UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-05189
THE SPAIN FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: November 30, 2004
Date of reporting period: November 30, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
[LOGO] ALLIANCEBERNSTEIN(SM)
Investment Research and Management
The Spain Fund
Closed End
Annual Report--November 30, 2004
Investment Products Offered
==================================
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
==================================
You may obtain a description of the Fund's proxy voting policies and procedures,
and information regarding how the Fund voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30, without charge.
Simply visit AllianceBernstein's web site at www.alliancebernstein.com, or go to
the Securities and Exchange Commission's (the "Commission") web site at
www.sec.gov, or call AllianceBernstein at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330
AllianceBernstein Investment Research and Management, Inc. is an affiliate of
Alliance Capital Management L.P., the manager of the funds, and is a member of
the NASD.
January 17, 2005
Annual Report
This report provides management's discussion of fund performance for The Spain
Fund (the "Fund") for the annual reporting period ended November 30, 2004. The
Fund is a closed-end fund that trades under the New York Stock Exchange Symbol
"SNF".
Investment Objectives and Policies
The Spain Fund is a closed-end fund that seeks long-term capital appreciation
through investment primarily in the equity securities of Spanish companies. For
more information regarding the Fund's risks, please see "A Word About Risk" on
page 3 and "Note F-Risks Involved in Investing in the Fund" of the Notes to
Financial Statements on page 15.
Investment Results
The table on page 4 shows the Fund's performance compared to its benchmarks, the
Madrid General Index and the IBEX 35 Index, for the three,- six- and 12-month
periods ended November 30, 2004. The Fund posted strong returns; however, it
underperformed both the Madrid General Index and the IBEX 35 Index for the
three,- six- and 12-month reporting periods ended November 30, 2004.
During the 12-month period, the Fund's overweighted position in insurance stocks
versus the Madrid General Index and the IBEX 35 Index, and the Fund's
underweighted positions in defensive sectors such as motorways, tobacco, and
real estate, contributed negatively to the Fund's performance. The Fund's
overweighted positions in media and construction contributed positively to
12-month performance, especially stocks such as Prisa, Telefonica Publicidad e
Informacion, SA, Sogecable, SA, and Grupo Ferrovial, SA.
During the six-month period, the Fund was negatively affected by its
overweighted positions in the energy, basic materials and insurance sectors.
Also, some specific stocks such as Sogecable, SA (cable TV) and Banco Popular
Espanol, SA (financials) negatively affected performance. The Fund's
overweighted position in transportation, construction and apparel contributed
positively to the Fund's performance.
The Fund slightly underperformed both the Madrid General Index and the IBEX 35
Index over the three-month period ended November 30, 2004 as a result of
overweighted positions in the energy, insurance and retail sectors, and an
underweighted position in tobacco and telecommunications. The Fund's
overweighted positions in media, apparel and transportation positively
contributed to its performance over the three-month reporting period.
Market Review and Investment Strategies
During the six- and 12-month periods ended November 30, 2004, the Spanish market
performed positively, benefiting from both the strength of the Spanish economy
and the worldwide economy. However, there were two difficult periods with strong
corrections in the market. First, the terrorist attacks in Madrid on March 11,
2004 resulted in an unexpected outcome in the government elections; and second,
soaring oil prices. Oil Prices, which reached their peak over the summer, raised
concerns about the sustainability of the economic recovery worldwide.
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THE SPAIN FUND o 1
Since the beginning of the calendar year, the management of the Fund had
anticipated the strengthening of the global economy. As a result, the Fund
maintained overweighted positions in energy, basic materials and growth stocks,
and as mentioned above, an underweighted position in defensive sectors, such as
electricity, motorways and tobacco.
During the three-month period ended November 30, 2004, the Spanish market also
performed strongly, even outperforming Europe. As oil prices moved lower and the
global environment improved, the Spanish market reacted positively. The strength
of the Spanish economy was fueled by the acceleration of consumer demand and
construction activity propelled by low interest rates.
The benign scenario in Latin America, with healthy growth rates across the
region and risk premiums at historical lows, also contributed positively to the
performance of the Spanish economy. The Fund maintained overweighted positions
in consumer goods and media, and underweighted positions in defensive sectors,
such as electricity, motorways and real estate. During the three-month reporting
period, the Fund's management team increased the Fund's exposure to the
construction sector. The Fund also maintained an overweighted position in
energy, as the Fund's management team believed in the strength of the sector on
a global basis fueled by growth in the U.S. and Chinese economies.
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2 o THE SPAIN FUND
HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance shown on the following page represents past performance and does
not guarantee future results. Current performance may be lower or higher than
the performance information shown. Returns are annualized for periods longer
than one year. All fees and expenses related to the operation of the Fund have
been deducted. Performance assumes reinvestment of distributions and does not
account for taxes.
The Spain Fund Shareholder Information
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transaction section of The Wall Street Journal under the
designation SpainFd. The daily net asset value of the Fund's shares are
available from the Fund's Transfer Agent by calling (800) 219-4218. The Fund
also distributes its daily net asset value to various financial publications or
independent organizations such as Lipper Inc. 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 in other newspapers in a table called "Closed End Funds".
Benchmark Disclosure
Neither the unmanaged Madrid General Index nor the unmanaged IBEX 35 Index
reflects fees and expenses associated with the active management of a mutual
fund portfolio. The Madrid General Index measures the performance of a selected
number of continuous market stocks. The IBEX 35 Index is the official index of
the Spanish Continuous Market and is composed of the 35 most liquid stocks
traded on the Continuous Market. The indices' returns are expressed in U.S.
dollars. An investor cannot invest directly in an index, and its results are not
indicative of the performance for any specific investment, including the Fund.
A Word About Risk
Investment in The Spain Fund includes risks not associated with funds that
invest primarily in U.S. issues. Substantially all of the Fund's assets may be
invested in Spanish securities and are subject to greater risk than would a fund
with a more diversified portfolio. Foreign markets can be more volatile than the
U.S. market due to increased risks of adverse issuer, political, regulatory,
market or economic developments. In addition, because the Fund will invest in
foreign currency denominated securities, fluctuations in the value of the Fund's
investments may be magnified by changes in foreign exchange rates. Although the
Fund expects to invest primarily in listed securities of established companies,
it may invest up to 25% of its total assets in unlisted securities of Spanish
companies which are not readily marketable, and which may involve a high degree
of business and financial risk that can result in substantial losses. Because of
the absence of a trading market for these types of investments, the Fund may not
be able to realize their value upon sale. In general, Spanish securities markets
are less liquid and more volatile than the major securities markets in the
United States. Issuers of securities in Spain are not subject to the same degree
of regulation as are U.S. issuers with respect to such matters as insider
trading rules, tender offer regulation, shareholder proxy requirements and the
timely disclosure of information. Spanish accounting, auditing and financial
reporting standards are not equivalent to U.S. standards and less information is
available to investors in Spanish securities than to investors in U.S.
securities. The Spanish securities industry is subject to less governmental
regulation than the securities industry in the United States.
(Historical Performance continued on the next page)
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THE SPAIN FUND o 3
HISTORICAL PERFORMANCE
(continued from previous page)
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------------------------------------------
Returns
THE FUND VS. ITS BENCHMARK ------------------------------------------
PERIODS ENDED NOVEMBER 30, 2004 3 Months 6 Months 12 Months
--------------------------------------------------------------------------------
The Spain Fund (NAV) 19.14% 17.36% 30.47%
--------------------------------------------------------------------------------
Madrid General Index 20.54% 21.03% 35.58%
--------------------------------------------------------------------------------
IBEX 35 Index 20.80% 20.62% 36.57%
--------------------------------------------------------------------------------
The Fund's Market Price per share on November 30, 2004 was $12.50. For
additional Financial Highlights, please see page 19.
