,911 (excluding foreign
currency). At November 30, 1995 the Fund had a total capital loss carryforward
of $8,187,572, of which $6,894,268 expires in the year 2001 and $1,293,304
expires in the year 2003. No capital gain distribution is expected to be paid
to shareholders until future net gains have been realized in excess of such
carryforward.
NOTE D: CAPITAL STOCK
There are 100,000,000 shares of $.01 par value common stock authorized. Of the
10,026,746 shares outstanding at November 30, 1995, the Investment Manager
owned 9,454 shares.
10
THE SPAIN FUND
_______________________________________________________________________________
NOTE E: QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NET REALIZED AND NET INCREASE
UNREALIZED GAIN (LOSS) (DECREASE)
ON INVESTMENTS AND IN NET ASSETS
NET INVESTMENT FOREIGN CURRENCY RESULTING FROM MARKET PRICE
INCOME (LOSS) TRANSACTIONS OPERATIONS 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, 1995 $ (75) $(.01) $(1,346) $(.14) $(1,420) $(.15) $ 8.88 $8.25
August 31, 1995 651 .06 1,872 .20 2,522 .26 $ 9.25 $8.50
May 31, 1995 (129) (.01) $9,486 .94 9,357 .93 $ 9.00 $7.25
February 28, 1995 468 .05 (5,784) (.58) (5,316) (.53) $ 9.125 $7.75
------ ------- -------- ------- -------- ------
$ 915 $ .09 $ 4,228 $ .42 $ 5,143 $ .51
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
</TABLE>
NOTE F: RESTRICTED SECURITIES
DATE ACQUIRED SHARES COST
------------- --------- ----------
Asesores Bursatiles Capital Fund, N.V. 10/29/90 25 $1,115,170
Asesores Bursatiles Capital Fund, N.V. II 5/24/94 25 1,307,667
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
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, 1995 was $3,790,078, representing
3.6% 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 750,000 Netherland
Guilders (US $463,168) upon the request of Asesores Bursatiles Capital Fund.
NOTE G: SUBSEQUENT EVENT
DIVIDEND DECLARED
On December 20, 1995, the Board of Directors declared a dividend of $0.03 per
share payable from net investment income. This dividend was paid on January 12,
1996 to shareholders of record as of December 29, 1995.
11
FINANCIAL HIGHLIGHTS THE SPAIN FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.96 $9.49 $8.28 $11.65 $12.26
INCOME FROM INVESTMENT OPERATIONS
Net investment income .09 .05 .10 .16 .15
Net realized and unrealized gain (loss) on
investments and foreign currency transactions .42 .88 1.29 (3.16) .53
Net increase (decrease) in net asset value
from operations .51 .93 1.39 (3.00) .68
LESS: DISTRIBUTIONS
Dividends from net investment income -0- (.10) (.17) (.15) (.14)
Distributions in excess of net investment income -0- (.05) -0- -0- -0-
Distributions from net realized gain on
investments and foreign currency transactions -0- (.31) (.01) (.22) (1.15)
Total dividends and distributions -0- (.46) (.18) (.37) (1.29)
Net asset value, end of year $10.47 $9.96 $9.49 $ 8.28 $11.65
Market value, end of year $ 8.625 $9.125 $9.625 $ 8.375 $13.25
TOTAL RETURN (A)
Total investment return based on:
Market value (5.48)% (1.29)% 17.31% (34.82)% 17.62%
Net asset value 5.12% 9.28% 16.99% (26.71)% 6.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $105,011 $99,886 $95,058 $82,920 $116,665
Ratio of expenses to average net assets 2.07% 2.09% 2.24% 2.34% 1.98%
Ratio of net investment income to average net
assets .89% .53% 1.10% 1.50% 1.33%
Portfolio turnover rate 38% 22% 65% 43% 35%
</TABLE>
(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 and Cash Purchase 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 years. 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 years.
12
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, 1995, 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, 1995 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
January 8, 1996
13
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 elections 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 the 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.
14
THE SPAIN FUND
_______________________________________________________________________________
There may be insufficient shares available in the market ot make distributions
in shares at process 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.
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) 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.
15
THE SPAIN FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
DAVE H. WILLIAMS, CHAIRMAN AND PRESIDENT
ANGEL CORCOSTEGUI
H.R.H. PILAR DE BORBON Y BORBON
INMACULADA DE HABSBURGO-LORENA
ENRIQUE L. FEVRE
IGNACIO GOMEZ-ACEBO
DR. JAMES M. HESTER
JOSE LUIS FEITO HIGUERUELA
MARILYN PERRY
FRANCISCO GOMEZ ROLDAN
JUAN MANUEL SAINZ DE VICUNA
REBA W. WILLIAMS
CARLOS DELCLAUX ZULUETA
OFFICERS
NORMAN S. BERGEL, VICE PRESIDENT
MARK H. BREEDON, VICE PRESIDENT
NICHOLAS CROSSLAND, VICE PRESIDENT
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
EDMUND P. BERGAN, JR., SECRETARY
JOSEPH J. MANTINEO, 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 form time to
time shares of its common stock on the open market.
This report, including the financial statements therein is transmitted ot 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
sharesof the Fund or any securities mentioned in this report.
16
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17
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18
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19
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 NYSEtrading 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.
THE SPAIN FUND, INC.
1345 Avenue of the Americas
New York, New York 10105
ALLIANCECAPITAL A
MUTUAL FUNDS WITHOUT THE MYSTERY.SM
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE
CAPITAL MANAGEMENT L.P.
SPNAR
