THE SPAIN FUND
ANNUAL REPORT
NOVEMBER 30, 1996
LETTER TO SHAREHOLDERS THE SPAIN FUND
_______________________________________________________________________________
January 17, 1997
Dear Shareholder:
We are pleased to provide you with an update of your Fund's performance and
market activity for the period ended November 30, 1996.
A REVIEW OF THE 1996 SPANISH ECONOMY
The Spanish stock market ended 1996 on a high note, accumulating a return of
over 34% in U.S. dollar terms over the course of the year. This strong revival
in the equity market can be attributed to three major events during 1996.
The first event was the election of Spain's first right of center government.
The Partido Popular, in coalition with the Catalan regional party, has focused
its activities to date on addressing the budgetary situation in its attempt to
qualify for the first round of European Monetary Union at the end of 1997. As
of yet, the government has not tackled some of the more fundamental and
structural distortions inside the Spanish economy, most notably labor market
reform. However, the government has succeeded in establishing a reputation for
fiscal prudence.
It was the appreciation of this new discipline that led to the second major
event of 1996. Both domestic and foreign investors came to the realization that
Spain had the ability to conform to the Maastricht treaty's budgetary and
inflationary criteria. The idea that Spain could achieve these required targets
resulted in a significant rally in Spain's bond markets, and long-term yields
fell from approximately 10% at the beginning of 1996 to below 7% by the end of
the year. The Bank of Spain was also able to cut short-term rates by nearly
three percentage points over the period to a level of about 6% by year-end.
In essence, fixed income investors removed the premium they demanded above the
European average for holding Spanish paper. This re-rating of Spanish interest
bearing debt also had a dramatic impact on the country's stock market. The
discount at which Spanish equities traded, in terms of valuation relative to
European averages, was largely eliminated by price gains as investors rapidly
expanded market multiples in the face of a lower cost of debt. At a current
prospective price to cash flow multiple of five times, Spain still trades
marginally cheaper than its European peer group, but the discount has narrowed
considerably.
The third significant event of 1996 concerned a move by the domestic Spanish
mutual fund industry towards more equity ownership. Despite having the ability
to invest in the Spanish stock market, most mutual funds had hardly invested in
equities, preferring cash and bonds. The average exposure to equities was less
than 5% of assets at the outset of the year. However, the sharp decline in
yields on Spanish cash and bonds forced the funds to look at the stock market
for the first time. As a result, much of the rally in share prices over the
last quarter of the year was fueled by domestic buying.
A LOOK AT THE 1997 SPANISH ECONOMY
Spain enters 1997 facing a different set of challenges from the outset of 1996.
In the short-term, all eyes will be fixed upon statistics for inflation and the
budget deficit with reference to the end of 1997 Maastricht criteria. Spain's
compliance with Maastricht is likely to be a close call, particularly with
regard to inflation where any negative development could have a
disproportionate effect on the stock and bond markets. However, we currently
believe that Spain can achieve the required targets.
Profit growth should recover somewhat in 1997 towards the 10% level, aided by
the cheaper cost of debt. We anticipate a recovery in the property market,
which should, in turn, help domestic consumption to accelerate. The
sustainability of a strong currency and low interest rates will depend upon the
propensity of the government to tackle labor market and civil service reform.
Domestic ownership of equities remains exceedingly low, but there is
considerable potential for a significant flow of funds from fixed income
securities and cash towards the stock market. Therefore, we see the greatest
prospect for a continuation of the current market rally in this shift from
mutual funds to equities.
PORTFOLIO STRATEGY
We continue to maintain your Fund in a broadly, fully invested position with a
focus on growth stocks where we see the potential for a further re-rating in
the current interest rate environment. We have generally reduced interest rate
sensitive issues following recent strong gains
1
THE SPAIN FUND
_______________________________________________________________________________
and have eliminated positions in the motorway sector through sales of Aumar,
Autopistas and Iberpistas. At the same time, we have added to positions in
Repsol, Spain's largest oil and refining company, and recently in the property
company, Vallehermoso, and gas company, Gas Natural.
