THE SPAIN FUND
ALLIANCE CAPITAL
SEMI-ANNUAL REPORT
MAY 31, 1999
LETTER TO SHAREHOLDERS THE SPAIN FUND
_______________________________________________________________________________
July 28, 1999
Dear Shareholder:
This report contains investment results and market commentary for The Spain
Fund (the "Fund") for the semi-annual reporting period ended May 31, 1999.
INVESTMENT RESULTS
The following table provides performance for your Fund and its benchmark, the
Madrid General Index, for the three-, six- and 12-month periods ended May 31,
1999. The Spain Fund outperformed its benchmark index over the three-, six- and
12-month periods as a result of its focus on "growth" companies, and because of
its underweighting in the utilities sector, relative to its benchmark.
INVESTMENT RESULTS*
Periods Ended May 31, 1999
TOTAL RETURNS
3 MONTHS 6 MONTHS 12 MONTHS
-------- -------- ---------
THE SPAIN FUND -2.51% -1.18% 1.74%
MADRID GENERAL INDEX -4.12% -3.70% -1.29%
* THE FUND'S INVESTMENT RESULTS ARE TOTAL RETURNS FOR THE PERIOD AND ARE
BASED ON THE NET ASSET VALUE AS OF MAY 31, 1999. ALL FEES AND EXPENSES RELATED
TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED. RETURNS FOR THE FUND INCLUDE
THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS.
THE MADRID GENERAL INDEX COMPRISES 124 STOCKS AND REPRESENTS SLIGHTLY MORE
THAN 92% OF TOTAL MARKET CAPITALIZATION (EXCLUDING FOREIGN STOCKS). THE INDEX
IS DOMINATED BY BANKS, UTILITIES AND COMMUNICATIONS COMPANIES, WHICH TOGETHER
ACCOUNT FOR 70% OF THE INDEX CAPITALIZATION. THE INDEX IS UNMANAGED AND
REFLECTS NO FEES OR EXPENSES. AN INVESTOR CANNOT INVEST DIRECTLY IN THE INDEX.
MARKET COMMENTARY
The Spanish stock market continued to mark time during the period under review.
Investors have been concerned over the possibility of rising domestic inflation
and uncertainty as to whether or not a European economic recovery will
materialize. In this regard, we believe the recent weakening of the Euro
against both the U.S. dollar and the Japanese yen should revive growth
expectations and the hope that the rapid deterioration seen in Spain's current
account over the last year can be reversed.
Spain continues to enjoy a faster growth rate than its European neighbors. We
believe that Spain's gross domestic product (GDP) should grow by more than 3%
both in 1999 and 2000. However, this relatively strong growth has increased
fears of higher inflation as productivity gains have been very low in
comparison to GDP growth. The government is doing all it can to maintain the
inflation differential between Spain and the rest of Europe, as Spain's 2.4%
year-on-year growth in consumer prices remains above the European average of
1.3%. We are optimistic that the recent increase in consumer prices can be
contained and that fears of a growing divergence between the economic
fundamentals of Spain and the rest of Europe will diminish.
Corporate profit growth should enable the stock market to make progress from
current levels. We anticipate that earnings for Spanish companies will grow by
at least 15% per annum over the next two years and, although valuation levels
remain above European averages in the short term, Spain's higher than average
growth rates should see investors continuing to favor the country.
Flows into domestic mutual funds have slowed this year at a time when the
initial public offering (IPO) market in Spain has been very active. Looking
forward, we anticipate a series of new opportunities in the Spanish market
ranging from further privatizations to new listings of technology and media
enterprises. This should both present your Fund with new opportunities to
broaden its industry exposure as well as raise the growth profile of a market
that remains dominated by the banking and utilities sectors.
PORTFOLIO STRATEGY AND MARKET OUTLOOK
Overall, we maintain a broad, fully invested position for your Fund's portfolio
in the belief that equity prices can make further progress over the remainder
of the year. Your Fund continues to emphasize companies with higher than
average earnings growth, while remaining underweighted in areas with more
stability but slower growth. Relative to its benchmark, your Fund is
overweighted in areas such as consumer staples, technology and media while
remaining relatively underexposed in the banking and utilities sectors.
1
THE SPAIN FUND
_______________________________________________________________________________
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 future.
