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 IBERO-AMERICA 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)
Joseph J. Mantineo
AllianceBernstein 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, 2010
Date of reporting period: November 30, 2010
| ITEM 1. | REPORTS TO STOCKHOLDERS. |
2
ANNUAL REPORT
The Ibero-America Fund
(formerly The Spain Fund)
November 30, 2010
Annual Report
Investment Products Offered
| • | Are Not FDIC Insured |
| • | May Lose Value |
| • | 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 Investments, Inc. (ABI) is the distributor of the AllianceBernstein family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the manager of the funds.
AllianceBernstein® and the AB Logo are registered trademarks and service marks used by permission of the owner, AllianceBernstein L.P.
January 20, 2011
Annual Report
This report provides management’s discussion of fund performance for The Ibero-America Fund (formerly The Spain Fund) (the “Fund”) for the annual reporting period ended November 30, 2010. This Fund is a closed-end fund that trades under the New York Stock Exchange Symbol “SNF”.
Changes in Investment Objective and Policies
Effective January 20, 2010, the Fund adopted a new name to reflect a broadening of its investment strategies approved by the Fund’s Board of Directors (the “Board”) to include investments in companies located in Spain and Portugal and in the historically Spanish- and Portuguese-speaking countries of Central and South America (Ibero-America). Consistent with its new name, the Fund has adopted an investment policy to invest at least 80% of its assets in securities of Ibero-American issuers. As approved, the Fund’s investment objective, which was “to seek long term capital appreciation by investing primarily in equity securities of Spanish companies” has been changed and is now “to seek long-term growth of capital.” In addition, stockholders approved, among other things, the elimination of: a requirement that the Fund invest at least 65% of its total assets in Spanish equity securities, a prohibition on investing more than 10% of the Fund’s total assets in non-Spanish equity securities and a prohibition on investments in American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”). Stockholders also approved changes in the Fund’s fundamental policies regarding
investments in options and commodities to allow investments in options and futures contracts and options on futures contracts.
The stockholders of the Fund also approved the elimination of the following additional fundamental investment policies:
| • | Prohibition on investing more than 35% of total assets in Spanish and certain other fixed-income securities; |
| • | Prohibition on investing more than 15% of total assets in a single issuer; |
| • | Prohibitions on pledging, hypothecating, mortgaging or otherwise encumbering assets; |
| • | Prohibition on purchasing more than 10% of an issuer’s voting securities; and |
| • | Prohibition on purchases of securities on margin. |
In addition, the stockholders of the Fund approved updating certain of the Fund’s fundamental policies including its fundamental policies on senior securities, borrowing, concentration, real estate and lending.
For additional information see the Fund’s proxy statement dated September 22, 2009.
For more information regarding the Fund’s risks, please see “A Word About Risk” on page 4 and “Note E—Risks Involved in Investing in the Fund” within the Notes to Financial Statements on page 20.
Investment Results
The table on page 5 shows the Fund’s performance compared to the bench-
| THE IBERO-AMERICA FUND • | 1 |
mark, the Madrid Stock Exchange General Index (IGBM), for the six- and 12-month periods ended November 30, 2010. Also included are returns for the Fund’s secondary benchmark, the MSCI Emerging Markets (EM) Latin America Index.
The Fund’s absolute returns were negative, but it outperformed the benchmark for the 12-month period ended November 30, 2010. The Fund’s investment focus on Spanish companies with geographically diversified revenue generation and increased exposure to Latin America drove the relative performance of the Fund versus the IGBM. An overweight to consumer companies such as fashion group Inditex, artificial casing manufacturer Viscofan and food manufacturer Ebro Foods had the largest contribution to performance followed by the positive contribution of an underweight exposure to domestic Spanish banks. The Fund underperformed the MSCI EM Latin America Index as it began its transition to this region early in the reporting period and exposure to Spain and Portugal detracted from returns.
The Fund outperformed the benchmark for the six-month period ended November 30, 2010. During this period, the investment management team continued to increase the Fund’s exposure to companies in Latin America, and this helped relative performance. An overweight to the consumer sector, especially in globally diversified companies such as Inditex and Viscofan had the largest positive contribution to performance. Also, a significant underweight to the financial sector, especially to Spanish domestic banks, also had a large positive contribution to
performance. Crises in the peripheral euro area affected the performance of the financial sector in Spain. The Fund underperformed the MSCI EM Latin American Index during the six-month period ended November 30, 2010, due to exposure to Spain and Portugal.
The Fund did not utilize leverage or derivatives during the reporting period.
Market Review and Investment Strategy
The Spanish equity market remained very volatile during the reporting period. The ongoing concerns over Spain’s macro situation and the uncertainty related to the fiscal imbalances not only in Spain but in other European countries such as Greece, Ireland and Portugal had a significant impact on market returns during the period ended November 30, 2010. The investment management team remained cautious on the outlook of the market during the reporting period, in particular, the investment management team was concerned about the high debt level among corporates, households and banks; the effect of larger budget cuts and higher cost of corporate debt; and the recapitalization needs of the domestic banking sector.
The investment management team maintained a well diversified portfolio during the reporting period. The Fund’s Spanish holdings were focused on geographically diversified companies. In Latin America, the Fund focused on Brazilian and Mexican consumer stocks and on producers of selected commodities. The investment management team continues to opportunistically add to the Fund’s allocation in Latin America.
| 2 | • THE IBERO-AMERICA FUND |
HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance shown on page 5 represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. 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 Ibero-America Fund Shareholder Information
The Fund’s NYSE trading symbol is “SNF”. Weekly comparative net asset value (NAV) and market price information about the Fund is published each Saturday in Barron’s and in other newspapers in a table called “Closed End Funds”. Daily net asset values and market price information, and additional information regarding the Fund, is available at www.alliancebernstein.com and www.nyse.com. For additional shareholder information regarding this Fund, please see page 27.
Benchmark Disclosure
The Madrid Stock Exchange General Index (IGBM) is a capitalization-weighted index that measures the performance of a selected number of Continuous Market (Sistema de Interconexión Bursátil Español—SIBE) securities. The SIBE is a fully transparent order driven, electronic trading system owned by the four major Spanish Exchanges. The IGBM is the principal index for the Madrid Stock Exchange and represents the construction, financial services, communications, consumer, capital/intermediate goods, energy and market service sectors. The MSCI EM Latin America Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of emerging markets in Latin America. As of June 2007 the MSCI EM Latin America Index consisted of the following five emerging market country indices: Brazil, Chile, Colombia, Mexico and Peru. MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices, any securities or financial products. This report is not approved, reviewed or produced by MSCI. Neither the unmanaged IGBM nor the MSCI EM Latin America Index reflect the fees and expenses associated with the active management of a fund. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Fund.
(Historical Performance continued on next page)
| THE IBERO-AMERICA FUND • | 3 |
Historical Performance
HISTORICAL PERFORMANCE
(continued from previous page)
A Word About Risk
Investment in the Fund includes risks not associated with funds that invest primarily in US issues. Substantially all of the Fund’s assets may be invested in Spanish, Portuguese and historically Spanish and Portuguese-speaking countries of Central and South America, and are subject to greater risk than would a fund with a more diversified portfolio. Foreign markets can be more volatile than the US 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. In general, Spanish and Latin American securities markets are less liquid and more volatile than the major securities markets in the US. Issuers of securities in Spain and Latin America are not subject to the same degree of regulation as are US issuers with respect to such matters as insider trading rules, tender offer regulation, shareholder proxy requirements and the timely disclosure of information. Spanish and Latin American accounting, auditing and financial reporting standards are not equivalent to US standards and less information is available to investors in Spanish and Latin American securities than to investors in US securities. The Spanish and Latin American securities industry is subject to less governmental regulation than the securities industry in the US.
The Fund’s investments in emerging markets are subject to emerging market risk. Investments in emerging market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory, or other uncertainties. Shares of closed-end investment companies that invest primarily in equity securities, in particular foreign countries or geographical areas, frequently trade at a discount from net asset value. This characteristic of shares of closed-end funds is a risk separate and distinct from the risk that the Fund’s net asset value will decrease. It should be noted, however, that in some cases, shares of closed-end funds may trade at a premium. The Fund cannot predict whether its shares will trade at, above or below net asset value.