We continue to maintain a hedged position of approximately 18% of the
portfolio's value back into the U.S. dollar.
INVESTMENT RESULTS
For the three months ending November 30, 1996, The Spain Fund returned 12.22%
on a net asset value basis, which compares with its benchmark, the Madrid
General Index, which had a return of 14.18% over the same period with net
dividends reinvested.
The Fund outperformed its benchmark over the last six month period, producing a
net asset value return of 13.55% versus 11.74% for its benchmark. Over the last
twelve month period ending November 30, 1996, the Fund slightly underperformed
its benchmark, producing a net asset value return of 28.48% versus 29.63% for
the same benchmark.
We thank you for your continued interest in The Spain Fund and look forward to
reporting to you again on market activity and the Fund's investment results in
the coming periods.
Sincerely,
Dave H. Williams
Chairman and President
Mark H. Breedon
Vice President
2
TEN LARGEST EQUITY HOLDINGS
NOVEMBER 30, 1996 THE SPAIN FUND
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Compania Telefonica Nacional de Espana, S.A. $12,708,633 9.4%
Endesa 10,527,747 7.8
Banco Bilbao Vizcaya 8,966,902 6.7
Iberdrola I, S.A. 7,844,839 5.8
Corporacion Financiera Alba, S.A. 7,756,404 5.8
Banco de Santander, S.A. 7,738,507 5.8
Banco Intercontinental 6,162,395 4.6
Repsol, S.A. 6,101,045 4.5
Acerinox, S.A. 5,703,216 4.2
Gas Natural, S.A. 5,193,256 3.9
$78,702,944 58.5%
3
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996 THE SPAIN FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS AND OTHER INVESTMENTS-99.1%
UTILITIES-33.0%
ELECTRIC & GAS-23.5%
Electricas Reunidas de Zaragoza, S.A. 111,587 $ 3,743,740
Endesa (a) 156,000 10,527,747
Gas Natural, S.A. 25,050 5,193,256
Gas y Electricidad, S.A. 32,000 1,801,672
Iberdrola I, S.A. 680,362 7,844,839
Sevillana de Electricidad 272,000 2,548,872
------------
31,660,126
TELEPHONE-9.5%
Compania Telefonica Nacional de Espana, S.A. 580,200 12,708,633
------------
44,368,759
FINANCIAL SERVICES-24.6%
BANKING-20.5%
Banco Bilbao Vizcaya (a)(b) 177,500 8,966,902
Banco de Andalucia 6,400 905,772
Banco de Castilla 1,500 758,923
Banco de Santander, S.A. 142,928 7,738,507
Banco Intercontinental (a) 47,000 6,162,395
Banco Popular Espanol, S.A. 15,800 3,058,677
------------
27,591,176
INSURANCE-2.6%
Corporacion Mapfre, S.A. (a) 33,627 1,776,567
Mapfre Vida De Seguros, S.A. 25,000 1,673,642
------------
3,450,209
REAL ESTATE-1.5%
Estacionameintos Subterraneos, S.A. 18,140 267,223
Filo, S.A. (c) 35,245 81,006
Vallehermoso, S.A. 86,000 1,787,557
------------
2,135,786
------------
33,177,171
CONSUMER SERVICES-9.8%
PRINTING & PUBLISHING-2.3%
Midesa 141,519 1,227,920
Unidad Editorial, S.A. Series A (c)(d) 1,511,470 1,865,187
------------
3,093,107
RESTAURANTS & LODGING-2.6%
Sol Melia, S.A. (c) 115,000 3,538,942
RETAIL-4.9%
Centros Comerciales Continente, S.A. 90,500 1,710,084
Cortefiel, S.A. 161,000 4,904,850
------------
6,614,934
------------
13,246,983
ENERGY-6.1%
Compania Espanola de Petroleos, S.A. 70,200 2,079,080
Repsol, S.A. (a) 164,973 6,101,045
------------
8,180,125
CONSUMER STAPLES-6.1%
FOOD-5.3%