GROWTH OF A $10,000 INVESTMENT IN THE FUND
11/30/94 TO 11/30/04
Madrid General Index: $40,030
The Spain Fund (NAV): $35,823
IBEX 35 Index: $35,280
[TABLE BELOW REPRESENT MOUNTAIN CHART]
The Spain Fund (NAV) Madrid General Index IBEX 35 Index
-------------------------------------------------------------------------------
11/30/94 $10,000 $10,000 $10,000
11/30/95 $10,512 $11,474 $11,771
11/30/96 $13,506 $14,649 $15,335
11/30/97 $18,711 $19,548 $20,342
11/30/98 $28,605 $28,847 $29,897
11/30/99 $29,998 $28,950 $30,190
11/30/00 $24,698 $23,544 $22,325
11/30/01 $22,759 $22,903 $21,234
11/30/02 $20,453 $21,614 $19,253
11/30/03 $27,457 $29,525 $25,833
11/30/04 $35,823 $40,030 $35,280
This chart illustrates the total value of an assumed $10,000 investment in the
Spain Fund at net asset value (NAV) (from 11/30/94 to 11/30/04) as compared to
its benchmarks, the Madrid General Index and the IBEX 35 Index. The chart
assumes the reinvestment of dividends and capital gains.
See Historical Performance and Benchmark disclosures on page 3.
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4 o THE SPAIN FUND
PORTFOLIO SUMMARY
November 30, 2004
PORTFOLIO STATISTICS
Net Assets ($mil): $87.8
SECTOR BREAKDOWN*
28.5% Financial Services
27.2% Consumer Services
27.1% Utilities
7.0% Energy [PIE GRAPH OMITTED]
5.5% Capital Goods
2.4% Technology
2.3% Basic Industry
TEN LARGEST HOLDINGS
November 30, 2004
Percent of
Company U.S. $ Value Net Assets
--------------------------------------------------------------------------------
Telefonica, SA $ 12,384,908 14.1%
--------------------------------------------------------------------------------
Banco Bilbao Vizcaya Argentaria, SA 10,838,735 12.3
--------------------------------------------------------------------------------
Banco Santander Central Hispano, SA 7,342,958 8.4
--------------------------------------------------------------------------------
Industria de Diseno Textil, SA (Inditex) 6,441,712 7.3
--------------------------------------------------------------------------------
Repsol-YPF, SA 6,003,480 6.8
--------------------------------------------------------------------------------
Endesa, SA 3,750,896 4.3
--------------------------------------------------------------------------------
Banco Popular Espanol, SA 3,569,433 4.1
--------------------------------------------------------------------------------
Unidad Editorial, SA Series A 3,278,042 3.7
--------------------------------------------------------------------------------
Gas Natural SDG, SA 2,711,862 3.1
--------------------------------------------------------------------------------
Promotora de Informaciones (Prisa), SA 2,709,217 3.1
--------------------------------------------------------------------------------
$ 59,031,243 67.2%
* All data are as of November 30, 2004. The Fund's sector breakdown is expressed
as a percentage of total investments and may vary over time.
--------------------------------------------------------------------------------
THE SPAIN FUND o 5
PORTFOLIO OF INVESTMENTS
November 30, 2004
Company Shares U.S. $ Value
--------------------------------------------------------------------------------
COMMON STOCKS-97.2%
Financial Services-27.7%
Banking - Money Center-20.7%
Banco Bilbao Vizcaya Argentaria, SA(a) ......... 662,000 $10,838,735
Banco Santander Central Hispano, SA ............ 613,819 7,342,958
-----------
18,181,693
-----------
Banking - Regional-4.1%
Banco Popular Espanol, SA ...................... 56,706 3,569,433
-----------
Insurance-2.9%
Corporacion Mapfre, SA ......................... 180,508 2,527,077
-----------
24,278,203
-----------
Consumer Services-26.4%
Airlines-1.1%
Iberia Lineas Aereas de Espana, SA ............. 297,242 966,516
-----------
Apparel-7.3%
Industria de Diseno Textil, SA (Inditex) ....... 220,744 6,441,712
-----------
Broadcasting & Cable-7.2%
Gestevision Telecinco, SA(b) ................... 139,894 2,636,509
Promotora de Informaciones (Prisa), SA ......... 132,000 2,709,217
Sogecable, SA(b) ............................... 22,504 953,431
-----------
6,299,157
-----------
Cellular Communications-1.6%
Telefonica Moviles, SA ......................... 126,028 1,430,706
-----------
Printing & Publishing-5.0%
Telefonica Publicidad e Informacion, SA ........ 140,000 1,140,328
Unidad Editorial, SA Series A(b)(c) ............ 687,039 3,278,042
-----------
4,418,370
-----------
Retail - General Merchandise-2.4%
Aldeasa, SA .................................... 62,980 2,115,978
-----------
Miscellaneous-1.8%
Amadeus Global Travel Distribution, SA ......... 180,363 1,569,468
-----------
23,241,907
-----------
Utilities-26.4%
Electric & Gas-12.3%
Enagas ......................................... 175,000 2,394,904
Endesa, SA ..................................... 174,593 3,750,896
Gas Natural SDG, SA ............................ 95,000 2,711,862
Red Electrica de Espana ........................ 99,106 1,915,072
-----------
10,772,734
-----------
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6 o THE SPAIN FUND
Company Shares U.S. $ Value
--------------------------------------------------------------------------------
Telephone-14.1%
Telefonica, SA ............................. 707,530 $ 12,384,908
------------
23,157,642
------------
Energy-6.8%
International-6.8%
Repsol-YPF, SA ............................. 247,070 6,003,480
------------
Capital Goods-5.3%
Engineering & Construction-5.3%
Acciona, SA ................................ 11,000 860,708
ACS, Actividades de Construccion y
Servicios, SA .............................. 90,000 1,886,783
Grupo Ferrovial, SA ........................ 40,500 1,950,138
------------
4,697,629
------------
Technology-2.3%
Computer Services-2.3%
Indra Sistemas, SA ......................... 128,035 2,005,920
------------
Basic Industry-2.3%
Mining & Metals-2.3%
Acerinox, SA ............................... 136,000 1,990,546
------------
Total Investments-97.2%
(cost $45,463,444) ......................... 85,375,327
Other assets less liabilities-2.8% ......... 2,423,533
------------
Net Assets-100% ............................ $87,798,860
------------
(a) Security represents investment in an affiliate (see Note B).
(b) Non-income producing security.
(c) Restricted and illiquid security, valued at fair value (see Notes A & E).
See notes to financial statements.
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THE SPAIN FUND o 7
STATEMENT OF ASSETS & LIABILITIES
November 30, 2004
Assets
Investments in securities, at value (cost $45,463,444).. $ 85,375,327
Cash.................................................... 88,067
Foreign cash, at value (cost $2,168,710)................ 2,244,544
Receivable for investment securities sold............... 1,105,873
---------------
Total assets............................................ 88,813,811
---------------
Liabilities
Payable for investment securities purchased............. 755,565
Management fee payable.................................. 59,849
Accrued expenses........................................ 199,537
---------------
Total liabilities....................................... 1,014,951
---------------
Net Assets.............................................. $ 87,798,860
---------------
Composition of Net Assets
Capital stock, at par................................... $ 86,987
Additional paid-in capital.............................. 56,368,410
Accumulated net realized loss on investment
and foreign currency transactions.................... (8,643,408)
Net unrealized appreciation of investments
and foreign currency denominated assets and
liabilities.......................................... 39,986,871
---------------
$ 87,798,860
---------------
Net Asset Value Per Share
(based on 8,698,682 shares outstanding).............. $10.09
------
See notes to financial statements.