(Historical Performance continued on next page)
| 4 | • THE IBERO-AMERICA FUND |
Historical Performance
HISTORICAL PERFORMANCE
(continued from previous page)
| THE FUND VS. ITS BENCHMARK PERIODS ENDED NOVEMBER 30, 2010 |
NAV Returns | |||||||||||
| 6 Months | 12 Months | |||||||||||
| The Ibero-America Fund (NAV) |
13.34% | -15.89% | ||||||||||
| Madrid Stock Exchange General Index (IGBM) |
5.79% | -29.28% | ||||||||||
| MSCI EM Latin American Index |
19.31% | 10.01% | ||||||||||
| The Fund’s Market Price per share on November 30, 2010, was $6.00. The Fund’s Net Asset Value Price per share on November 30, 2010, was $6.88. For additional Financial Highlights, please see page 23. | ||||||||||||
See Historical Performance and Benchmark disclosures on pages 3-4.
| THE IBERO-AMERICA FUND • | 5 |
Historical Performance
PORTFOLIO SUMMARY
November 30, 2010 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $61.3
| * | All data are as of November 30, 2010. The Fund’s sector and country breakdowns are expressed as a percentage of total investments and may vary over time. |
Please Note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard and Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the Broad Market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Fund’s prospectus.
| 6 | • THE IBERO-AMERICA FUND |
Portfolio Summary
TEN LARGEST HOLDINGS*
November 30, 2010 (unaudited)
| Company | U.S. $ Value | Percent of Net Assets |
||||||
| Telefonica SA |
$ | 7,188,557 | 11.7 | % | ||||
| Banco Santander SA |
5,800,890 | 9.5 | ||||||
| Inditex SA |
4,812,632 | 7.8 | ||||||
| America Movil SAB de CV |
4,141,524 | 6.8 | ||||||
| Repsol YPF SA |
3,105,501 | 5.1 | ||||||
| Investimentos Itau SA (Preference Shares) |
2,642,507 | 4.3 | ||||||
| Banco Bilbao Vizcaya Argentaria SA |
2,569,500 | 4.2 | ||||||
| Iberdrola SA |
1,790,325 | 2.9 | ||||||
| Ebro Puleva SA |
1,762,888 | 2.9 | ||||||
| Vale SA |
1,693,078 | 2.8 | ||||||
| $ | 35,507,402 | 58.0 | % | |||||
| * | Long-term investments. |
| THE IBERO-AMERICA FUND • | 7 |
Ten Largest Holdings
PORTFOLIO OF INVESTMENTS
November 30, 2010
| Company | Shares | U.S. $ Value | ||||||
| COMMON STOCKS – 97.8% |
||||||||
| Financials – 29.3% |
||||||||
| Commercial Banks – 19.1% |
||||||||
| Banco Bilbao Vizcaya Argentaria SA(a) |
279,710 | $ | 2,569,500 | |||||
| Banco Santander SA |
608,515 | 5,800,890 | ||||||
| Grupo Financiero Banorte SAB de CV – Class O |
154,400 | 663,013 | ||||||
| Investimentos Itau SA (Preference Shares) |
349,602 | 2,642,507 | ||||||
| 11,675,910 | ||||||||
| Consumer Finance – 2.4% |
||||||||
| Banco Compartamos SA de CV |
176,300 | 1,453,103 | ||||||
| Diversified Financial Services – 5.5% |
||||||||
| BM&F BOVESPA SA |
50,600 | 385,122 | ||||||
| Corp. Financiera Alba |
34,048 | 1,528,011 | ||||||
| Criteria Caixacorp SA |
302,524 | 1,483,591 | ||||||
| 3,396,724 | ||||||||
| Insurance – 1.5% |
||||||||
| Grupo Catalana Occidente SA |
65,227 | 941,915 | ||||||
| Real Estate Management & |
||||||||
| BR Malls Participacoes SA |
48,300 | 476,070 | ||||||
| 17,943,722 | ||||||||
| Telecommunication Services – 18.5% |
||||||||
| Diversified Telecommunication |
||||||||
| Telefonica SA |
338,482 | 7,188,557 | ||||||
| Wireless Telecommunication |
||||||||
| America Movil SAB de CV |
1,423,200 | 4,141,524 | ||||||
| 11,330,081 | ||||||||
| Consumer Discretionary – 10.9% |
||||||||
| Diversified Consumer Services – 1.3% |
||||||||
| Anhanguera Educacional Participacoes SA |
35,000 | 812,026 | ||||||
| Household Durables – 1.7% |
||||||||
| Gafisa SA |
68,100 | 473,833 | ||||||
| PDG Realty SA Empreendimentos e Participacoes |
92,600 | 561,130 | ||||||
| 1,034,963 | ||||||||
| Specialty Retail – 7.9% |
||||||||
| Inditex SA |
63,807 | 4,812,632 | ||||||
| 6,659,621 | ||||||||
| Consumer Staples – 10.6% |
||||||||
| Beverages – 1.7% |
||||||||
| Cia de Bebidas das Americas (Preference Shares) |
7,922 | 1,064,984 | ||||||
| 8 | • THE IBERO-AMERICA FUND |
Portfolio of Investments
| Company | Shares | U.S. $ Value | ||||||
| Food & Staples Retailing – 2.3% |
||||||||
| Grupo Comercial Chedraui SA de CV(b) |
203,600 | $ | 635,858 | |||||
| Wal-Mart de Mexico SAB de CV |
274,900 | 773,978 | ||||||
| 1,409,836 | ||||||||
| Food Products – 6.6% |
||||||||
| Cosan SA Industria e Comercio |
39,400 | 603,202 | ||||||
| Ebro Puleva SA |
89,662 | 1,762,888 | ||||||
| Viscofan SA |
48,200 | 1,665,766 | ||||||
| 4,031,856 | ||||||||
| 6,506,676 | ||||||||
| Energy – 8.6% |
||||||||
| Energy Equipment & Services – 2.5% |
||||||||
| Tecnicas Reunidas SA |
27,788 | 1,502,611 | ||||||
| Oil, Gas & Consumable Fuels – 6.1% |
||||||||
| Petroleo Brasileiro SA |
40,000 | 638,516 | ||||||
| Repsol YPF SA |
128,832 | 3,105,501 | ||||||
| 3,744,017 | ||||||||
| 5,246,628 | ||||||||
| Industrials – 7.5% |
||||||||
| Commercial Services & Supplies – 1.4% |
||||||||
| Prosegur Cia de Seguridad SA |
16,049 | 896,745 | ||||||
| Construction & Engineering – 3.9% |
||||||||
| Ferrovial SA |
73,800 | 699,271 | ||||||
| Obrascon Huarte Lain SA |
64,743 | 1,683,182 | ||||||
| 2,382,453 | ||||||||
| Machinery – 0.4% |
||||||||
| Construcciones y Auxiliar de Ferrocarriles SA |
500 | 232,967 | ||||||
| Transportation Infrastructure – 1.8% |
||||||||
| Abertis Infraestructuras SA |
69,392 | 1,102,101 | ||||||
| 4,614,266 | ||||||||
| Utilities – 6.9% |
||||||||
| Electric Utilities – 3.5% |
||||||||
| EDP – Energias de Portugal SA |
117,300 | 374,455 | ||||||
| Iberdrola SA |
261,412 | 1,790,325 | ||||||
| 2,164,780 | ||||||||
| Gas Utilities – 2.4% |
||||||||
| Enagas |
22,065 | 406,910 | ||||||
| Gas Natural SDG SA |
78,700 | 1,062,109 | ||||||
| 1,469,019 | ||||||||
| Independent Power Producers & Energy Traders – 1.0% |
||||||||
| Iberdrola Renovables SA |
207,600 | 609,595 | ||||||
| 4,243,394 | ||||||||
| THE IBERO-AMERICA FUND • | 9 |
Portfolio of Investments
| Company | Shares | U.S. $ Value | ||||||
| Materials – 4.1% |
||||||||
| Metals & Mining – 2.8% |
||||||||
| Vale SA |
54,200 | $ | 1,693,078 | |||||
| Paper & Forest Products – 1.3% |
||||||||
| Fibria Celulose SA(b) |
52,600 | 815,721 | ||||||
| 2,508,799 | ||||||||
| Health Care – 1.4% |
||||||||
| Health Care Providers & Services – 1.4% |
||||||||
| Diagnosticos da America SA |
66,400 | 851,977 | ||||||
| Total Common Stocks |
59,905,164 | |||||||
| SHORT-TERM INVESTMENTS – 0.1% |
||||||||
| Investment Companies – 0.1% |
||||||||
| AllianceBernstein Fixed-Income Shares, Inc.—Government STIF Portfolio, 0.17%(c) |
88,934 | 88,934 | ||||||
| Total Investments – 97.9% |
59,994,098 | |||||||
| Other assets less liabilities – 2.1% |
1,268,679 | |||||||
| Net Assets – 100.0% |
$ | 61,262,777 | ||||||
| (a) | Security represents investments in an affiliate. (See Note B) |
| (b) | Non-income producing security. |
| (c) | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
See notes to financial statements.