Sincerely,
Dave H. Williams
Chairman and President
Mark H. Breedon
Senior Vice President
2
TEN LARGEST HOLDINGS
MAY 31, 1999 (UNAUDITED) THE SPAIN FUND
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Telefonica, SA (common and new shares) $ 20,435,368 14.6%
Banco Bilbao Vizcaya, SA 14,546,588 10.4
Banco Santander Central Hispano, SA 13,791,864 9.9
Repsol, SA 7,721,758 5.5
Corporacion Financiera Alba, SA 6,399,161 4.6
Acerinox, SA 5,942,489 4.2
Electricas Reunidas de Zaragoza, SA 5,869,746 4.2
Tabacalera, SA Series A 5,840,209 4.2
Aldeasa, SA 5,663,198 4.0
Grupo Dragados, SA 4,556,958 3.3
$ 90,767,339 64.9%
3
PORTFOLIO OF INVESTMENTS
MAY 31, 1999 (UNAUDITED) THE SPAIN FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-97.5%
FINANCIAL SERVICES-31.3%
BANKING-25.6%
Banco Bilbao Vizcaya, SA (a) 1,010,000 $ 14,546,588
Banco Popular Espanol, SA 57,800 4,219,524
Banco Santander Central Hispano, SA 662,179 13,791,864
Bankinter, SA 85,000 3,341,592
------------
35,899,568
REAL ESTATE-4.6%
Corporacion Financiera Alba, SA 42,672 6,399,161
VENTURE CAPITAL-1.1%
Dinamia Capital Privado (b) 150,000 1,546,479
------------
43,845,208
UTILITIES-29.2%
ELECTRIC & GAS-13.2%
Electricas Reunidas de Zaragoza, SA 137,641 5,869,746
Empresa Hidroelectrica del Ribargorzana, SA 114,000 2,516,855
Endesa, SA 211,000 4,484,800
Gas Natural SDG, SA 32,000 2,479,365
Iberdrola, SA 221,000 3,162,253
------------
18,513,019
TELECOMMUNICATIONS-1.4%
Indra Sistemas, SA 199,000 1,879,654
TELEPHONE-14.6%
Telefonica, SA (b) 418,404 20,034,678
new shares (b) 8,368 400,690
------------
20,435,368
------------
40,828,041
CONSUMER SERVICES-14.4%
PRINTING & PUBLISHING-1.0%
Unidad Editorial, SA Series A (b)(c) 687,039 1,430,965
RESTAURANTS & LODGING-3.1%
NH Hoteles, SA (b) 340,000 4,337,431
RETAIL-7.3%
Aldeasa, SA 189,150 5,663,198
Cortefeil, SA 170,200 4,510,918
------------
10,174,116
MISCELLANEOUS-3.0%
Funespana, SA (b) 90,000 1,593,342
Prosegur, CIA de Seguridad, SA 235,000 2,613,706
------------
4,207,048
------------
20,149,560
CAPITAL GOODS-6.0%
ENGINEERING & CONSTRUCTION-6.0%
Aumar-Autopistas del Mare Nostrum, SA 70,000 1,566,578
Fomento de Construcciones y Contratas, SA 22,632 1,298,650
Grupo Dragados, SA 132,000 4,556,958
Grupo Ferrovial, SA (b) 45,000 1,002,868
------------
8,425,054
CONSUMER STAPLES-5.8%
FOOD-1.6%
Telepizza, SA (b) 358,320 2,242,658
TOBACCO-4.2%
Tabacalera, SA Series A 299,895 5,840,209
------------
8,082,867
ENERGY-5.5%
OIL-5.5%
Repsol, SA 427,119 7,721,758
BASIC INDUSTRIES-4.2%
MINING & METALS-4.2%
Acerinox, SA 207,500 5,942,489
4
THE SPAIN FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
CONSUMER MANUFACTURING-1.1%
BUILDING & RELATED-1.1%
Portland Valderrivas, SA 46,374 $ 1,487,452
TOTAL INVESTMENTS-97.5%
(cost $107,776,320) $136,482,429
Other assets less liabilities-2.5% 3,437,141
NET ASSETS-100% $139,919,570
(a) Security represents investment in an affiliate.
(b) Non-income producing security.
(c) Restricted and illiquid security, valued at fair value (See Notes A & E).