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8 o THE SPAIN FUND
STATEMENT OF OPERATIONS
Year Ended November 30, 2004
Investment Income
Dividends--unaffiliated issuers
(net of foreign taxes withheld
of $246,305)........................ $ 1,579,308
Dividends--affiliated issuer
(net of foreign taxes withheld
of $49,746)......................... 281,895
Interest............................... 10,622 $ 1,871,825
---------------
Expenses
Management fee......................... 834,749
Custodian.............................. 212,712
Directors' fees and expenses........... 129,095
Printing............................... 126,305
Legal.................................. 93,983
Transfer agency........................ 79,243
Audit.................................. 78,961
Registration........................... 23,754
Miscellaneous.......................... 10,142
---------------
Total expenses......................... 1,588,944
Less: expenses waived by the Investment
Manager (see Note B)................ (42,109)
---------------
Net expenses........................... 1,546,835
---------------
Net investment income.................. 324,990
---------------
Realized and Unrealized Gain on
Investment and Foreign Currency
Transactions
Net realized gain on:
Investment transactions............. 8,857,204
Foreign currency transactions....... 125,545
Net change in unrealized appreciation/ depreciation of:
Investments......................... 12,772,420
Foreign currency denominated assets
and liabilities................... 43,175
---------------
Net gain on investment and foreign
currency transactions............... 21,798,344
---------------
Net Increase in Net Assets
from Operations..................... $ 22,123,334
---------------
See notes to financial statements.
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THE SPAIN FUND o 9
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
November 30, November 30,
2004 2003
--------------- ---------------
Increase (Decrease) in Net Assets
from Operations
Net investment income.................. $ 324,990 $ 70,384
Net realized gain (loss) on investment
and foreign currency transactions... 8,982,749 (429,440)
Net change in unrealized
appreciation/depreciation
of investments and foreign
currency denominated assets
and liabilities..................... 12,815,595 19,585,606
--------------- ---------------
Net increase in net assets from
operations.......................... 22,123,334 19,226,550
Dividends and Distributions to
Shareholders from
Net investment income.................. (324,990) (438,342)
Net realized gain on investment
and foreign currency transactions... (7,180,577) -0-
Tax return of capital.................. -0- (5,032,175)
Capital Stock Transactions
Net increase........................... 363,771 261,141
--------------- ---------------
Total increase......................... 14,981,538 14,017,174
Net Assets
Beginning of period.................... 72,817,322 58,800,148
--------------- ---------------
End of period (including accumulated
net investment income/(loss) of
$0 and $0, respectively)............ $ 87,798,860 $ 72,817,322
--------------- ---------------
See notes to financial statements.
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10 o THE SPAIN FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 2004
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 U.S. generally
accepted accounting principles, which require management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the
basis of market quotations or, if market quotations are not readily available or
are deemed unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange or on a foreign securities exchange are valued at the last
sale price at the close of the exchange or foreign securities exchange. If there
has been no sale on such day, the securities are valued at the mean of the
closing bid and asked prices on such day. Securities listed on more than one
exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
are valued using the closing settlement price or, in the absence of such a
price, the most recent quoted bid price. If there are no quotations available
for the day of valuation, the last available closing settlement price is used;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and asked
prices as reported by the National Quotation Bureau or other comparable sources;
U.S. Government securities and other debt instruments having 60 days or less
remaining until maturity are valued at amortized cost if their original maturity
was 60 days or less; or by amortizing their fair value as of the 61st day prior
to maturity if their original term to maturity exceeded 60 days; fixed-income
securities, including mortgage backed and asset backed securities, may be valued
on the basis of prices provided by a pricing service or at a price obtained from
one or more of the major broker/dealers. In cases where broker/dealer quotes are
obtained, Alliance Capital Management, L.P. (the "Investment Manager") may
establish procedures whereby changes in market yields or spreads are used to
adjust, on a daily basis, a recently obtained quoted price on a security; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
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THE SPAIN FUND o 11
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not limited
to, information obtained by contacting the issuer, analysts, analysis of the
issuer's financial statements or other available documents. In addition, the
Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities. To account for this, the Fund may frequently value
many of its foreign equity securities using fair value prices based on third
party vendor modeling tools to the extent available.
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the mean
of the quoted bid and asked prices of such currencies against the U.S. dollar.
Purchases and sales of portfolio securities are translated into U.S. dollars at
the rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated into U.S. dollars at rates of exchange
prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign currencies,
currency gains or losses realized between the trade and settlement dates on
foreign investment transactions, and the difference between the amounts of
dividends, interest and foreign withholding 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 and depreciation of investments and foreign currency
denominated assets and liabilities.
The exchange rate for the Euro at November 30, 2004 was .75 EUR 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
shareholders. Therefore, no provisions for federal income or excise taxes are
required. The Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on income and/or capital gains earned or
repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation/depreciation as such income
and/or gains are earned. Withholding taxes on foreign interest and dividends
have been provided for in accordance with the Spanish tax rates.
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12 o THE SPAIN FUND
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, if any, are recorded on the
ex-dividend date. Income dividends and capital gain distributions are determined
in accordance with federal tax regulations and may differ from those determined
in accordance with U.S. generally accepted accounting principles. To the extent
these differences are permanent, such amounts are reclassified within the
capital accounts based on their federal tax treatment; temporary differences, do
not require such reclassification.
NOTE B
Management Fee and Other Transactions with Affiliates
Until August 31, 2004, under the terms of the Investment Management and
Administration Agreement, the Fund paid 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 0.90% of the Fund's average weekly net assets over
$100 million. Under the Sub-Advisory Agreement among the Fund, Investment
Manager and BBVA Patrimonios Gestora, S.A. ("Sub-Adviser"), the Sub-Adviser
received a fee at the annual rate of 0.25% of the Fund's average weekly net
assets. All amounts paid to the Sub-Adviser were payable by the Investment
Manager from its fee. Effective August 31, 2004, the Fund, the Investment
Manager and the Sub-Adviser agreed to the termination of the Sub-Advisory
Agreement.
Effective September 1, 2004, the Investment Manager implemented a fee waiver to
reduce the fees payable by the Fund to the Investment Manager at an annual rate
of 0.85% on the first $50 million, 0.75% on the next $50 million, and 0.65% in
excess of $100 million, of the Fund's average weekly net assets. Such waiver
amounted to $42,109. As of November 18, 2004, the Investment Management and
Administration Agreement was amended to incorporate these fee reductions.
Brokerage commissions paid on investment transactions for the year ended
November 30, 2004 amounted to $105,937, of which $30,334 was paid to Banco
Bilbao Vizcaya Argentaria.
Banco Bilbao Vizcaya Argentaria, 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, 2004, the Fund earned $10,622 of interest income on cash
balances
--------------------------------------------------------------------------------
THE SPAIN FUND o 13
maintained at the subcustodian. According to information filed with the
Securities and Exchange Commission, Banco Bilbao-Vizcaya, S.A. owns
approximately 17.5% of the outstanding shares of common stock of the Fund and is
therefore an "affiliated person" as defined under the Investment Company Act of
1940. A director of the Fund is a director of Banco Bilbao Vizcaya Argentaria,
an affiliate of the Sub-Adviser.
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Global
Investor Services, Inc. (AGIS), an affiliate of the Investment Manager, the Fund
reimburses AGIS for costs relating to servicing phone inquiries for the Fund.
The Fund reimbursed AGIS $135 during the year ended November 30, 2004.
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended November 30, 2004, were as follows:
Purchases Sales
--------------- ---------------
Investment securities (excluding
U.S. government securities)......... $ 21,239,209 $ 29,858,769
U.S. government securities............. -0- -0-
At November 30, 2004, the cost of investments for federal income tax purposes,
gross unrealized appreciation and unrealized depreciation (excluding foreign
currency transactions) are as follows:
Cost.................................................... $ 46,062,347
---------------
Gross unrealized appreciation........................... $ 39,312,980
Gross unrealized depreciation........................... -0-
---------------
Net unrealized appreciation............................. $ 39,312,980
---------------
Forward Exchange Currency Contracts
The Fund may enter into forward exchange currency contracts in order to hedge
its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings, to hedge certain firm purchase and sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss arising
from the difference between the original contract and the closing of such
contract would be included in net realized gain or loss on foreign currency
transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as net unrealized appreciation or
depreciation by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or other liquid assets in a separate account of the Fund having a value at least
equal to the aggregate amount of the Fund's commitments under forward exchange
currency contracts entered into with respect to position hedges.
--------------------------------------------------------------------------------
14 o THE SPAIN 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. The face or contract amount, in U.S.
dollars reflects the total exposure the Fund has in that particular currency
contract.