| 10 | • THE IBERO-AMERICA FUND |
Portfolio of Investments
STATEMENT OF ASSETS & LIABILITIES
November 30, 2010
| Assets | ||||
| Investments in securities, at value |
||||
| Unaffiliated issuers (cost $47,771,893) |
$ | 57,335,664 | ||
| Affiliated issuers (cost $772,735) |
2,658,434 | |||
| Foreign currencies, at value (cost $1,591,087) |
1,510,927 | |||
| Dividends and interest receivable |
17,909 | |||
| Total assets |
61,522,934 | |||
| Liabilities | ||||
| Management fee payable |
49,197 | |||
| Audit fee payable |
46,884 | |||
| Legal fee payable |
41,600 | |||
| Transfer Agent fee payable |
37,221 | |||
| Directors’ fee payable |
27,092 | |||
| Printing fee payable |
21,097 | |||
| Custody fee payable |
13,305 | |||
| Accrued expenses and other liabilities |
23,761 | |||
| Total liabilities |
260,157 | |||
| Net Assets |
$ | 61,262,777 | ||
| Composition of Net Assets | ||||
| Capital stock, at par |
$ | 89,057 | ||
| Additional paid-in capital |
51,936,088 | |||
| Undistributed net investment income |
276,720 | |||
| Accumulated net realized loss on investment |
(2,406,882 | ) | ||
| Net unrealized appreciation of investments |
11,367,794 | |||
| $ | 61,262,777 | |||
| Net Asset Value Per Share—100 million shares of capital stock authorized, $.01 par value (based on 8,905,699 shares outstanding) |
$ | 6.88 | ||
See notes to financial statements.
| THE IBERO-AMERICA FUND • | 11 |
Statement of Assets & Liabilities
STATEMENT OF OPERATIONS
Year Ended November 30, 2010
| Investment Income | ||||||||
| Dividends |
||||||||
| Unaffiliated issuers (net of foreign taxes withheld of $317,403) |
$ | 1,996,988 | ||||||
| Affiliated issuers (net of foreign taxes withheld of $25,607) |
145,221 | |||||||
| Interest |
545 | $ | 2,142,754 | |||||
| Expenses | ||||||||
| Management fee (see Note B) |
528,829 | |||||||
| Legal |
312,906 | |||||||
| Directors’ fees |
132,692 | |||||||
| Printing |
124,693 | |||||||
| Transfer agency |
75,453 | |||||||
| Custodian |
57,867 | |||||||
| Audit |
49,424 | |||||||
| Registration fees |
26,313 | |||||||
| Miscellaneous |
67,926 | |||||||
| Net expenses |
1,376,103 | |||||||
| Net investment income |
766,651 | |||||||
| Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions | ||||||||
| Net realized gain (loss) on: |
||||||||
| Investment transactions—unaffiliated issuers |
2,770,561 | |||||||
| Investment transactions—affiliated issuers |
339,948 | |||||||
| Foreign currency transactions |
(321,319 | ) | ||||||
| Net change in unrealized appreciation/depreciation of: |
||||||||
| Investments |
(15,026,455 | ) | ||||||
| Foreign currency denominated assets and liabilities |
(89,315 | ) | ||||||
| Net loss on investment and foreign currency transactions |
(12,326,580 | ) | ||||||
| Net Decrease in Net Assets from Operations |
$ | (11,559,929 | ) | |||||
See notes to financial statements.
| 12 | • THE IBERO-AMERICA FUND |
Statement of Operations
STATEMENT OF CHANGES IN NET ASSETS
| Year Ended November 30, 2010 |
Year Ended November 30, 2009 |
|||||||
| Increase (Decrease) in Net Assets from Operations | ||||||||
| Net investment income |
$ | 766,651 | $ | 1,329,797 | ||||
| Net realized gain (loss) on investment and foreign currency transactions |
2,789,190 | (4,474,288 | ) | |||||
| Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities |
(15,115,770 | ) | 29,394,385 | |||||
| Net increase (decrease) in net assets from operations |
(11,559,929 | ) | 26,249,894 | |||||
| Dividends and Distributions to Shareholders from |
||||||||
| Net investment income |
– 0 | – | (2,387,371 | ) | ||||
| Tax return of capital |
– 0 | – | (3,490,346 | ) | ||||
| Capital Stock Transactions | ||||||||
| Sale of Capital Stock |
782 | – 0 | – | |||||
| Total increase (decrease) |
(11,559,147 | ) | 20,372,177 | |||||
| Net Assets | ||||||||
| Beginning of period |
72,821,924 | 52,499,747 | ||||||
| End of period (including undistributed net investment income of $276,720 and distributions in excess of net investment income of ($247,423), respectively) |
$ | 61,262,777 | $ | 72,821,924 | ||||
See notes to financial statements.
| THE IBERO-AMERICA FUND • | 13 |
Statement of Changes in Net Assets
NOTES TO FINANCIAL STATEMENTS
November 30, 2010
NOTE A
Significant Accounting Policies
The Ibero-America Fund, Inc. (the “Fund”), formerly The Spain Fund, Inc., was incorporated in the State of Maryland on June 30, 1987, and is registered under the Investment Company Act of 1940 as a non-diversified, closed-end management investment company. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), 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 (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) 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 listed only on 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”) 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, AllianceBernstein L.P. (the “Investment Manager”)
| 14 | • THE IBERO-AMERICA FUND |
Notes to Financial Statements
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. Investments in money market funds are valued at their net asset value each day.
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 (see Note A.2).
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The U.S. GAAP disclosure requirements establish a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | Level 1—quoted prices in active markets for identical investments |
| • | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
| THE IBERO-AMERICA FUND • | 15 |
Notes to Financial Statements
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of November 30, 2010:
| Investments in Securities |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Common Stocks: |
||||||||||||||||
| Financials |
$ | 8,189,315 | $ | 9,754,407 | $ | – 0 | – | $ | 17,943,722 | |||||||
| Telecommunication Services |
4,141,524 | 7,188,557 | – 0 | – | 11,330,081 | |||||||||||
| Consumer Discretionary |
1,846,989 | 4,812,632 | – 0 | – | 6,659,621 | |||||||||||
| Consumer Staples |
3,078,022 | 3,428,654 | – 0 | – | 6,506,676 | |||||||||||
| Energy |
638,516 | 4,608,112 | – 0 | – | 5,246,628 | |||||||||||
| Industrials |
– 0 | – | 4,614,266 | – 0 | – | 4,614,266 | ||||||||||
| Utilities |
– 0 | – | 4,243,394 | – 0 | – | 4,243,394 | ||||||||||
| Materials |
2,508,799 | – 0 | – | – 0 | – | 2,508,799 | ||||||||||
| Health Care |
851,977 | – 0 | – | – 0 | – | 851,977 | ||||||||||
| Short-Term Investments |
88,934 | – 0 | – | – 0 | – | 88,934 | ||||||||||
| Total Investments in Securities |
21,344,076 | 38,650,022 | † | – 0 | – | 59,994,098 | ||||||||||
| Other Financial Instruments*: |
– 0 | – | – 0 | – | – 0 | – | – 0 | – | ||||||||
| Total |
$ | 21,344,076 | $ | 38,650,022 | $ | – 0 | – | $ | 59,994,098 | |||||||
| * | Other financial instruments are derivative instruments, such as futures, forwards and swap contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
| † | The earlier close of the foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred between the close of the foreign markets and the time at which the Fund values its securities which may materially affect the value of securities trading in such markets. 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. Accordingly, a significant portion of the Fund’s investments are categorized as Level 2 investments. |
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange 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 the 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, 2010 was .77 EUR to U.S. $1.00.
| 16 | • THE IBERO-AMERICA FUND |
Notes to Financial Statements
4. Taxes
It is the Fund’s policy to meet the requirements of the 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.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.
5. 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. Investment gains and losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income.
6. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
Until the third quarter of 2009, the Fund had a managed distribution policy under which the Fund distributed to its shareholders an amount equal to 2.5% of its total net assets at the beginning of each of the first three quarters of the calendar year.