El Aguila, S.A. (c) 175,000 877,312
General de Aguas de Barcelona, S.A. 42,834 1,684,851
Natra, S.A. 70,134 892,515
Puleva, S.A. (c) 95,000 1,736,500
Telepizza, S.A.(c) 26,300 638,953
Viscofan Envolturas Celulosicas (a) 83,503 1,288,056
------------
7,118,187
TOBACCO-0.8%
Tabacalera, S.A. Series A (a) 26,779 1,051,272
------------
8,169,459
MULTI INDUSTRY-5.8%
Corporacion Financiera Alba, S.A. 82,500 7,756,404
BASIC INDUSTRIES-5.2%
MINING AND METALS-5.2%
Acerinox, S.A. 44,816 5,703,216
Asturiana de Zinc, S.A. (c) 150,000 1,313,076
------------
7,016,292
CONSUMER MANUFACTURING-2.6%
BUILDING & RELATED-2.3%
Portland Valderrivas, S.A. (a) 19,590 1,193,615
Uralita, S.A. 261,650 1,937,290
------------
3,130,905
4
THE SPAIN FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
TRANSPORTATION-0.3%
Iberica de Autopistas 23,000 $ 430,172
------------
3,561,077
CAPITAL GOODS-2.3%
ENGINEERING & CONSTRUCTION-2.3%
Abengoa, S.A. (c) 17,000 586,083
Fomento de Construcciones Y Contratas, S.A. 29,158 2,462,491
------------
3,048,574
HEALTHCARE-1.8%
Fabrica Espanol de Productos Quimicos
y Farmaceuticos 28,075 1,325,177
Indo Internacional, S.A. 19,119 663,560
Prim, S.A. (c) 92,026 408,114
------------
2,396,851
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
OTHER-1.8%
Asesores Bursatiles
Capital Fund N.V. (c)(d) 25 $ 664,551
Capital Fund N.V. II (c)(d) 25 1,725,984
-------------
2,390,535
Total Common Stocks and Other Investments
(cost $103,843,734) 133,312,230
RIGHTS-0.0%
UTILITIES-0.0%
Aguas De Barcelona Rts 12/18/96 (c)
(cost $20,532) 42,834 21,143
TIME DEPOSIT-0.2%
Sumitomo Bank 5.50%, 12/02/96
(cost $200,000) $200 200,000
TOTAL INVESTMENTS-99.3%
(cost $104,064,266) 133,533,373
Other assets less liabilities-0.7% 974,393
NET ASSETS-100% $134,507,766
(a) Security, or portion thereof, has been segregated to collateralize forward
exchange currency contracts. Total value of securities amounted to $27,691,940
at November 30, 1996.
(b) Security represents investment in an affiliate.
(c) Non-income producing security.
(d) Restricted securities, valued at fair value. (See Notes A and E.)
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996 THE SPAIN FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $104,064,266) $133,533,373
Foreign cash, at value (cost $1,645,973) 1,617,836
Cash 17,286
Unrealized appreciation of forward exchange currency contract 240,521
Foreign taxes receivable 167,111
Receivable for investment securities sold 28,155
Interest receivable and other assets 12,478
Total assets 135,616,760
LIABILITIES
Payable for investment securities purchased 557,238
Management fee payable 108,397
Accrued expenses 443,359
Total liabilities 1,108,994
NET ASSETS $134,507,766
COMPOSITION OF NET ASSETS
Capital stock, at par $ 100,267
Additional paid-in capital 106,918,079
Undistributed net investment income 1,498,070
Accumulated net realized loss on investments and foreign
currency transactions (3,689,645)
Net unrealized appreciation on investments and foreign
currency denominated assets and liabilities 29,680,995
$134,507,766
NET ASSET VALUE PER SHARE (based on 10,026,746 shares outstanding) $13.41
See notes to financial statements.