NOTE D
Capital Stock
There are 100,000,000 shares of $.01 par value common stock authorized. At
November 30, 2004, 8,698,682 shares were outstanding. During the year ended
November 30, 2004, the Fund issued 35,696 shares, in connection with the Fund's
dividend reinvestment plan.
NOTE E
Restricted Security
Date Acquired Cost
--------------- ---------------
Unidad Editorial, SA 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 November 30, 2004 was $3,278,042 representing 3.7%
of net assets.
NOTE F
Risks Involved in Investing in the Fund
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.
Indemnification Risk--In the ordinary course of business, the Fund enters into
contracts that contain a variety of indemnifications. The Fund's maximum
exposure under these arrangements is unknown. However, the Fund has not had
prior claims or losses pursuant to these indemnification provisions and expects
the risk of loss thereunder to be remote.
--------------------------------------------------------------------------------
THE SPAIN FUND o 15
NOTE G
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended November
30, 2004 and November 30, 2003 were as follows:
2004 2003
-------------- ---------------
Distributions paid from:
Ordinary income.................... $ 7,505,567 $ 438,342
-------------- ---------------
Total taxable distributions........... 7,505,567 438,342
Tax return of capital.............. 0 5,032,175
-------------- ---------------
Total distributions paid.............. $ 7,505,567 $ 5,470,517
-------------- ---------------
As of November 30, 2004, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Accumulated capital and other losses................... $ (8,044,505)(a)
Unrealized appreciation/(depreciation)................. 39,387,968(b)
---------------
Total accumulated earnings/(deficit)................... $ 31,343,463
---------------
(a) On November 30, 2004, the Fund had a net capital loss carryforward of
$8,044,505, of which $7,221,114 expires in the year 2010 and $823,391
expires in the year 2011. The Fund utilized capital loss carryforwards of
$8,215,600. Future realized gains offset by the loss carryforwards are not
required to be distributed to shareholders. However, under the Fund's
distribution policy, such gains may be distributed to shareholders in the
year the gains are realized. Any such gains distributed may be taxable to
shareholders.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
During the current fiscal year, permanent differences, primarily due to foreign
currency transactions and reclassification of distributions, resulted in a net
decrease in accumulated net investment income, a net increase in accumulated net
realized loss on investment and foreign currency transactions and a decrease in
additional paid-in capital. This reclassification had no effect on net assets.
NOTE H
Legal Proceedings
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of the New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices within
the industry and have requested that the Investment Manager provide information
to them. The Investment Manager has been cooperating and will continue to
cooperate with all of these authorities. The shares of the Fund are not
redeemable by the Fund, but are traded on an exchange at prices established by
the market. Accordingly, the Fund and its shareholders are not subject to the
market timing and late trading practices that are the subject of the
investigations mentioned above or the lawsuits described below. Please see below
for a
--------------------------------------------------------------------------------
16 o THE SPAIN FUND
description of the agreements reached by the Investment Manager and the SEC and
NYAG in connection with the investigations mentioned above.
Numerous lawsuits have been filed against the Investment Manager and certain
other defendants in which plaintiffs make claims purportedly based on or related
to the same practices that are the subject of the SEC and NYAG investigations
referred to above. Some of these lawsuits name the Fund as a party. The lawsuits
are now pending in the United States District Court for the District of Maryland
pursuant to a ruling by the Judicial Panel on Multidistrict Litigation
transferring and centralizing all of the mutual funds involving market and late
trading in the District of Maryland. Management of the Investment Manager
believes that these private lawsuits are not likely to have a material adverse
effect on the results of operations or financial condition of the Fund.
On December 18, 2003, the Investment Manager confirmed that it had reached terms
with the SEC and the NYAG for the resolution of regulatory claims relating to
the practice of "market timing" mutual fund shares in some of the
AllianceBernstein Mutual Funds. The agreement with the SEC is reflected in an
Order of the Commission ("SEC Order"). The agreement with the NYAG is
memorialized in an Assurance of Discontinuance dated September 1, 2004 ("NYAG
Order"). Among the key provisions of these agreements are the following:
(i) The Investment Manager agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the
adverse effects of market timing attributable to market timing
relationships described in the SEC Order. According to the SEC
Order, the Reimbursement Fund is to be paid, in order of priority,
to fund investors based on (i) their aliquot share of losses
suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such
market timing;
(ii) The Investment Manager agreed to reduce the advisory fees it
receives from some of the AllianceBernstein long-term, open-end
retail funds, commencing January 1, 2004, for a period of at least
five years; and
(iii) The Investment Manager agreed to implement changes to its governance
and compliance procedures. Additionally, the SEC Order contemplates
that the Investment Manager's registered investment company clients,
including the Fund, will introduce governance and compliance
changes.
The shares of the Fund are not redeemable by the Fund, but are traded on an
exchange at prices established by the market. Accordingly, the Fund and its
shareholders are not subject to the market timing practices described in the SEC
Order and are not expected to participate in the Reimbursement Fund. Since the
Fund is a closed-end fund, it will not have its investment management fee
reduced pursuant to the terms of the agreements mentioned above.
--------------------------------------------------------------------------------
THE SPAIN FUND o 17
The Investment Manager and approximately twelve other investment management
firms were publicly mentioned in connection with the settlement by the SEC of
charges that an unaffiliated broker/dealer violated federal securities laws
relating to its receipt of compensation for selling specific mutual funds and
the disclosure of such compensation. The SEC has indicated publicly that, among
other things, it is considering enforcement action in connection with mutual
funds' disclosure of such arrangements and in connection with the practice of
considering mutual fund sales in the direction of brokerage commissions from
fund portfolio transactions. The SEC has issued subpoenas to the Investment
Manager in connection with this matter and the Investment Manager has provided
documents and other information to the SEC and is cooperating fully with its
investigation.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Investment Manager, Alliance Capital Management Holding L.P., Alliance
Capital Management Corporation, AXA Financial, Inc., AllianceBernstein
Investment Research & Management, Inc., certain current and former directors of
the AllianceBernstein Mutual Funds, and unnamed Doe defendants. The Aucoin
Complaint names certain of the AllianceBernstein mutual funds as nominal
defendants. The Fund was not named as a nominal defendant in the Aucoin
Complaint. The Aucoin Complaint was filed in the United States District Court
for the Southern District of New York by an alleged shareholder of an
AllianceBernstein mutual fund. The Aucoin Complaint alleges, among other things,
(i) that certain of the defendants improperly authorized the payment of
excessive commissions and other fees from fund assets to broker-dealers in
exchange for preferential marketing services, (ii) that certain of the
defendants misrepresented and omitted from registration statements and other
reports material facts concerning such payments, and (iii) that certain
defendants caused such conduct as control persons of other defendants. The
Aucoin Complaint asserts claims for violation of Sections 34(b), 36(b) and 48(a)
of the Investment Company Act, Sections 206 and 215 of the Advisers Act, breach
of common law fiduciary duties, and aiding and abetting breaches of common law
fiduciary duties. Plaintiffs seek an unspecified amount of compensatory damages
and punitive damages, rescission of their contracts with the Investment Manager,
including recovery of all fees paid to the Investment Manager pursuant to such
contracts, an accounting of all fund-related fees, commissions and soft dollar
payments, and restitution of all unlawfully or discriminatorily obtained fees
and expenses.
Since June 22, 2004, numerous additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Investment Manager and certain other defendants, and others may be filed.
The Investment Manager believes that these matters are not likely to have a
material adverse effect on the Fund or the Investment Manager's ability to
perform advisory services relating to the Fund.