The Fund suspended payments under its managed distribution policy effective after the distribution made in the third quarter of 2009. On an annual basis, the Fund will continue to make distributions in order to meet distribution requirements under the Internal Revenue Code, if needed, in the fourth quarter.
| THE IBERO-AMERICA FUND • | 17 |
Notes to Financial Statements
NOTE B
Management Fee and Other Transactions with Affiliates
Under the terms of the Investment Management and Administration Agreement, the Fund pays the Investment Manager 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 fee is accrued daily and paid monthly.
Brokerage commissions paid on investment transactions for the year ended November 30, 2010, amounted to $57,520, of which $0, $0 and $109 was paid to Banco Bilbao Vizcaya Argentina (“BBVA”), Sanford C. Bernstin Co. LLC and Sanford C. Bernstein Limited, respectively, affiliates of the Investment Manager.
BBVA 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, 2010, the Fund did not earn interest income on cash balances maintained at the subcustodian. Based on publicly available filings, BBVA currently owns approximately 17% of the Fund’s outstanding shares of Common Stock and was therefore an “affiliated person” as defined under the Investment Company Act of 1940.
Under the terms of a Shareholder Inquiry Agency Agreement with AllianceBernstein Investor Services, Inc. (“ABIS”) a wholly-owned subsidiary of the Investment Manager, the Fund reimburses ABIS for costs relating to servicing phone inquiries for the Fund. During the year ended November 30, 2010, the Fund reimbursed ABIS $285 for such costs.
The Fund may invest in the AllianceBernstein Fixed-Income Shares, Inc. – Government STIF Portfolio, an open-end management investment company managed by the Investment Manager. The Government STIF Portfolio is offered as a cash management option to mutual funds and other institutional accounts of the Investment Manager, and is not available for direct purchase by members of the public. The Government STIF Portfolio pays no investment management fees but does bear its own expenses. A summary of the Fund’s transactions in shares of the Government STIF Portfolio for the year ended November 30, 2010, is as follows:
| Market Value (000) |
Purchases at Cost (000) |
Sales Proceeds (000) |
Market
Value November 30, 2010 (000) |
Dividend Income (000) |
||||||||||||
| $ 19 | $ | 1,408 | $ | 1,338 | $ | 89 | $ | 0 | * | |||||||
| * | Amount is less than $500. |
| 18 | • THE IBERO-AMERICA FUND |
Notes to Financial Statements
NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended November 30, 2010, were as follows:
| Purchases | Sales | |||||||
| Investment securities (excluding |
$ | 25,544,578 | $ | 26,070,785 | ||||
| U.S. government securities |
– 0 | – | – 0 | – | ||||
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding foreign currency transactions) are as follows:
| Cost |
$ | 49,495,195 | ||
| Gross unrealized appreciation |
$ | 13,916,489 | ||
| Gross unrealized depreciation |
(3,417,586 | ) | ||
| Net unrealized appreciation |
$ | 10,498,903 | ||
1. Derivative Financial Instruments
The Fund may use derivatives to earn income and enhance returns, to hedge or adjust the risk profile of its portfolio, to replace more traditional direct investments, or to obtain exposure to otherwise inaccessible markets. The Fund may also use derivatives for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions.”
The Fund did not engage in derivative transactions for the year ended November 30, 2010.
2. Currency Transactions
The Fund may invest in non-U.S. Dollar securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Investment Manager believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
| THE IBERO-AMERICA FUND • | 19 |
Notes to Financial Statements
NOTE D
Capital Stock
During the year ended November 30, 2010, the Fund had no shares issued in connection with the Fund’s dividend reinvestment plan; residual capital stock shares held by the Fund were sold in the amount of $782.
NOTE E
Risks Involved in Investing in the Fund
Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency exchange rates and the possibility of future political and economic developments which could adversely affect the value of such securities. Moreover, securities of many foreign companies or foreign governments and their markets may be less liquid and their prices more volatile than those of comparable U.S. companies and the U.S. government.
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 Ibero-American equities market. The possibility of political and economic instability of government supervision and regulation of the market may further affect the Fund’s investments.
Emerging Markets Securities Risk—Investments in emerging market countries may impose risks different from, or greater than, risks of investing in domestic securities or in foreign, developed countries. These risks include: smaller market capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions on foreign investment; and possible restrictions on repatriation of investment income and capital. In addition, foreign investors may be required to register the proceeds of sales; future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization or creation of government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. Dollar, and devaluation may occur subsequent to investments in these currencies by the Fund. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries.
Additional risks of emerging market securities may include: greater social, economic and political uncertainty and instability; more substantial governmental involvement in the economy; less governmental supervision and regulation; unavailability of currency hedging techniques; companies that are newly organized and small; differences in auditing and financial reporting standards, which may result in unavailability of material information about issuers; and less developed legal systems. In addition, emerging securities markets may have different clearance and settlement procedures, which may be unable to keep pace
| 20 | • THE IBERO-AMERICA FUND |
Notes to Financial Statements
with the volume of securities transactions or otherwise make it difficult to engage in such transactions. Settlement problems may cause the Fund to miss attractive investment opportunities, hold a portion of its assets in cash pending investment, or be delayed in disposing of a portfolio security. Such a delay could result in possible liability to a purchaser of the security.
Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Fund’s investments or reduce the returns of the Fund. For example, the value of the Fund’s investments in foreign currency-denominated securities or currencies may decrease if the U.S. Dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. Dollar). Currency markets are generally not as regulated as securities markets. Independent of the Fund’s investments denominated in foreign currencies, the Fund’s positions in various foreign currencies may cause the Fund to experience investment losses due to the changes in exchange rates and interest rates.
Derivatives Risk—The Fund may enter into in derivatives such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
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. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
NOTE F
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended November 30, 2010 and November 30, 2009 were as follows:
| 2010 | 2009 | |||||||
| Distributions paid from: |
||||||||
| Ordinary income |
$ | – 0 | – | $ | 2,387,371 | |||
| Long-term capital gains |
– 0 | – | – 0 | – | ||||
| Total taxable distributions |
– 0 | – | 2,387,371 | |||||
| Tax return of capital |
– 0 | – | 3,490,346 | |||||
| Total distributions paid |
$ | – 0 | – | $ | 5,877,717 | |||
| THE IBERO-AMERICA FUND • | 21 |
Notes to Financial Statements
As of November 30, 2010, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| Undistributed ordinary income |
$ | 601,052 | ||
| Accumulated capital and other losses |
(1,780,646 | )(a) | ||
| Unrealized appreciation/(depreciation) |
10,417,226 | (b) | ||
| Total accumulated earnings/(deficit) |
$ | 9,237,632 | ||
| (a) | On November 30, 2010, the Fund had a net capital loss carryover for federal income tax purposes of $1,780,646 which expires in the year 2017. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. During the fiscal year, the Fund utilized capital loss carryforwards of $3,031,698. |
| (b) | The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable to the tax deferral of losses on wash sales, and investments in passive foreign investment companies. |
During the current fiscal year, permanent differences primarily due to foreign currency transactions, the tax treatment of passive foreign investment companies, and capital gain withholding tax, resulted in a net decrease in undistributed net investment income and a net decrease in accumulated net realized loss on investment and foreign currency transactions. This reclassification had no effect on net assets.
NOTE G
Change of Independent Registered Public Accounting Firm
On November 29, 2010 the Audit Committee of the Board of Directors of the Fund recommended that the Board of Directors, including a majority of the disinterested Directors, select Tait, Weller & Baker LLP (“Tait”) as independent accountants. Tait accepted the engagement on December 16, 2010. On January 14, 2011, a majority of the Independent Directors approved the appointment of Tait. The predecessor independent registered public accounting firm’s reports on the Fund’s financial statements for each of the years ended November 30, 2009 and 2008 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such periods.