6
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1996 THE SPAIN FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends--unaffiliated issuers (net of foreign
taxes withheld of $490,379) $2,767,929
Dividends--affiliated issuer (net of foreign
taxes withheld of $43,982) 249,235
Interest 110,528 $ 3,127,692
EXPENSES
Management fee 1,207,278
Custodian 331,790
Audit and Legal 163,097
Transfer agency 141,348
Directors' fees and expenses 122,596
Printing 36,035
Registration 24,272
Miscellaneous 3,903
Total expenses 2,030,319
Net investment income 1,097,373
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 4,749,824
Net realized gain on foreign currency transactions 400,697
Net change in unrealized appreciation of:
Investments 23,480,299
Foreign currency denominated assets and liabilities 68,904
Net gain on investments and foreign currency transactions 28,699,724
NET INCREASE IN NET ASSETS FROM OPERATIONS $29,797,097
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS THE SPAIN FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 1,097,373 $ 897,991
Net realized gain (loss) on investments and
foreign currency transactions 5,150,521 (1,788,684)
Net change in unrealized appreciation of
investments and foreign currency
denominated assets and liabilities 23,549,203 6,016,278
Net increase in net assets from operations 29,797,097 5,125,585
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income (300,802) -0-
Total increase 29,496,295 5,125,585
NET ASSETS
Beginning of year 105,011,471 99,885,886
End of year (including undistributed net
investment income of $1,498,070 and
$300,802 respectively) $134,507,766 $105,011,471
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 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. In determining fair value, consideration is given to cost,
operating and other financial data of the issuer. 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.
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 gain on foreign currency transactions 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 forward exchange currency 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 year 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, 1996 was 129.657 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.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date or as soon as the Fund is
informed of the dividend. Interest income is accrued daily. Investment
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.
6. RECLASSIFICATION OF COMPONENTS OF NET ASSETS
As of November 30, 1996, the Fund reclassified certain components of net
assets. The reclassifications resulted in a net increase to accumulated net
realized loss on investments of $400,697 and a net increase in undistributed
net investment income of $400,697. This reclassification was the result of
permanent book to tax differences resulting from foreign currency transactions.
Net assets were not affected by the change.
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.
The Fund and the Investment Manager have entered into a Sub-Advisory Agreement
with Privanza Banco Personal, S.A. (the "Sub-Adviser"). Under this agreement
the Sub-Adviser receives a fee at the annual rate of .25 of 1% of the Fund's
average weekly net assets. All amounts paid to the Sub-Adviser are payable by
the Investment Manager from its fee. An officer of the Fund is a director of
the Sub-Adviser.
The Fund has entered into a Shareholder Inquiry Agency Agreement with Alliance
Fund Services, Inc. ("AFS"), an affiliate of the Investment Manager, whereby
the Fund reimburses AFS for costs relating to servicing phone inquiries for the
Fund. The Fund reimbursed AFS $5,170 during the year ended November 30, 1996
relating to shareholder servicing costs.
Banco Bilbao Vizcaya, an affiliate of the Sub-Adviser, serves as subcustodian
of the Fund. Fees paid to the sub-custodian are payable by the custodian from
its fee. For the year ended November 30, 1996, the Fund earned $70,600 of
interest income on cash balances maintained at the subcustodian.
Brokerage commissions paid on securities transactions for the year ended
November 30, 1996 amounted to $286,107 of which $13,516 was paid to Banco
Bilbao Vizcaya.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. Government obligations) aggregated $54,799,701 and $51,174,973,
respectively, for the year ended November 30, 1996.
At November 30, 1996, the cost of securities for federal income tax purposes
was $104,339,454. Accordingly, gross unrealized appreciation of investments was
$36,798,787 and gross unrealized depreciation of investments was $7,604,868
resulting in net unrealized appreciation of $29,193,919 (excluding foreign
currency). At November 30, 1996, the Fund had a total capital loss carryforward
of $3,414,457 of which $2,121,153 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.
FORWARD EXCHANGE CURRENCY CONTRACTS
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 open 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, 1996, the Fund had outstanding forward exchange currency
contracts as follows:
CONTRACT VALUE ON U.S. $
AMOUNT ORIGINATION CURRENT UNREALIZED
(000) DATE VALUE APPRECIATION
--------- ----------- ----------- ------------
FOREIGN CURRENCY SALE CONTRACT
Spanish Pesetas
expiring 12/31/96 3,169,000 $24,658,025 $24,417,504 $240,521
10
THE SPAIN FUND
_______________________________________________________________________________
NOTE D: CAPITAL STOCK
There are 100,000,000 shares of $.01 par value common stock authorized. At
November 30, 1996, 10,026,746 shares were outstanding.