--------------------------------------------------------------------------------
18 o THE SPAIN FUND
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Year Ended November 30,
----------------------------------------------------------------
2004 2003 2002 2001 2000
----------------------------------------------------------------
Net asset value,
beginning of period............ $ 8.41 $ 6.81 $ 8.39 $10.30 $ 16.45
----------------------------------------------------------------
Income From
Investment Operations
Net investment income (loss)...... .04(a)(b) .01(a) (.03)(a) (.03)(a) (.13)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions................... 2.51 2.22 (.79) (.75) (1.76)
----------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations..................... 2.55 2.23 (.82) (.78) (1.89)
----------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income.............. (.04) (.05) -0- (.02) -0-
Distributions from net realized
gain on investment
and foreign currency
transactions................... (.83) -0- -0- (.48) (4.26)
Tax return of capital............. -0- (.58) (.76) (.63) -0-
----------------------------------------------------------------
Total dividends and
distributions.................. (.87) (.63) (.76) (1.13) (4.26)
----------------------------------------------------------------
Net asset value, end of period ... $ 10.09 $ 8.41 $ 6.81 $ 8.39 $10.30
================================================================
Market value, end of period ...... $12.50 $ 9.57 $ 6.97 $ 8.55 $ 9.625
================================================================
Premium/(Discount)................ 23.89% 13.79% 2.35% 1.91% (6.55)%
Total Return
Total investment return
based on(c):
Market value................... 42.04% 49.25% (9.74)% 0.49% (12.72)%
Net asset value................ 30.47% 34.24% (10.13)% (7.85)% (17.67)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted)................ $87,799 $72,817 $58,800 $72,001 $88,207
Ratio to average net assets of:
Expenses, net of waivers........ 1.95% 2.19% 2.13% 1.91% 1.96%
Expenses, before waivers........ 2.01% 2.19% 2.13% 1.91% 1.96%
Net investment income (loss) ... .41%(b) .11% (.48)% (.35)% (.88)%
Portfolio turnover rate........... 27% 26% 39% 34% 29%
See footnote summary on page 20
--------------------------------------------------------------------------------
THE SPAIN FUND o 19
(a) Based on average shares outstanding.
(b) Net of waivers by the Investment Manager.
(c) Total investment return is calculated assuming a purchase of common stock on
the opening of the first day and a sale on the closing of the last 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
investment return calculated for a period of less than one year is not
annualized.
--------------------------------------------------------------------------------
20 o THE SPAIN FUND
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
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, 2004, 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 accounting principles generally accepted in the United States of
America. 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 the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements 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, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
January 24, 2005
TAX INFORMATION (unaudited)
The Fund intends to make an election under the Internal Revenue Code Section 853
to pass through foreign taxes paid by the Fund to its shareholders. The total
amount of foreign taxes that may be passed through to shareholders for the
fiscal year ended November 30, 2004 is $296,051. The foreign source of income
for information reporting purposes is $2,157,254.
For the fiscal year ended November 30, 2004 certain dividends paid by the Fund
may be subject to a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. The Fund designates a maximum
amount of $2,048,915 as qualified dividend income, which is taxed at a maximum
rate of 15%.
Shareholders should not use the above information to prepare their tax returns.
The information necessary to complete your income tax returns will be included
with your Form 1099-DIV which will be sent to you separately in January 2005.
--------------------------------------------------------------------------------
THE SPAIN FUND o 21
ADDITIONAL INFORMATION
(unaudited)
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 participant's 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
--------------------------------------------------------------------------------
22 o THE SPAIN FUND
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, PO 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.
--------------------------------------------------------------------------------
THE SPAIN FUND o 23
SUPPLEMENTAL PROXY INFORMATION
(unaudited)
The Annual Meeting of Shareholders of The Spain Fund was held on June 30, 2004.
The description of each proposal and number of shares are as follows:
Authority
Voted For Withheld
--------------------------------------------------------------------------------
1. To elect directors: Class One Director
(term expires 2005)
Daniel de Fernando Garcia 6,370,787 103,366
Class Two Director
(term expires 2006)
William H. Foulk, Jr. 6,368,001 106,152
Class Three Directors
(terms expire 2007)
Inmaculada de Habsburgo-Lorena 6,379,552 94,601
Francisco Gomez Roldan 6,365,309 108,844
Juan Manuel Sainz de Vicuna 6,371,942 102,211
--------------------------------------------------------------------------------
24 o THE SPAIN FUND
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Daniel de Fernando Garcia
Inmaculada de Habsburgo-Lorena(1)
Antonio Eraso(1)
Ignacio Gomez-Acebo
Francisco Gomez Roldan(1)
Jose Ignacio Comenge(1)
Juan Manuel Sainz de Vicuna(1)
OFFICERS
Marc O. Mayer, President
Edward D. Baker III(2), Senior Vice President
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Russell Brody, Vice President
Cristina Fernandez-Alepuz(2), Vice President
Mark R. Manley, Secretary
Mark D. Gersten, Treasurer and 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 Registered
Public Accounting Firm
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
Dividend Paying Agent, Transfer Agent and Registrar
Equiserve Trust Company
P.O. Box 43011 Providence, RI 02840-3011
--------------------------------------------------------------------------------
(1) Member of the Audit Committee and the Governance and Nominating Committee
(2) Mr. Baker and Ms. Fernandez-Alepuz are the persons primarily responsible for
the day-to-day management of the Fund's investment portfolio.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock 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.
Annual Certifications - As required, the Fund has submitted to the New York
Stock Exchange ("NYSE") the annual certification of the Fund's Chief
Executive Officer certifying that he is not aware of any violation of the
NYSE's Corporate Governance listing standards. The Fund also has included
the certifications of the Fund's Chief Executive Officer and Chief Financial
Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 as
exhibits to the Fund's Form N-CSR filed with the Securities and Exchange
Commission for the annual period.
--------------------------------------------------------------------------------
THE SPAIN FUND o 25
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the
Board of Directors. Certain information concerning the Fund's Directors is set
forth below.
PORTFOLIOS
PRINCIPAL IN FUND OTHER
NAME, ADDRESS, OCCUPATION(S) COMPLEX DIRECTORSHIPS
DATE OF BIRTH DURING OVERSEEN BY HELD BY
(YEAR ELECTED*) PAST 5 YEARS DIRECTOR DIRECTOR
---------------------------------------------------------------------------------------------
INTERESTED DIRECTORS
Daniel de Fernando Director, Private Banking and Asset 1 None
Garcia,** Management--BBVA Privanza
BBVA, Gestora, S.G.I.I.C., S.A. ("BBVA")
Padilla, 17 since October 2002. Since prior to
28006 Madrid, 2000 he was associated with J.P.
Spain Morgan in the following capacities:
7/27/65 Director, Asset Management JP
(2003) Morgan Private Banking; Head
of Asset Management & Private
Banking (Europe, Africa and
The Orient); Co-Head of AMS, Head
of Investments and Chairman & CEO
of Morgan Gestion, S.A. (JPM Madrid);
Member of AMS European Mgmt. Group,
Member of PCG Europe Management
Team, Member of JPM Madrid Management
Committee, Member of AMS European Mgmt
Group, Equity Portfolio Manager in the
International Investment Group
(JPMIM London), Fixed Income Portfolio
Manager, Equity Portfolio Manager and
Director of Morgan Gestion, S.A.
(Mutual Fund Management Company).
Ignacio Gomez- He is Senior Partner of Gomez- 1 Clarke,
Acebo,** Acebo & Pombo (law firm); Modet & Co.
Gomez-Acebo & Pombo Chairman of the Board of Clarke, and NOKIA
Paseo de la Castella Modet & Co. and NOKIA Spain. Spain
216-12th Floor,
28046 Madrid,
Spain
3/17/32
(1994)
--------------------------------------------------------------------------------
26 o THE SPAIN FUND
PORTFOLIOS
PRINCIPAL IN FUND OTHER
NAME, ADDRESS, OCCUPATION(S) COMPLEX DIRECTORSHIPS
DATE OF BIRTH DURING OVERSEEN BY HELD BY
(YEAR ELECTED*) PAST 5 YEARS DIRECTOR DIRECTOR
---------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
William H. Foulk, Jr., # Investment adviser and an 116 None
2 Sound View Drive independent consultant. He was
Suite 100 formerly Senior Manager of Barrett
Greenwich, CT 06830 Associates, Inc., a registered
Chairman of the Board investment adviser, with which he
9/7/32 had been associated since prior
(2004) to 2000. He was formerly Deputy
Comptroller and Chief Investment
Officer of the State of New York
and, prior thereto, Chief Investment
Officer of the New York Bank for Savings.