NOTE H
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
| 22 | • THE IBERO-AMERICA FUND |
Notes to Financial Statements
FINANCIAL HIGHLIGHTS
Selected Data For A Share of Capital Stock Outstanding Throughout Each Period
| Year Ended November 30, | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| Net asset value, beginning of period |
$ 8.18 | $ 5.89 | $ 15.40 | $ 13.24 | $ 10.12 | |||||||||||||||
| Income From Investment Operations |
||||||||||||||||||||
| Net investment income(a) |
.09 | .15 | .17 | .15 | .12 | |||||||||||||||
| Net realized and unrealized gain (loss) on investment and foreign currency transactions |
(1.39 | ) | 2.80 | (6.30 | ) | 3.51 | 4.06 | |||||||||||||
| Net increase (decrease) in net asset value from operations |
(1.30 | ) | 2.95 | (6.13 | ) | 3.66 | 4.18 | |||||||||||||
| Less: Dividends and Distributions |
||||||||||||||||||||
| Dividends from net investment income |
– 0 | – | (.27 | ) | (1.22 | ) | (1.03 | ) | (.12 | ) | ||||||||||
| Tax return of capital |
– 0 | – | (.39 | ) | – 0 | – | – 0 | – | – 0 | – | ||||||||||
| Distributions from net realized gain on investment and foreign currency transactions |
– 0 | – | – 0 | – | (2.16 | ) | (.47 | ) | (.94 | ) | ||||||||||
| Total dividends and distributions |
– 0 | – | (.66 | ) | (3.38 | ) | (1.50 | ) | (1.06 | ) | ||||||||||
| Net asset value, end of period |
$ 6.88 | $ 8.18 | $ 5.89 | $ 15.40 | $ 13.24 | |||||||||||||||
| Market value, end of period |
$ 6.00 | $ 7.37 | $ 5.00 | $ 15.24 | $ 14.70 | |||||||||||||||
| Premium/(Discount), end of period |
(12.79 | )% | (9.90 | )% | (15.11 | )% | (1.04 | )% | 11.03 | % | ||||||||||
| Total Return |
||||||||||||||||||||
| Total investment return based on(b): |
||||||||||||||||||||
| Market value |
(18.59 | )% | 65.63 | % | (57.13 | )% | 14.22 | % | 29.05 | % | ||||||||||
| Net asset value |
(15.89 | )% | 56.05 | % | (50.03 | )% | 28.15 | % | 42.76 | % | ||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||
| Net assets, end of period (000’s omitted) |
$61,263 | $72,822 | $52,450 | $135,681 | $116,105 | |||||||||||||||
| Ratio to average net assets of: |
||||||||||||||||||||
| Expenses |
2.16 | % | 1.99 | % | 1.46 | % | 1.25 | % | 1.56 | % | ||||||||||
| Net investment income |
1.20 | % | 2.26 | % | 1.63 | % | 1.05 | % | 1.12 | % | ||||||||||
| Portfolio turnover rate |
41 | % | 40 | % | 41 | % | 72 | % | 56 | % | ||||||||||
See footnote summary on page 24.
| THE IBERO-AMERICA FUND • | 23 |
Financial Highlights
| (a) | Based on average shares outstanding. |
| (b) | Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last business day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Fund’s Dividend Reinvestment and Cash Purchase Plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such years. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such years. Total investment return calculated for a period of less than one year is not annualized. |
See notes to financial statements.
| 24 | • THE IBERO-AMERICA FUND |
Financial Highlights
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
The Ibero-America Fund, Inc
We have audited the accompanying statement of assets and liabilities of The Ibero-America Fund, Inc. (the “Fund”), including the portfolio of investments, as of November 30, 2010, and the related statement of operations, the statement of changes in net assets, and financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes for the year ended November 30, 2009 and financial highlights for each of the four years in the period then ended were audited by other independent registered public accountants whose report thereon, dated January 26, 2010, expressed an unqualified opinion on those statement of changes and financial highlights.
We conducted our audit 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 and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of November 30, 2010, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Ibero-America Fund, Inc. as of November 30, 2010, the results of its operations, the changes in its net assets, and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
January 24, 2011
| THE IBERO-AMERICA FUND • | 25 |
Report of Independent Registered Public Accounting Firm
2010 FEDERAL TAX INFORMATION
(unaudited)
For Federal income tax purposes, the following information is furnished with respect to the earnings of the Fund for the taxable year ended November 30, 2010.
The Fund intends to make an election to pass through foreign taxes to its shareholders. For the taxable year ended November 30, 2010, $343,009 of foreign taxes may be passed through and the associated foreign source income for information reporting purposes is $2,483,344.
For the taxable year ended November 30, 2010, the Fund designates $2,280,857 as the maximum amount that may be considered qualified dividend income for individual shareholders.
Shareholders should not use the above information to prepare their income 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 2011.
| 26 | • THE IBERO-AMERICA FUND |
2010 Federal Tax Information
ADDITIONAL INFORMATION
(unaudited)
Managed Distribution Policy
Until recently, the Fund had a managed distribution policy under which the Fund distributed to its shareholders an amount equal to 2.5% of its total net assets at the beginning of each of the first three quarters of the calendar year.
If distributions under the managed distribution policy exceeded the Fund’s aggregate net investment income and net realized capital gains with respect to a given year, the difference generally constituted a return of capital to shareholders. A return of capital may occur when some or all of the money a shareholder invested in the Fund is returned to the shareholder. A return of capital does not necessarily reflect the Fund’s performance and should not be confused with “yield” or “income”.
Shareholders should not draw any conclusions about the Fund’s performance from the amount of the Fund’s distributions or from the terms of the Fund’s managed distribution policy.
As previously announced, the Fund’s Board of Directors (the “Board”) approved the suspension of the Fund’s managed distribution policy. The Fund suspended payments under its managed distribution policy effective after the distribution made in the third quarter of 2009. On an annual basis, the Fund will continue to make distributions in order to meet distribution requirements under the Internal Revenue Code, if needed, in the fourth quarter.
Dividend Reinvestment and Cash Purchase Plan
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 distributions to shareholders will be paid in or reinvested in additional shares of the Fund. The Plan also allows you to make optional cash investments in Fund shares through the Plan Agent. Computershare Trust Company N.A. (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 or other 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. |
| THE IBERO-AMERICA FUND • | 27 |
Additional Information
| (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 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.
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 Computershare Trust Company N.A., c/o The Ibero-America Fund, Inc., P.O. Box 43010, Providence, Rhode Island 02940-3010.
| 28 | • THE IBERO-AMERICA FUND |
Additional Information
SUPPLEMENTAL PROXY INFORMATION
The Annual Meeting of the Stockholders of The Ibero-America Fund, Inc. (the “Fund”) was held on November 8, 2010.
A description of the proposals and number of shares voted at the Meeting are as follows:
| Director | Voted for | Authority Withheld | ||||
| 1. To elect Class Three Directors: (terms expire in 2013) |
Luis Abril Perez Inmaculada de Habsburgo-Lorena |
4,808,885 4,683,727 |
772,288 897,446 |
| THE IBERO-AMERICA FUND • | 29 |
Supplemental Proxy Information
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Robert M. Keith, President and Chief Executive Officer
Luis Abril Perez(1)
Daniel de Fernando Garcia(1)
Inmaculada de Habsburgo-Lorena(1)
Antonio Eraso(1)
Baldomero Falcones Jaquotot(1)
OFFICERS
Robert Alster, Senior Vice President
Liliana C. Dearth(2), Senior Vice President
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Emilie D. Wrapp, Secretary
Joseph J. Mantineo, Treasurer and Chief Financial Officer
Phyllis J. Clarke, Controller
| Custodian and Accounting Agent Brown Brothers Harriman & Co. 40 Water Street Boston, MA 02109
Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY10004 |
Independent Registered Public Accounting Firm Tait, Weller & Baker LLP 1818 Market Street, Suite 2400 Philadelphia, PA 19103
Dividend Paying Agent, Transfer Agent and Registrar Computershare Trust Company N.A. P.O. Box 43010 Providence, RI 02940-3010 |
| (1) | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. Mr. Foulk is the sole member of the Fair Value Pricing Committee. |
| (2) | Ms. Dearth is the person 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 Ibero-America 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, on January 6, 2011, the Fund 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 period. |
| 30 | • THE IBERO-AMERICA FUND |
Board of Directors
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.