NOTE E: 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 1,772,724
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, 1996 was $4,255,722, representing
3.2% of net assets.
NOTEF:CONCENTRATION OF RISK
Investment in the Fund's shares requires consideration of certain factors that
are not typically associated with investments in U.S. equity securities such as
currency fluctuations, potential price volatility, lower liquidity and
concentration of the Spanish equities market and limitations on the
concentration of investment in the equity of securities of companies in certain
industry sectors. The possibility of political and economic instability of
government supervision and regulation of the market may further affect the
Fund's investments.
11
FINANCIAL HIGHLIGHTS THE SPAIN FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.47 $9.96 $9.49 $8.28 $11.65
INCOME FROM INVESTMENT OPERATIONS
Net investment income .11 .09 .05 .10 .16
Net realized and unrealized gain (loss)
on investments
and foreign currency transactions 2.86 .42 .88 1.29 (3.16)
Net increase (decrease) in net asset
value from operations 2.97 .51 .93 1.39 (3.00)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.03) -0- (.10) (.17) (.15)
Distributions in excess of net
investment income -0- -0- (.05) -0- -0-
Distributions from net realized gain
on investments and foreign currency
transactions -0- -0- (.31) (.01) (.22)
Total dividends and distributions (.03) -0- (.46) (.18) (.37)
Net asset value, end of year $13.41 $10.47 $9.96 $9.49 $8.28
Market value, end of year $10.75 $8.625 $9.125 $9.625 $8.375
TOTAL RETURN(A)
Total investment return based on:
Market value 25.03% (5.48)% (1.29)% 17.31% (34.82)%
Net asset value 28.48% 5.12% 9.28% 16.99% (26.71)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $134,508 $105,011 $99,886 $95,058 $82,920
Ratio of expenses to average net assets 1.73% 2.07% 2.09% 2.24% 2.34%
Ratio of net investment income to
average net assets .93% .89% .53% 1.10% 1.50%
Portfolio turnover rate 44% 38% 22% 65% 43%
Average commission rate paid(b) $.0618 -- -- -- --
</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 business
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 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.
(b) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged. This amount includes commissions paid in foreign
currencies, which have been converted into USdollars using the prevailing
exchange rate on the date of the transaction. Such conversions may materially
affect the rate shown.
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, 1996, 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, 1996 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
January 14, 1997
FOREIGN TAX CREDIT (UNAUDITED)
_______________________________________________________________________________
The Fund has elected to give the benefit to its shareholders of foreign taxes
that have been paid and/or withheld. For the fiscal year ended November 30,
1996, this amounted to $534,361. Although the Fund has made the election
required to make this credit available, the amount of allowable tax credit is
subject to limitation under the Internal Revenue Code.
A notification reflecting the per share amount to be used by taxpayers on their
federal income tax return will be mailed to shareholders in January 1997.
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. State Street Bank
and Trust Company (the "Agent") will act as agent for participants under the
Plan. Shareholders whose shares are held in the name of a broker or nominee
should contact such broker or nominee to determine whether or how they may
participate in the Plan.
If the Board declares an income distribution or determines to make a capital
gain distribution payable either in shares or in cash, as holders of the Common
Stock may have elected, non-participants in the Plan will receive cash and
participants in the Plan will receive the equivalent in shares of Common Stock
of the Fund valued as follows:
(i) If the shares of Common Stock are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will issue new
shares at the greater of net asset value or 95% of the then current market
price.