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999 (UNAUDITED) THE SPAIN FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $107,776,320) $136,482,429
Foreign cash, at value (cost $3,865,766) 3,787,767
Cash 84,138
Foreign taxes receivable 93,155
Other assets 11,465
Total assets 140,458,954
LIABILITIES
Management fee payable 111,243
Accrued expenses 428,141
Total liabilities 539,384
NET ASSETS $139,919,570
COMPOSITION OF NET ASSETS
Capital stock, at par $ 85,606
Additional paid-in capital 79,292,657
Distributions in excess of net investment income (9,896,689)
Accumulated net realized gain on investments and foreign
currency transactions 41,818,535
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 28,619,461
$139,919,570
NET ASSET VALUE PER SHARE (based on 8,560,621
shares outstanding) $16.34
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1999 (UNAUDITED) THE SPAIN FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends - unaffiliated issuers (net of
foreign taxes withheld of $166,400) $ 977,734
Dividends - affiliated issuer (net of
foreign taxes withheld of $23,837) 135,075
Interest 41,717 $ 1,154,526
EXPENSES
Management fee 772,055
Audit and legal 373,627
Custodian 257,559
Directors' fees and expenses 58,871
Printing 57,440
Transfer agency 21,956
Registration 9,088
Miscellaneous 15,451
Total expenses 1,566,047
Net investment loss (411,521)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment
transactions - unaffiliated issuers 30,969,683
Net realized gain on investment
transactions - affiliated issuer 6,712,601
Net realized loss on foreign currency
transactions (258,619)
Net change in unrealized depreciation of:
Investments (41,574,002)
Foreign currency denominated assets and
liabilities (124,268)
Net loss on investments and foreign currency
transactions (4,274,605)
NET DECREASE IN NET ASSETS FROM OPERATIONS $ 4,686,126)
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS THE SPAIN FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1999 NOVEMBER 30,
(UNAUDITED) 1998
---------------- --------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (411,521) $ 326,494
Net realized gain on investments
and foreign currency transactions 37,423,665 56,838,861
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency denominated assets
and liabilities (41,698,270) 16,842,699
Net increase (decrease) in net assets
from operations (4,686,126) 74,008,054
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income -0- (4,446,478)
Distributions in excess of net
investment income (9,485,168) (14,822,505)
Net realized gain on investments and
foreign currency transactions (37,332,868) (19,532,101)
CAPITAL STOCK TRANSACTIONS:
Net decrease (12,223,161) (15,416,922)
Total increase (decrease) (63,727,323) 19,790,048
NET ASSETS
Beginning of year 203,646,893 183,856,845
End of period $ 139,919,570 $ 203,646,893
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999 (UNAUDITED) 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 have been prepared in conformity with generally
accepted accounting principles which require management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sales price or if no sale occurred, at
the mean of the closing bid and asked prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors. Fixed income securities may be valued on the basis of
prices obtained from a pricing service when such prices are believed to reflect
the fair market value of such securities.
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 gains and losses on foreign currency transactions represent 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, 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 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 May 31, 1999 was 159.77 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 any, 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 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. To the extent these differences are permanent, such
amounts are reclassified within the capital accounts based on their federal tax
treatment; temporary differences, do not require such reclassification.
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 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.
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Investment Manager, the Fund
reimburses AFS for costs relating to servicing phone inquiries for the Fund.
There were no reimbursements from the Fund to AFS during the six months ended
May 31, 1999.
Brokerage commissions paid on investment transactions for the six months ended
May 31, 1999 amounted to $741,242, none of which was paid to Banco Bilbao
Vizcaya.
Banco Bilbao Vizcaya, an affiliate of the Sub-Adviser, serves as subcustodian
of the Fund. Fees paid to the subcustodian are payable by the custodian from
its fee. For the six months ended May 31, 1999, the Fund earned no interest
income on cash balances maintained at the subcustodian.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $30,841,143 and $93,133,408,
respectively, for the six months ended May 31, 1999. There were no purchases or
sales of U.S. government or government agency obligations for the six months
ended May 31, 1999.
At May 31, 1999, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $31,685,449 and
gross unrealized depreciation of investments was $2,979,340 resulting in net
unrealized appreciation of $28,706,109 (excluding foreign currency
transactions).
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 May 31, 1999, the Fund had no outstanding forward foreign exchange
currency contracts.
NOTE D: CAPITAL STOCK
There are 100,000,000 shares of $.01 par value common stock authorized. At May
31, 1999, 8,560,621 shares were outstanding. On November 2, 1998 the Fund
initiated a share repurchase program. For the period ended November 2, 1998 to
May 31, 1999, 1,466,125 shares were repurchased at a cost of $27,640,083
representing 14.6% of the 10,026,746 shares outstanding at November 2, 1998.