| NAME, ADDRESS†, AGE (FIRST YEAR ELECTED*) |
PRINCIPAL AND OTHER RELEVANT QUALIFICATIONS*** |
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR |
OTHER IN THE PAST FIVE YEARS | |||||
| INTERESTED DIRECTOR | ||||||||
| Robert M. Keith, + (2009) |
Senior Vice President of AllianceBernstein L.P. (the “Investment Manager”)** and the head of AllianceBernstein Investments, Inc. (“ABI”)** since July 2008; Director of ABI, and President of the AllianceBernstein Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Investment Manager’s institutional investment management business since 2004. Prior thereto, Managing Director and Head of North American Client Service and Sales in the Investment Manager’s institutional investment management business, with which he had been associated since prior to 2004. | 97 | None | |||||
| THE IBERO-AMERICA FUND • | 31 |
Management of the Fund
| NAME, ADDRESS†, AGE (FIRST YEAR ELECTED*) |
PRINCIPAL AND OTHER RELEVANT QUALIFICATIONS*** |
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR |
OTHER IN THE PAST FIVE YEARS | |||||
| DISINTERESTED DIRECTORS | ||||||||
| Chairman of the Board William H. Foulk, Jr., #, ** 78 (2004) |
Investment Adviser and an Independent Consultant since prior to 2006. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. 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. He has served as a director or trustee of various AllianceBernstein Funds since 1983 and has been Chairman of the AllianceBernstein Funds and of the Independent Directors Committee of such Funds since 2003. He is also active in a number of mutual fund related organizations and committees. | 97 | None | |||||
| 32 | • THE IBERO-AMERICA FUND |
Management of the Fund
| NAME, ADDRESS†, AGE (FIRST YEAR ELECTED*) |
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** |
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR |
OTHER DIRECTORSHIPS HELD BY DIRECTOR IN THE PAST FIVE YEARS | |||||
| DISINTERESTED DIRECTORS (continued) |
||||||||
| Daniel de Fernando Garcia, # (2003) |
Managing Partner of Mdf Achievers (wealth management) as of March 2009. Consultant and formerly, Head of Private Banking and Personal Banking (prior to March 2008) after being Head of Asset Management and Private Banking Banco Bilbao Vizcaya Argentaria (“BBVA”) since October 2002. Prior to 2002, he was associated with J.P. Morgan for 14 years in the following capacities: Managing Director and Head of J.P. Morgan Private Banking Asset Management (Europe, Africa, The Orient and Asia); Head of J.P. Morgan Private Banking Wealth Management (Europe, Africa and The Orient); J.P. Morgan Co-Head of Asset Management Services Iberia, Head of Investments and Chairman and CEO of Morgan Gestión, S.A. (JPM Madrid); Member of AMS European Mgmt. Group, Member of PCG Europe Management Team, Member of JPM Madrid Management Committee, Equity Portfolio Manager in the International Investment Group (JPMIM London), Fixed Income Portfolio Manager, Equity Portfolio Manager and Director of Altitude Investments Limited, Proxima Alfa Investments, S.A., BBVA Pensiones, S.A. EGFP, Gestion de Prevision y Pensiones, S.A. EGFP, BBVA Gestion, S.A. SGIIC. He is also an Independent Director of various European funds advised by Schroder Investment Management. | 1 | None | |||||
| THE IBERO-AMERICA FUND • | 33 |
Management of the Fund
| NAME, ADDRESS†, AGE (FIRST YEAR ELECTED*) |
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** |
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR |
OTHER DIRECTORSHIPS HELD BY DIRECTOR IN THE PAST FIVE YEARS | |||||
| DISINTERESTED DIRECTORS (continued) |
||||||||
| Antonio Eraso, # 69 (2002) |
President of Heron Espana (real estate); Advisor to President, Northern & Shell (press group) since 2007; Director of Grupo Immobiliaria Chamartin (property development) since 2007; Director of Grupo Freedom Finance S.A. (consumer and mortgage finance) since 2007; Director of Berge Finance (consumer finance) since 2007; Advisor to President of Grupo Berge (maritime, logistics, car imports and distribution); Director of Mapfre International S.A. (insurance) and various Mapfre affiliates since 2006; Director of McCann Ericsson Spain (advertising); director of Albinana Films S.A. (film distribution); Director of Grupo Kia (Portugal) (car distribution); Advisory Director of Burson Marsteller S.A. (public relations); President of Italtel S.A. (producer and supplier of electronics); Director of Chrysler Portugal; Spanish Advisor to Kohn Pederson Fox (international architecture); Director of Transolver Financier (finance); Director of Equifax ASNEF Solvencia S.A. (risk evaluation) and various other companies. He is also a former director or advisor to a number of companies, and is Advisor CEO Iberdrola. Advisor of CB Richard Ellis (Spain & Portugal); Member of the National Assembly and Permanent Commission of ASNEF (National Association of Financial Entities); Spanish Representative of EURO-FINAS (European Association of Finance). | 1 | None | |||||
| 34 | • THE IBERO-AMERICA FUND |
Management of the Fund
| NAME, ADDRESS†, AGE (FIRST YEAR ELECTED*) |
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** |
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR |
OTHER DIRECTORSHIPS HELD BY DIRECTOR IN THE PAST FIVE YEARS | |||||
| DISINTERESTED DIRECTORS (continued) |
||||||||
| Inmaculada de Habsburgo-Lorena, # 65 (1987) |
President and Chief Executive Officer of The Queen Sofia Spanish Institute; Founder of the King Juan Carlos International Center of New York University Foundation, and Director of World Monuments Fund Espana. | 1 | None | |||||
| Baldomero Falcones Jaquotot, # 64 (2006) |
Chairman and Chief Executive Officer of Fomento de Construcciones y Contratas S.A. (since 2008) and formerly founding Partner and GP of Magnum Industrial Partners (private equity firm) (2006-2007). Formerly, Chairman, Mastercard International Worldwide (2002-2006), Santander Seguros (2002-2006) and Europay Spain; Managing Director Banco Santander Central Hispano and Member of the Management Executive Committee; Chairman, Bank Urquijo Limited London UK, Hispano Americano Sociedade do Investimento Lisboa, Banco Urquijo Chile, Banco Hispano Americano Benelux, Brussels, Fiat Finance, S.A., Madrid; Executive Vice Chairman and CEO, Corporacion Financiera Hispamer; CEO Banco Hispano Industrial Investment Bank. Former Board member Union Electrica Fenosa, S.A.; Board Member RWE Espana, S.A., Mastercard Europe, CESCE, Cia de Segurose, S.A., C.H. Generalli Seguros, S.A., La Estrella, S.A., and Banif, S.A. | 1 | None | |||||
| THE IBERO-AMERICA FUND • | 35 |
Management of the Fund
| NAME, ADDRESS†, AGE (FIRST YEAR ELECTED*) |
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** |
PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR |
OTHER DIRECTORSHIPS HELD BY DIRECTOR IN THE PAST FIVE YEARS | |||||
| DISINTERESTED DIRECTORS (continued) |
||||||||
| Luis Abril Pérez, # 62 (2006) |
General Manager for the Chairman’s Technical Staff at Telefónica S.A. and member of the Executive Committee. Prior thereto he was Chairman of Telefónica Media Group. Formerly, General Manager of Corporate Marketing, Media and Content and Corporate Communications. He was previously a director of Sogecable S.A. (pay TV) and Chairman of the Supervisory Board of Endemol S.A. (TV production). | 1 | None | |||||
| † | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
| * | There is no stated term of office for the Fund’s Directors. |
| ** | Member of the Fair Value Pricing Committee. |
| *** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which lead to the conclusion that each Director should serve as a Director for the Fund. |
| + | Mr. Keith is an “interested person”, as defined in the 1940 Act, due to his position as a Senior Vice President of the Investment Manager. |
| # | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
| 36 | • THE IBERO-AMERICA FUND |
Management of the Fund
Officer Information
Certain information concerning the Fund’s Officers is listed below.
| NAME, ADDRESS* AND AGE |
PRINCIPAL POSITION(S) HELD WITH FUND |
PRINCIPAL OCCUPATION DURING PAST FIVE YEARS | ||
| Robert M. Keith 50 |
President and Chief Executive Officer | (See above) | ||
| Robert Alster 50 |
Senior Vice President | Senior Vice President of the Investment Manager**, with which he has been associated since prior to 2006. | ||
| Liliana C. Dearth 42 |
Senior Vice President | Senior Vice President of the Investment Manager**, with which she has been associated since prior to 2006. | ||
| Philip L. Kirstein 65 |
Senior Vice President and Independent Compliance Officer | Senior Vice President and Independent Compliance Officer of the AllianceBernstein Funds 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 of Merrill Lynch Investment Managers, L.P. since prior to March 2003. | ||
| Emilie D. Wrapp 55 |
Secretary | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2006. | ||
| Joseph J. Mantineo 51 |
Treasurer and Chief Financial Officer | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2006. | ||
| Phyllis J. Clarke 50 |
Controller | Vice President of ABIS**, with which she has been associated since prior to 2006. |
| * | The address for each of the Fund’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
| ** | The Investment Manager, ABI and ABIS are affiliates of the Fund. |
| THE IBERO-AMERICA FUND • | 37 |
Management of the Fund
Information Regarding the Review and Approval of the Fund’s Investment Management and Administration Agreement (the “Advisory Agreement”)
The disinterested directors (the “directors”) of The Ibero-America Fund, Inc. (formerly The Spain Fund, Inc.) (the “Fund”) approved the continuance of the Advisory Agreement with the Investment Manager at a meeting held on November 10, 2010.