(ii) If the shares of Common Stock are trading at a discount from net asset
value at the time of valuation, the Agent will receive the dividend or
distribution in cash and apply it to the purchase of the Fund's shares of
Common Stock in the open market on the New York Stock Exchange or elsewhere,
for the participants' accounts. Such purchases will be made on or shortly after
the payment date for such dividend or distribution and in no event more than 30
days after such date except where temporary curtailment or suspension of
purchase is necessary to comply with Federal securities laws. If, before the
Agent has completed its purchases, the market price exceeds the net asset value
of a share of Common Stock, the average purchase price per share paid by the
Agent may exceed the net asset value of the Fund's shares of Common Stock,
resulting in the acquisition of fewer shares than if the dividend or
distribution had been paid in shares issued by the Fund.
The Agent will maintain all shareholders' accounts in the Plan and furnish
written confirmation of all transactions in the account, including information
needed by shareholders for tax records. Shares in the account of each Plan
participant will be held by the Agent in non-certificate form in the name of
the participant, and each shareholder's proxy will include those shares
purchased or received pursuant to the Plan.
There will be no charges with respect to shares issued directly by the Fund to
satisfy the dividend reinvestment requirements. However, each participant will
pay a pro rata share of brokerage commissions incurred with respect to the
Agent's open market purchases of shares. In each case, the cost per share of
shares purchased for each shareholder's account will be the average cost,
including brokerage commissions, of any shares purchased in the open market
plus the cost of any shares issued by the Fund.
The automatic reinvestment of dividends and distributions will not relieve
participants of any income taxes that may be payable (or required to be
withheld) on dividends and distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
the Fund reserves the right to amend or terminate the Plan as applied to any
voluntary cash payments made and any dividend or distribution paid subsequent
to written notice of the change sent to participants in the Plan at least 90
days before the record date for such dividend or distribution. The Plan may
also be amended or terminated by the Agent on at least 90 days' written notice
to participants in the Plan. All correspondence concerning the Plan should be
directed to the Agent at State Street Bank and Trust Company, P.O. Box 8200,
Boston, Massachusetts 02266-8200.
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.
14
THE SPAIN FUND
_______________________________________________________________________________
SUPPLEMENTAL PROXY INFORMATION (UNAUDITED)
The Annual Meeting of Shareholders of The Spain Fund was held on June 27, 1996.
The description of each proposal and number of shares are as follows:
SHARES
VOTED FOR
- -------------------------------------------------------------------------------
1. To elect directors: Class One Directors
(term expires 1999)
Angel Corcostegui 5,725,621
Ignacio Gomez-Acebo 5,726,704
Marilyn Perry 5,723,936
Reba W. Williams 5,734,969
SHARES SHARES SHARES VOTED
VOTED FOR VOTED AGAINST ABSTAIN
- -------------------------------------------------------------------------------
2. To ratify the selection of Price
Waterhouse LLP as the Fund's
independent auditors of the Fund's
fiscal year ending November 30, 1996 5,792,551 40,306 35,027
15
THE SPAIN FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
DAVE H. WILLIAMS, CHAIRMAN AND PRESIDENT
ANGEL CORCOSTEGUI (1)
H.R.H. PILAR DE BORBON Y BORBON (1)
INMACULADA DE HABSBURGO-LORENA (1)
ENRIQUE L. FEVRE (1)
IGNACIO GOMEZ-ACEBO (1)
DR. JAMES M. HESTER (1)
MARILYN PERRY (1)
FRANCISCO GOMEZ ROLDAN (1)
JUAN MANUEL SAINZ DE VICUNA (1)
REBA W. WILLIAMS
CARLOS DELCLAUX ZULUETA
OFFICERS
NORMAN S. BERGEL, VICE PRESIDENT
MARK H. BREEDON, 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
(1) Member of the Audit Committee
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 on the open market.
This report, including the financial statements therein 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.
16
THE SPAIN FUND
Summary of General Information
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek long-term capital appreciation
through investment primarily in the equity securities of Spanish companies.
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, each Sunday in THE NEW YORK TIMES and each
Saturday in 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
1345 Avenue of the Americas
New York, New York 10105
ALLIANCE CAPITAL
INVESTING WITHOUT THE MYSTERY
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE
CAPITAL MANAGEMENT L.P.
SPNAR