This includes $87,968 in commissions paid to PaineWebber Group Incorporated.
The average discount of market price to net asset value of shares repurchased
over the period of November 2, 1998 to May 31, 1999 was 12.44%.
10
THE SPAIN FUND
_______________________________________________________________________________
NOTE E: RESTRICTED AND ILLIQUID SECURITY
DATE ACQUIRED COST
------------- --------
Unidad Editorial S.A. Series A 9/30/92 $871,944
The security shown above is restricted as to sale and has been valued at fair
value in accordance with the policy described in Note A.
The value of this security at May 31, 1999 was $1,430,965 representing 1.0% of
net assets.
NOTE F: CONCENTRATION OF RISK
Investing in securities of foreign companies involves special risks which
include the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign companies and their markets may be less liquid and their prices
more volatile than those of United States companies.
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.
NOTE G: YEAR 2000
Many computer systems and applications in use today process transactions using
two-digit date fields for the year of the transaction, rather than the full
four digits. If these systems are not modified or replaced, transactions
occurring after 1999 could be processed as year "1900," which could result in
processing inaccuracies and computer system failures at or after the Year 2000.
This is commonly known as the Year 2000 problem. The Fund and its major service
providers, including Alliance, utilize a number of computer systems and
applications that have been either developed internally or licensed from third
party suppliers. In addition, the Fund and its major service providers,
including Alliance, are dependent on third party suppliers for certain systems
applications and for electronic receipt of information. Should any of computer
systems employed by the Fund or its major service providers, including
Alliance, fail to process year 2000 related information properly, that could
have a significant negative impact on the Fund's operations and the services
that are provided to the Fund's stockholders. To the extent that the operations
of issuers of securities held by the Fund are impaired by the Year 2000
problem, or prices of securities held by the Fund decline as a result of real
or perceived problems relating to the Year 2000, the value of the Fund's shares
may be materially affected. In addition, for the Fund's investments in foreign
markets, it is possible that foreign companies and markets will not be as
prepared for Year 2000 as domestic companies and markets.
The Year 2000 issue is a high priority for the Fund and Alliance. The Fund has
been advised that, during 1997, Alliance began a formal Year 2000 initiative
which established a structured and coordinated process to deal with the Year
2000 issue. As part of its initiative, Alliance established a Year 2000 project
office to manage the Year 2000 initiative, focusing on both information
technology and non-information technology systems. Alliance has also retained
the services of a number of consulting firms which have expertise in advising
and assisting with regard to Year 2000 issues. Alliance reports that by June
30, 1998 it had completed its inventory and assessment of its domestic and
international computer systems and applications, identified mission critical
systems and non-mission critical systems and determined which of these systems
are not Year 2000 compliant. All third party suppliers of mission critical
computer systems and applications have been contacted to verify whether their
systems and applications will be Year 2000 compliant and their responses are
being evaluated. Substantially all of those contacted have responded and
approximately
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE SPAIN FUND
_______________________________________________________________________________
90% have informed Alliance that their systems and applications are or will be
Year 2000 compliant. Alliance will seek alternative solutions or third party
suppliers for all suppliers who do not furnish a satisfactory response by July
31, 1999. The same process is being performed for non-mission critical systems
with estimated completion by July 31, 1999. Alliance had remediated, replaced
or retired all of its non-compliant mission critical systems and applications
which can impact the Fund. After each system has been remediated, it is tested
with 19xx dates to determine if it still performs its intended business
function correctly. Next, each system undergoes a simulation test using dates
occurring after December 31, 1999. Inclusive of the replacement and retirement
of some of its systems, Alliance has completed these testing phases for
approximately 89% of nonmission critical systems. Integrated systems tests will
then be conducted to verify that the systems will continue to work together.
Full integration testing of all mission critical and nonmission critical
systems is estimated to be completed by July 31, 1999. Testing of interfaces
with third-party suppliers has begun and will continue throughout 1999.
Alliance reports that it has completed an inventory of its facilities and
related technology applications and has begun to evaluate and test these
systems. Alliance reports that it anticipates that these systems will be fully
operable in the year 2000. Alliance, with the assistance of a consulting firm,
is developing Year 2000 specific contingency plans with emphasis on mission
critical functions. These plans seek to provide alternative methods of
processing in the event of a failure that is outside Alliance's control. The
estimated date for the completion of these plans is July 31, 1999.