Antonio Eraso, # He is Non-executive Director of 1 Mapfre,
Latinver, S.A., Mapfre, Heron, Santander Central Heron,
Paseo de la Castellana, Hispano Activos Inmobiliarios, Santander
28046 Madrid, Advisor CEO Iberdrola. President Central
Spain of Heron Espana; Advisor of CB Hispano
4/22/41 Richard Ellis (Spain & Portugal); Activos
(2002) Advisor of Bansa Leasing; Advisor Inmobiliario
of Transolver (Finance); Advisor
of Grupo Tecnobit S.A. (Defense);
Advisor of Equifax Iberica; President's
Assessor of Iberdrola; President's
Assessor of Grupo Berge; Assessor of
Tishman & Speyer Espana S.A.; Board's
Assessor of Young & Rubican Espana;
Board's Assessor of Gleeds Iberica
(project management); Member of the
National Assembly and Permanent
Commission of ASNEF (National
Association of Financial Entities);
Spanish Representative of EURO-FINAS
(European Association of Finance);
formerly Advisor of Sedgwick Group Espana.
--------------------------------------------------------------------------------
THE SPAIN FUND o 27
PORTFOLIOS
PRINCIPAL IN FUND OTHER
NAME, ADDRESS, OCCUPATION(S) COMPLEX DIRECTORSHIPS
DATE OF BIRTH DURING OVERSEEN BY HELD BY
(YEAR ELECTED*) PAST 5 YEARS DIRECTOR DIRECTOR
---------------------------------------------------------------------------------------------
Inmaculada de She is President and Chief Executive 1 The Queen
Habsburgo-Lorena, # Officer of The Queen Sophia Spanish Sophia
Spanish Institute Institute; Trustee of Samuel H. Kress Spanish
684 Park Avenue Foundation; Founder and Trustee of Institute
New York, NY 10021 the King Juan Carlos International Samuel H.
7/3/45 Center of New York University Kress
(1987) Foundation; and member of the Board Foundation;
of World Monuments Fund Espana. King Juan
Carlos
International
Center of
New York
University
Foundation
Francisco Gomez Chief Financial Officer of Santander 1 None
Roldan, # Central Hispano. He was formerly
Ciudad Grupo Santander Chief Executive Officer of Argenteria,
Avenida de Cantabria Caja Postal y Banco Hipotecario;
s/n, Edificio Pereda, Deputy General Manager of Banco
1a planta, 28660 Bilbao-Vizcaya, S.A., the parent of
Boadilla del Monte Privanza; General Manager of BBV
Madrid, Spain Interactivos, S.A.; and General
7/16/53 Manager of Banca Catalana, S.A.
(1987)
Jose Ignacio Comenge, # Chairman and C.E.O. of Rexam Iberica, 1 Colebega,
Paseo de la Castellana, 15 Vice Chairman of Casbega and Director Refrige,
28046, Madrid, Spain of Colebega, Refrige, Ebro-Puleva and Ebro-Puleva,
9/8/51 Barbosa & Almeida. President and Board Barbosa &
(2004) Member of Several Sicav. Prior thereto, he Almeida
was Vice Chairman of Mutual Madrilena and Several
Automovista since prior to 2000. Sicav.
Juan Manuel Sainz He is Honorary Chairman of Coca- 1 Fundacion
de Vicuna, # Cola Espana; President of the Coca-Cola
Coca Cola International, Fundacion Coca-Cola Espana, Espana and
Josefa Valcarcel 36 Director of Rendelsur (Coca-Cola Rendelsur
28027 Madrid, franchise, Southern Spain); member
Spain of the Fundacion de Amigos de
11/29/25 Museo del Prado, The Board of
(1987) World Monuments Fund Espana,
Notre Dame University Joan B.
Kroc Institute for International
Peace Studies and the Patronato
of Universidad Pontificia de Salamanca.
* There is no stated term of office for the Fund's Directors.
** "Interested person," as defined in the 1940 Act, of the Fund because of an
affiliation with either the Fund's investment adviser, Alliance Capital
Management L.P., or BBVA.
# Member of the Audit Committee and the Governance and Nominating Committee.
--------------------------------------------------------------------------------
28 o THE SPAIN FUND
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, ADDRESS* PRINCIPAL POSITION(S) PRINCIPAL OCCUPATION
AND DATE OF BIRTH HELD WITH FUND DURING PAST 5 YEARS
--------------------------------------------------------------------------------
Marc O. Mayer, President Executive Vice President of Alliance
10/2/57 Capital Management Corporation ("ACMC")**
since 2001; prior thereto, Chief Executive
Officer of Sanford C. Bernstein & Co., LLC
and its predecessor since prior to 2000.
Edward D. Baker III, Senior Vice President Senior Vice President and Chief
2/4/51 Investment Officer--Emerging Markets of
ACMC**, with which he has been
associated since prior to 2000.
Philip L. Kirstein, Senior Vice President Senior Vice President, Independent
5/29/45 and Independent Compliance Officer--Mutual Funds of
Compliance Officer ACMC** with which he has been associated
since October 2004. Prior thereto, he was
Of Counsel to Kirkpatrick & Lockhart, LLP
from October 2003 to October 2004, and
General Counsel and First Vice President
of Merrill Lynch Investment Managers, L.P.
since prior to 2000 until March 2003.
Russell Brody, Vice President Vice President of ACMC**, with which
11/14/66 he has been associated since prior to 2000.
Cristina Fernandez- Vice President Vice President of Alliance Capital Limited
Alepuz, ("Limited")**. She is a European Companies
11/1/69 Analyst, responsible for analyzing the Spanish
market and Latin American banks. Prior thereto,
she was a securities analyst at Gerstemar
Securities and Ibersecurities in Spain since
prior to 2000.
Mark R. Manley, Secretary Senior Vice President, Deputy General
10/23/62 Counsel and Chief Compliance Officer of
ACMC**, with which he has been
associated since prior to 2000.
Mark D. Gersten, Treasurer and Chief Senior Vice President of Alliance Global
10/4/50 Financial Officer Investor Services, Inc. ("AGIS")** and a Vice
President of AllianceBernstein Investment
Research and Management, Inc. ("ABIRM")**,
with which he has been associated since prior
to 2000.
Vincent S. Noto, Controller and Chief Vice President of AGIS** with which
12/14/64 Financial Officer he has been associated since prior to 2000.
* The address for each of the Fund's Officers is 1345 Avenue of the Americas,
New York, NY 10105.
** ACMC, ABIRM, Limited and AGIS are affiliates of the Fund.
--------------------------------------------------------------------------------
THE SPAIN FUND o 29
ALLIANCEBERNSTEIN FAMILY OF FUNDS
--------------------------------------------------------------------------------
Wealth Strategies Funds
--------------------------------------------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy
--------------------------------------------------------------------------------
Blended Style Funds
--------------------------------------------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
--------------------------------------------------------------------------------
Growth Funds
--------------------------------------------------------------------------------
Domestic
Growth Fund
Mid-Cap Growth Fund
Large Cap Growth Fund*
Small Cap Growth Fund
Global & International All-Asia Investment Fund
Global Health Care Fund*
Global Research Growth Fund
Global Technology Fund*
Greater China '97 Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
--------------------------------------------------------------------------------
Value Funds
--------------------------------------------------------------------------------
Domestic
Balanced Shares
Focused Growth & Income Fund*
Growth & Income Fund
Real Estate Investment Fund
Small Cap Value Fund**
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
--------------------------------------------------------------------------------
Taxable Bond Funds
--------------------------------------------------------------------------------
Americas Government Income Trust
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Quality Bond Portfolio
Short Duration Portfolio
U.S. Government Portfolio
--------------------------------------------------------------------------------
Municipal Bond Funds
--------------------------------------------------------------------------------
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
--------------------------------------------------------------------------------
Intermediate Municipal Bond Funds
--------------------------------------------------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
--------------------------------------------------------------------------------
Closed-End Funds
--------------------------------------------------------------------------------
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
We also offer Exchange Reserves,*** which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our web site at
www.alliancebernstein.com or call us at (800) 227-4618 for a current prospectus.