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Investment Manager, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Investment Manager and with experienced counsel who are independent of the Investment Manager, who advised on the relevant legal standards. The directors also discussed the proposed continuance in a private session with counsel and the Fund’s Senior Officer.
The directors considered their knowledge of the nature and quality of the services provided by the Investment Manager to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Investment Manager, their overall confidence in the Investment Manager’s integrity and competence they have gained from that experience, the Investment Manager’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Investment Manager’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AllianceBernstein Funds. The directors noted that they have four regular meetings each year, at each of which they receive presentations from the Investment Manager on the investment results of the Fund and review extensive materials and information presented by the Investment Manager.
The directors also considered all other factors they believed relevant, including the specific matters discussed below. In their deliberations, the directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Investment Manager to manage the Fund, and the overall arrangements between the Fund and the Investment Manager, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Investment Manager under the Advisory Agreement, including the quality of the
| 38 | • THE IBERO-AMERICA FUND |
investment research capabilities of the Investment Manager and the other resources it has dedicated to performing services for the Fund. They noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Investment Manager. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Investment Manager for the cost to it of providing certain clerical, accounting, administrative and other services provided at the Fund’s request by employees of the Investment Manager or its affiliates. The directors noted that no reimbursements have been made to date by the Fund to the Investment Manager as no requests for such reimbursements had been made. The quality of administrative and other services, including the Investment Manager’s role in coordinating the activities of the Fund’s other service providers, also were considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues, expenses and related notes indicating the profitability of the Fund to the Investment Manager for calendar years 2008 and 2009 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s Senior Officer. The directors reviewed the assumptions and methods of allocation used by the Investment Manager in preparing fund-specific profitability data, and noted that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Investment Manager’s relationship with the Fund, including those relating to its subsidiaries which provide shareholder and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of profitability between fund advisory contracts because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Investment Manager’s relationship with the Fund before taxes. The directors concluded that they were satisfied that the Investment Manager’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the benefits to the Investment Manager and its affiliates from their relationships with the Fund other than the fees payable under the Advisory Agreement, including but not limited to benefits relating to soft dollar arrangements (whereby the Investment Manager receives brokerage and research services from many of the brokers that execute purchases and sales of securities on behalf of its clients on an agency basis) and shareholder servicing fees paid by the Fund to a wholly owned subsidiary of the Investment Manager. The directors recognized that the Investment Manager’s profitability would be somewhat
| THE IBERO-AMERICA FUND • | 39 |
lower without these benefits. The directors understood that the Investment Manager also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year. At the November 2010 meeting, the directors reviewed information prepared by Lipper and the Investment Manager showing the Fund’s performance as compared with four indices, the Madrid General Net Dividend Reinvestment Index (the “Madrid General Net Index”), the Morgan Stanley Capital International (MSCI) Emerging Markets (EM) Latin America Index (the “MSCI EM Latin America Index”), the MSCI Spain Index and the IBEX 35 Net Dividend Reinvestment Index (the “IBEX 35 Net Index”) for various periods ended September 30, 2010. The directors noted that the Fund’s performance was above the Madrid General Net Index in the 1-, 3- and 5-year periods but below that index in the 10-year period. The Fund’s performance was above the IBEX 35 Net Index in all periods. The Fund’s performance was above the MSCI Spain Index in the 1-year period but below that index in all other periods. The Fund underperformed the MSCI EM Latin America Index in all periods. The directors also noted that effective January 20, 2010 the Fund changed its name The Ibero-America Fund, Inc. from The Spain Fund, Inc. to reflect a broadening of its investment strategies. As a result, the Fund’s investment performance prior to January 20, 2010 was not expected to be representative of performance under the new investment strategies. Based on their review, the directors concluded that the Fund’s relative investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the latest fiscal year actual management fee rate paid by the Fund and information prepared by Lipper concerning fee rates paid by other funds in the same Lipper category as the Fund (none of which invests primarily in Spanish equity securities.) The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds.
The directors noted that in connection with the settlement of the market timing matter with the New York Attorney General in December 2003, the Investment Manager agreed to material reductions (averaging 20%) in the fee schedules of most of the open-end funds sponsored by the Investment Manager and that such open-end Funds had benefited from such reductions since 2004. The directors noted that as a result of that settlement, the Investment Manager’s fees for managing open-end funds that invest in international securities are .75% of the first $2.5 billion of average daily net assets, .65% for average daily net assets over that level to $5 billion, and .60% for average daily net assets over $5 billion.
| 40 | • THE IBERO-AMERICA FUND |
As a result, the latest fiscal year actual management fee rate paid by the Fund was higher than the Investment Manager’s fee rate under such rate schedule.
The Investment Manager informed the directors that there are no institutional products managed by it that pursue an investment style substantially similar to that of the Fund. The directors reviewed relevant fee information from the Investment Manager’s Form ADV and noted that it charged institutional clients lower fees for advising comparably sized institutional accounts using strategies that differ from those of the Fund but which involve investments in securities of the same type that the Fund invests in (i.e., international equity securities). The Investment Manager reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional clients. In light of the substantial differences in services rendered by the Adviser to institutional clients as compared to funds such as the Fund, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The directors also considered the total expense ratio of the Fund in comparison to the fees and expenses of funds within a comparison group of funds created by Lipper (an Expense Group, which Lipper described as a representative sample of funds similar to the Fund). The expense ratio of the Fund was based on the Fund’s latest fiscal year. The directors view expense ratio information as relevant to their evaluation of the Investment Manager’s services because the Investment Manager is responsible for coordinating services provided to the Fund by others.
The information reviewed by the directors showed that the latest fiscal year actual management fee rate paid by the Fund of 83.5 basis points was lower than the Expense Group median. The directors also noted that the Fund’s total expense ratio was higher than the Expense Group median. The directors noted that the Fund was the second smallest in its comparison group and that the Fund’s size adversely affected its expense ratio. The directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors considered that the Fund is a small closed-end fund and that, apart from the returns on its investments, it was not expected to have meaningful asset growth (absent a rights offering or an acquisition). In such circumstances, they did not view the potential for realization of economies of scale as the Fund’s assets grow to be a material factor in their deliberations. They also noted that, if the Fund’s net assets were to increase materially, they would review whether potential economies of scale were being realized.
| THE IBERO-AMERICA FUND • | 41 |
SUMMARY OF GENERAL INFORMATION
| 42 | • THE IBERO-AMERICA FUND |
Summary of General Information
THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
ALLIANCEBERNSTEIN FAMILY OF FUNDS
Retirement Strategies Funds
| 2000 Retirement Strategy |
2020 Retirement Strategy |
2040 Retirement Strategy | ||
| 2005 Retirement Strategy |
2025 Retirement Strategy |
2045 Retirement Strategy | ||
| 2010 Retirement Strategy |
2030 Retirement Strategy |
2050 Retirement Strategy | ||
| 2015 Retirement Strategy |
2035 Retirement Strategy |
2055 Retirement Strategy |
We also offer Exchange Reserves,** which serves as the money market fund exchange vehicle for the AllianceBernstein mutual funds.
You should consider the investment objectives, risks, charges and expenses of any AllianceBernstein fund/portfolio carefully before investing. For free copies of our prospectuses, which contain this and other information, visit us online at www.alliancebernstein.com or contact your financial advisor. Please read the prospectus carefully before investing.
| * | Prior to January 20, 2010, The Ibero-America Fund was named The Spain Fund. Prior to March 1, 2010, Core Opportunities Fund was named the Focused Growth & Income Fund. Prior to August 31, 2010, Equity Income Fund was named Utility Income Fund. Prior to September 27, 2010, Real-Asset Strategy was named Multi-Asset Inflation Strategy. |
| ** | 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. |
| THE IBERO-AMERICA FUND • | 43 |
AllianceBernstein Family of Funds
Privacy Notice
Alliance, the AllianceBernstein Family of Funds and AllianceBernstein Investment Research and Management, Inc. (collectively, “Alliance” or “we”) understand the importance of maintaining the confidentiality of our customers’ nonpublic personal information. In order to provide financial products and services to our customers efficiently and accurately, we may collect nonpublic personal information about our customers from the following sources: (1) information we receive from account documentation, including applications or other forms (which may include information such as a customer’s name, address, social security number, assets and income) and (2) information about our customers’ transactions with us, our affiliates and others (including information such as a customer’s account balances and account activity).