There are many risks associated with Year 2000 issues, including the risks that
the computer systems and applications used by the Fund and its major service
providers, including Alliance, will not operate as intended and that the
systems and applications of third party providers to the Fund and its service
providers will not be Year 2000 compliant. Likewise there can be no assurance
the compliance schedules outlined above will be met or that the actual cost
incurred will not exceed current cost estimates. Should the significant
computer systems and applications used by the Fund and its major service
providers or the systems of its important third party suppliers be unable to
process date sensitive information accurately after 1999, the Fund and its
service providers may be unable to conduct its normal business operations and
to provide shareholders with the required services. In addition, the Fund and
its service providers may incur unanticipated expenses, regulatory actions and
legal liabilities. The Fund and Alliance cannot determine which risks, if any,
are most reasonably likely to occur or the effects of any particular failure to
be Year 2000 compliant. Certain statements provided by Alliance in this section
entitled "Year 2000," as such statements relate to Alliance, are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. To the fullest extent permitted by law, the
foregoing Year 2000 discussion is a "Year 2000 Readiness Disclosure" within the
meaning of the Year 2000 Information and Readiness Disclosure Act, 15 U.S.C.
Sec. 1 (1998).
12
FINANCIAL HIGHLIGHTS THE SPAIN FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
MAY 31, 1999 --------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $22.16 $18.34 $13.41 $10.47 $9.96 $9.49
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.05)(a) .04(a) .06 .11 .09 .05
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.49) 7.41 5.03 2.86 .42 .88
Net increase (decrease) in net asset value
from operations (.54) 7.45 5.09 2.97 .51 .93
Realized gain due to repurchase
program .19 .24 -0- -0- -0- -0-
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.45) (.16) (.03) -0- (.10)
Distributions in excess of net
investment income (0.58) (1.47) -0- -0- -0- (.05)
Distributions from net realized gain on
investments and foreign currency
transactions (4.89) (1.95) -0- -0- -0- (.31)
Total dividends and distributions (5.47) (3.87) (.16) (.03) -0- (.46)
Net asset value, end of period $16.34 $22.16 $18.34 $13.41 $10.47 $9.96
Market value, end of period $14.938 $18.875 $15.875 $10.75 $8.625 $9.125
TOTAL RETURN
Total investment return based on (b):
Market value 6.06% 50.44% 49.59% 25.03% (5.48)% (1.29)%
Net asset value (1.18)% 52.88% 38.54% 28.48% 5.12% 9.28%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $139,920 $203,647 $183,857 $134,508 $105,011 $99,886
Ratio of expenses to average net assets 2.02%(c) 1.44% 1.55% 1.73% 2.07% 2.09%
Ratio of net investment income (loss)
to average net assets (.52)%(c) .16% .38% .93% .89% .53%
Portfolio turnover rate 40% 47% 45% 44% 38% 22%
</TABLE>
(a) Based on average shares outstanding.
(b) 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. Total return calculated for a period of
less than one year is not annualized.
(c) Annualized.
13
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
IGNACIO GOMEZ-ACEBO (1)
FRANCISCO GOMEZ ROLDAN (1)
JUAN MANUEL SAINZ DE VICUNA (1)
DR. REBA W. WILLIAMS
CARLOS DELCLAUX ZULUETA
OFFICERS
NORMAN S. BERGEL, VICE PRESIDENT
MARK H. BREEDON, VICE PRESIDENT
RUSSELL BRODY, VICE PRESIDENT
CRISTINA FERNANDEZ-ALEPUZ, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, CONTROLLER
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
40 Water Street
Boston, MA 02109
LEGAL COUNSEL
SEWARD & KISSEL LLP
One Battery Park Plaza
New York, NY 10004
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, NY 10036
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 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.
14
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 daily net asset value of the Fund's shares are available from the
Fund's Transfer Agent by calling 1-800-219-4218. The Fund also distributes its
daily net asset value to various financial publications or independent
organizations such as Lipper Analytical Services and Morningstar, Inc. 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".
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. 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.
For questions concerning shareholder account information, or if you would like
a brochure describing the Dividend Reinvestment Plan, please call State Street
Bank and Trust Company at 1-800-219-4218.
THE SPAIN FUND
1345 Avenue of the Americas
New York, New York 10105
ALLIANCE CAPITAL
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE
CAPITAL MANAGEMENT L.P.
SPNSR599