You should read the prospectus carefully before you invest.
* Prior to December 15, 2004, these Funds were named as follows: Global Health
Care Fund was Health Care Fund; Large Cap Growth Fund was Premier Growth
Fund; Global Technology Fund was Technology Fund; and Focused Growth &
Income Fund was Disciplined Value Fund.
** Effective February 1, 2005, Small Cap Value Fund will be renamed
Small/Mid-Cap Value Fund.
*** An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in
the Fund.
--------------------------------------------------------------------------------
30 o THE SPAIN FUND
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 The Wall Street Journal under the
designation SpainFd. The daily net asset value of the Fund's shares are
available from the Fund's Transfer Agent by calling (800) 219-4218. The Fund
also distributes its daily net asset value to various financial publications or
independent organizations such as Lipper Inc. 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 (800) 219-4218.
--------------------------------------------------------------------------------
THE SPAIN FUND o 31
NOTES
--------------------------------------------------------------------------------
32 o THE SPAIN FUND
THE SPAIN FUND
1345 Avenue of the Americas
New York, NY 10105
[LOGO] ALLIANCEBERNSTEIN(SM)
Investment Research and Management
(SM) This service mark used under license from the owner, Alliance Capital
Management L.P.
SPNAR1104
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and principal accounting officer.
A copy of the registrant's code of ethics is filed herewith as Exhibit 11(a)(1).
(b) During the period covered by this report, no material amendments were made
to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers to
the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent director
William H. Foulk, Jr. qualifies as an audit committee financial expert.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (c) The following table sets forth the aggregate fees billed by the
independent auditor PricewaterhouseCoopers LLP for the Fund's last two fiscal
years for professional services rendered for: (i) the audit of the Fund's annual
financial statements included in the Fund's annual report to stockholders; (ii)
assurance and related services that are reasonably related to the performance of
the audit of the Fund's financial statements and are not reported under (i),
which include advice and education on accounting and auditing issues and
quarterly press release review, and preferred stock maintenance testing (for
those Funds that issue preferred stock); and (iii) tax compliance, tax advice
and tax return preparation.
Audit-Related
Audit Fees Fees* Tax Fees
--------------------------------------------------------------------------------
The Spain Fund, Inc. 2003 $60,000 $14,500 $16,500
2004 $60,000 $10,000 $24,700
*Audit related fees include $10,000 per year for sub-custodial security counts,
paid by the Investment Manager.
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into on or
after May 6, 2003, the Fund's Audit Committee policies and procedures require
the pre-approval of all audit and non-audit services provided to the Fund by the
Fund's independent auditors. The Fund's Audit Committee policies and procedures
also require pre-approval of all audit and non-audit services provided to the
Adviser and Service Affiliates to the extent that these services are directly
related to the operations or financial reporting of the Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in
the table under Item 4 (a) - (c) are for services pre-approved by the Fund's
Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services provided to
the Fund, the Fund's Adviser and entities that control, are controlled by or
under common control with the Adviser that provide ongoing services to the Fund,
which include conducting an annual internal control report pursuant to Statement
on Auditing Standards No. 70 ("Service Affiliates"):
Total Amount of
Foregoing Column
Pre-approved by the
Audit Committee
All Fees for (Portion Comprised of
Non-Audit Services Audit Related Fees)
Provided to the (Portion Comprised of
Portfolio, the Adviser Tax Fees)
and Service Affiliates
--------------------------------------------------------------------------------
The Spain Fund, Inc. 2003 $732,291 [ $31,000 ]
( $14,500 )
( $16,500 )
2004 $769,802 [ $34,700 ]
( $10,000 )
( $24,700 )
(h) The Audit Committee of the Fund has considered whether the provision of any
non-audit services not pre-approved by the Audit Committee provided by the
Fund's independent auditor to the Adviser and Service Affiliates is compatible
with maintaining the auditor's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The registrant has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.
The audit committee members are as follows:
William H. Foulk, Jr. Francisco Gomez Roldan
Inmaculada de Habsburgo-Lorena Jose Ignacio Comenge
Antonio Eraso Juan Manuel Sainz de Vicuna
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant has adopted the following proxy voting policies and procedures of
its investment adviser, Alliance Capital Management L.P.
ALLIANCE CAPITAL MANAGEMENT L.P.
Statement of Policies and Procedures for Proxy Voting
Introduction
As a registered investment adviser, Alliance Capital Management L.P. ("Alliance
Capital", "we" or "us") has a fiduciary duty to act solely in the best interests
of our clients. We recognize that this duty requires us to vote client
securities in a timely manner and make voting decisions that are in the best
interests of our clients. Consistent with these obligations, we will disclose
our clients' voting records only to them and as required by mutual fund vote
disclosure regulations. In addition, the proxy committees may, after careful
consideration, choose to respond to surveys regarding past votes.
This statement is intended to comply with Rule 206(4)-6 of the Investment
Advisers Act of 1940. It sets forth our policies and procedures for voting
proxies for our discretionary investment advisory clients, including investment
companies registered under the Investment Company Act of 1940. This statement
applies to Alliance Capital's growth and value investment groups investing on
behalf of clients in both US and non-US securities.
Proxy Policies
This statement is designed to be responsive to the wide range of proxy voting
subjects that can have a significant effect on the investment value of the
securities held in our clients' accounts. These policies are not exhaustive due
to the variety of proxy voting issues that we may be required to consider.
Alliance Capital reserves the right to depart from these guidelines in order to
avoid voting decisions that we believe may be contrary to our clients' best
interests. In reviewing proxy issues, we will apply the following general
policies:
Corporate Governance: Alliance Capital's proxy voting policies recognize the
importance of good corporate governance in ensuring that management and the
board of directors fulfill their obligations to the shareholders. We favor
proposals promoting transparency and accountability within a company. We will
vote for proposals providing for equal access to the proxy materials so that
shareholders can express their views on various proxy issues. We also support
the appointment of a majority of independent directors on key committees and
separating the positions of chairman and chief executive officer.
Elections of Directors: Unless there is a proxy fight for seats on the Board or
we determine that there are other compelling reasons for withholding votes for
directors, we will vote in favor of the management proposed slate of directors.
That said, we believe that directors have a duty to respond to shareholder
actions that have received significant shareholder support. We may withhold
votes for directors that fail to act on key issues such as failure to implement
proposals to declassify boards, failure to implement a majority vote
requirement, failure to submit a rights plan to a shareholder vote or failure to
act on tender offers where a majority of shareholders have tendered their
shares. In addition, we will withhold votes for directors who fail to attend at
least seventy-five percent of board meetings within a given year without a
reasonable excuse. Finally, we may withhold votes for directors of non-U.S.
issuers where there is insufficient information about the nominees disclosed in
the proxy statement.
Appointment of Auditors: Alliance Capital believes that the company remains
in the best position to choose the auditors and will generally support
management's recommendation. However, we recognize that there may be inherent
conflicts when a company's independent auditor performs substantial nonaudit
related services for the company. While we will recognize that there may be
special circumstances that could lead to high non-audit fees in some years, we
would normally consider non-audit fees in excess of 70% to be disproportionate.
Therefore, we may vote against the appointment of auditors if the fees for
non-audit related services exceed 70% of the total audit fees paid by the
company or there are other reasons to question the independence of the company's
auditors.
Changes in Legal and Capital Structure: Changes in a company's charter, articles
of incorporation or by-laws are often technical and administrative in nature.
Absent a compelling reason to the contrary, Alliance Capital will cast its votes
in accordance with the company's management on such proposals. However, we will
review and analyze on a case-by-case basis any non-routine proposals that are
likely to affect the structure and operation of the company or have a material
economic effect on the company. For example, we will generally support proposals
to increase authorized common stock when it is necessary to implement a stock
split, aid in a restructuring or acquisition or provide a sufficient number of
shares for an employee savings plan, stock option or executive compensation
plan. However, a satisfactory explanation of a company's intentions must be
disclosed in the proxy statement for proposals requesting an increase of greater
than one hundred percent of the shares outstanding. We will oppose increases in
authorized common stock where there is evidence that the shares will be used to
implement a poison pill or another form of anti-takeover device, or if the
issuance of new shares could excessively dilute the value of the outstanding
shares upon issuance.
Corporate Restructurings, Mergers and Acquisitions: Alliance Capital believes
proxy votes dealing with corporate reorganizations are an extension of the
investment decision. Accordingly, we will analyze such proposals on a
case-by-case basis, weighing heavily the views of the research analysts that
cover the company and the investment professionals managing the portfolios in
which the stock is held.
Proposals Affecting Shareholder Rights: Alliance Capital believes that certain
fundamental rights of shareholders must be protected. We will generally vote in
favor of proposals that give shareholders a greater voice in the affairs of the
company and oppose any measure that seeks to limit those rights. However, when
analyzing such proposals we will weigh the financial impact of the proposal
against the impairment of shareholder rights.
Anti-Takeover Measures: Alliance Capital believes that measures that impede
takeovers or entrench management not only infringe on the rights of shareholders
but may also have a detrimental effect on the value of the company. We will
generally oppose proposals, regardless of whether they are advanced by
management or shareholders, the purpose or effect of which is to entrench
management or dilute shareholder ownership. Conversely, we support proposals
that would restrict or otherwise eliminate antitakeover measures that have
already been adopted by corporate issuers. For example, we will support
shareholder proposals that seek to require the company to submit a shareholder
rights plan to a shareholder vote. We will evaluate, on a case-by-case basis,
proposals to completely redeem or eliminate such plans. Furthermore, we will
generally oppose proposals put forward by management (including blank check
preferred stock, classified boards and supermajority vote requirements) that
appear to be intended as management entrenchment mechanisms.
Executive Compensation: Alliance Capital believes that company management and
the compensation committee of the board of directors should, within reason, be
given latitude to determine the types and mix of compensation and benefit awards
offered. Whether proposed by a shareholder or management, we will review
proposals relating to executive compensation plans on a case-by-case basis to
ensure that the long-term interests of management and shareholders are properly
aligned. We will analyze the proposed plans to ensure that shareholder equity
will not be excessively diluted, the option exercise price is not below market
price on the date of grant and an acceptable number of employees are eligible to
participate in such programs. We will generally oppose plans that permit
repricing of underwater stock options without shareholder approval. Other
factors such as the company's performance and industry practice will generally
be factored into our analysis. We will support proposals to submit severance
packages that do not exceed 2.99 times the sum of an executive officer's base
salary plus bonus that are triggered by a change in control to a shareholder
vote. Finally, we will support shareholder proposals requiring companies to
expense stock options because we view them as a large corporate expense.
Social and Corporate Responsibility: Alliance Capital will review and analyze on
a case-by-case basis proposals relating to social, political and environmental
issues to determine whether they will have a financial impact on shareholder
value. We will vote against proposals that are unduly burdensome or result in
unnecessary and excessive costs to the company. We may abstain from voting on
social proposals that do not have a readily determinable financial impact on
shareholder value.
Proxy Voting Procedures
Proxy Voting Committees
Our growth and value investment groups have formed separate proxy voting
committees to establish general proxy policies for Alliance Capital and consider
specific proxy voting matters as necessary. These committees periodically review
these policies and new types of corporate governance issues, and decide how we
should vote on proposals not covered by these policies. When a proxy vote cannot
be clearly decided by an application of our stated policy, the proxy committee
will evaluate the proposal. In addition, the committees, in conjunction with the
analyst that covers the company, may contact corporate management and interested
shareholder groups and others as necessary to discuss proxy issues. Members of
the committee include senior investment personnel and representatives of the
Legal and Compliance Department. The committees may also evaluate proxies where
we face a potential conflict of interest (as discussed below). Finally, the
committees monitor adherence to these policies.
Conflicts of Interest
Alliance Capital recognizes that there may be a potential conflict of interest
when we vote a proxy solicited by an issuer whose retirement plan we manage, or
we administer, who distributes Alliance Capital sponsored mutual funds, or with
whom we or an employee has another business or personal relationship that may
affect how we vote on the issuer's proxy. Similarly, Alliance may have a
potential material conflict of interest when deciding how to vote on a proposal
sponsored or supported by a shareholder group that is a client. We believe that
centralized management of proxy voting, oversight by the proxy voting committees
and adherence to these policies ensures that proxies are voted with only our
clients' best interests in mind. That said, we have implemented additional
procedures to ensure that our votes are not the product of a material conflict
of interests, including: (i) on an annual basis, the proxy committees will take
reasonable steps to evaluate the nature of Alliance Capital's and our employees'
material business and personal relationships (and those of our affiliates) with
any company whose equity securities are held in client accounts and any client
that has sponsored or has material interest in a proposal upon which we will be
eligible to vote; (ii) requiring anyone involved in the decision making process
to disclose to the chairman of the appropriate proxy committee any potential
conflict that they are aware of (including personal relationships) and any
contact that they have had with any interested party regarding a proxy vote;
(iii) prohibiting employees involved in the decision making process or vote
administration from revealing how we intend to vote on a proposal in order to
reduce any attempted influence from interested parties; and (iv) where a
material conflict of interests exists, reviewing our proposed vote by applying a
series of objective tests and, where necessary, considering the views of a third
party research service to ensure that our voting decision is consistent with our
clients' best interests. Because under certain circumstances Alliance Capital
considers the recommendation of third party research services, the proxy
committees will take reasonable steps to verify that any third party research
service is in fact independent based on all of the relevant facts and
circumstances. This includes reviewing the third party research service's
conflict management procedures and ascertaining, among other things, whether the
third party research service (i) has the capacity and competency to adequately
analyze proxy issues; and (ii) can make such recommendations in an impartial
manner and in the best interests of our clients.
Proxies of Certain Non-US Issuers
Proxy voting in certain countries requires "share blocking." Shareholders
wishing to vote their proxies must deposit their shares shortly before the date
of the meeting (usually one-week) with a designated depositary. During this
blocking period, shares that will be voted at the meeting cannot be sold until
the meeting has taken place and the shares are returned to the clients'
custodian banks. Alliance Capital may determine that the benefit to the client
of exercising the vote does not outweigh the cost of voting, which is not being
able to transact in the shares during this period. Accordingly, if share
blocking is required we may abstain from voting those shares.
In addition, voting proxies of issuers in non-US markets may give rise to a
number of administrative issues that may prevent Alliance Capital from voting
such proxies. For example, Alliance Capital may receive meeting notices without
enough time to fully consider the proxy or after the cut-off date for voting.
Other markets require Alliance Capital to provide local agents with power of
attorney prior to implementing Alliance Capital's voting instructions. Although
it is Alliance Capital's policy to seek to vote all proxies for securities held
in client accounts for which we have proxy voting authority, in the case of
non-US issuers, we vote proxies on a best efforts basis.
Proxy Voting Records
Clients may obtain information about how we voted proxies on their behalf by
contacting their Alliance Capital administrative representative. Alternatively,
clients may make a written request for proxy voting information to: Mark R.
Manley, Senior Vice President & Chief Compliance Officer, Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, NY 10105.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
There have been no purchases of equity securities by the Fund or by affiliated
parties for the reporting period.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last provided
disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule
14A in its proxy statement filed with the Commission on June 4, 2004.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures (as
defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended)
are effective at the reasonable assurance level based on their evaluation of
these controls and procedures as of a date within 90 days of the filing date of
this document.
(b) There were no significant changes in the registrant's internal controls over
financial reporting that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 11. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
Exhibit No. DESCRIPTION OF EXHIBIT
----------- ----------------------
11 (a) (1) Code of ethics that is subject to the disclosure of
Item 2 hereof
11 (b) (1) Certification of Principal Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
11 (b) (2) Certification of Principal Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
11 (c) Certification of Principal Executive Officer and
Principal Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): The Spain Fund, Inc.
By: Marc O. Mayer
-------------
Marc O. Mayer
President
Date: January 27, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: Marc O. Mayer
-------------
Marc O. Mayer
President
Date: January 27, 2005
By: Mark D. Gersten
-------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: January 27, 2005