It is our policy not to disclose nonpublic personal information about our customers (or former customers) except to our affiliates, or to others as permitted or required by law. From time to time, Alliance may disclose nonpublic personal information that we collect about our customers (or former customers), as described above, to non-affiliated third party providers, including those that perform processing or servicing functions and those that provide marketing services for us or on our behalf pursuant to a joint marketing agreement that requires the third party provider to adhere to Alliance’s privacy policy. We have policies and procedures to safe-guard nonpublic personal information about our customers (or former customers) which include: (1) restricting access to such nonpublic personal information and (2) maintaining physical, electronic and procedural safeguards that comply with federal standards to safeguard such nonpublic personal information.
THE IBERO-AMERICA FUND
(formerly The Spain Fund)
1345 Avenue of the Americas
New York, NY 10105
800.221.5672
| IAF-0151-1110 |
|
| 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 12(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 registered public accounting firms, KPMG LLP in 2009 and Tait, Weller & Baker LLP in 2010, 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 related to accounting and auditing issues, quarterly press release review (for those Funds that issue quarterly press releases), and preferred stock maintenance testing (for those Funds that issue preferred stock); and (iii) tax compliance, tax advice and tax return preparation.
| Audit Fees | Audit-Related Fees | Tax Fees | ||||||||||||
| The Ibero-America Fund |
2009 | $ | 40,518 | $ | — | $ | 14,275 | |||||||
| 2010 | $ | 35,000 | $ | — | $ | 14,438 | * | |||||||
* Paid to KPMG LLP
(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.
3
(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 (“Service Affiliates”):
| All Fees for Non-Audit Services Provided to the Portfolio, the Adviser and Service Affiliates |
Total Amount of Foregoing Column Pre- approved by the Audit Committee (Portion Comprised of Audit Related Fees) (Portion Comprised of Tax Fees) |
|||||||||
| The Ibero-America Fund |
2009 | $ | 173,524 | $ | 14,275 | |||||
| $ | — | |||||||||
| $ | (14,275 | ) | ||||||||
| 2010 | $ | 189,302 | * | $ | 14,438 | |||||
| $ | — | |||||||||
| $ | (14,438 | ) | ||||||||
* Paid to KPMG LLP
(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:
| Antonio Eraso | Baldomero Falcones Jaquotot | |
| William H. Foulk, Jr | Luis Abril Perez | |
| Inmaculada de Habsburgo-Lorena | Daniel de Fernando Garcia |
| 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.
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| ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Statement of Policies and Procedures for Proxy Voting 1.
| 1. | Introduction |
As a registered investment adviser, AllianceBernstein L.P. (“AllianceBernstein”, “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 intended to maximize shareholder value. We consider ourselves shareholder advocates and take this responsibility very seriously. 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 AllianceBernstein’s investment groups investing on behalf of clients in both U.S. and non-U.S. securities.
| 2. | Proxy Policies |
Our proxy voting policies are principle-based rather than rules-based. We adhere to a core set of principles that are described in this Statement and in our Proxy Voting Manual. We assess each proxy proposal in light of those principles. Our proxy voting “litmus test” will always be what we view as most likely to maximize shareholder value. We believe that authority and accountability for setting and executing corporate policies, goals and compensation should generally rest with the board of directors and senior management. In return, we support strong investor rights that allow shareholders to hold directors and management accountable if they fail to act in the best interests of shareholders. In addition, when a company engages in illegal activities or other anti-social behavior, we exercise our proxy voting rights considering such behavior.
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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. AllianceBernstein reserves the right to depart from these guidelines in order to make voting decisions that are in our clients’ best interests. In reviewing proxy issues, we will apply the following general policies:
| 2.1. | Corporate Governance |
AllianceBernstein’s proxy voting policies recognize the importance of good corporate governance in ensuring that management and the board of directors fulfill their obligations to shareholders. We favor proposals promoting transparency and accountability within a company. We support the appointment of a majority of independent directors on key committees and generally support separating the positions of chairman and chief executive officer, except in cases where a company has sufficient counter-balancing governance in place. Because we believe that good corporate governance requires shareholders to have a meaningful voice in the affairs of the company, we generally will support shareholder proposals which request that companies amend their by-laws to provide that director nominees be elected by an affirmative vote of a majority of the votes cast. Furthermore, we have written to the SEC in support of shareholder access to corporate proxy statements under specified conditions with the goal of serving the best interests of all shareholders.
| 2.2. | 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. Therefore, we may withhold votes for directors (or vote against directors in non-U.S. markets) who 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. (We may vote against directors under these circumstances if the company has adopted a majority voting policy because, if a
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company has adopted such a policy, withholding votes from directors is not possible.) 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, and we may abstain or vote against directors of non-U.S. issuers where there is insufficient information about the nominees disclosed in the proxy statement. Also, we will generally not withhold votes for directors who meet the definition of independence promulgated by the primary exchange on which the company’s shares are traded or set forth in the code we determine to be best practice in the country where the subject company is domiciled. Finally, because we believe that cumulative voting in single shareholder class structures provides a disproportionately large voice to minority shareholders in the affairs of a company, we will generally vote against such proposals and vote for management proposals seeking to eliminate cumulative voting. However, in dual class structures (such as A&B shares) where the shareholders with a majority economic interest have a minority voting interest, we will generally vote in favor of cumulative voting.
| 2.3. | Appointment of Auditors |
AllianceBernstein believes that the company is in the best position to choose its auditors, so we will generally support management’s recommendation. However, we recognize that there are inherent conflicts when a company’s independent auditor performs substantial non-audit services for the company. The Sarbanes-Oxley Act of 2002 prohibits certain categories of services by auditors to U.S. issuers, making this issue less prevalent in the U.S. Nevertheless, in reviewing a proposed auditor, we will consider the fees paid for non-audit services relative to total fees and whether there are other reasons for us to question the independence or performance of the auditors.
| 2.4. | 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, AllianceBernstein will cast its votes in accordance with management’s recommendations 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
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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 plan 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 100% 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. We will support shareholder proposals that seek to eliminate dual class voting structures.
| 2.5. | Corporate Restructurings, Mergers and Acquisitions |
AllianceBernstein 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 our research analysts that cover the company and our investment professionals managing the portfolios in which the stock is held.
| 2.6. | Proposals Affecting Shareholder Rights |
AllianceBernstein 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.
| 2.7. | Anti-Takeover Measures |
AllianceBernstein believes that measures that impede corporate transactions (such as 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. Therefore, we will generally oppose proposals, regardless of whether they are advanced by management or shareholders, when their purpose or effect is to entrench management or excessively or inappropriately dilute shareholder ownership. Conversely, we support proposals that would restrict or otherwise eliminate anti-takeover or anti-shareholder measures that have already been adopted by corporate issuers. For example, we will support
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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 the authorization of blank check preferred stock, classified boards and supermajority vote requirements) that appear to be anti-shareholder or intended as management entrenchment mechanisms.
| 2.8. | Executive Compensation |
AllianceBernstein 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 benefits offered to company employees. 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. In general, we will analyze the proposed plan to ensure that shareholder equity will not be excessively diluted taking into account shares available for grant under the proposed plan as well as other existing plans. We generally will oppose plans that allow stock options to be granted with below market value exercise prices on the date of issuance or permit re-pricing 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. In markets where remuneration reports are not required for all companies (for instance, in the U.S. such reports are required only for companies that received funds from the Troubled Asset Relief Program (“TARP”) but not other companies), we will generally support shareholder proposals asking the board to adopt a policy (i.e., “say on pay”) that the company’s shareholders be given the opportunity to vote on an advisory resolution to approve the compensation committee’s report. Although “say on pay” votes are by nature only broad indications of shareholder views, they do lead to more compensation-related dialogue between management and shareholders and help ensure that the important common objective of management and shareholders is met, which is maximizing the value of the company. In markets where votes to approve remuneration reports are required, we review the reports on a case-by-case basis. With respect to companies that have received governmental assistance through government programs such as TARP, we will generally oppose shareholder proposals that seek to impose greater executive compensation restrictions on subject companies than are required
9
under the applicable program because such restrictions could create a competitive disadvantage for the subject company. We believe the U.S. Securities and Exchange Commission (“SEC”) took appropriate steps to ensure more complete and transparent disclosure of executive compensation when it issued modified executive compensation and corporate governance disclosure rules in 2006 and February 2010. Therefore, while we will consider them on a case-by-case basis, we generally vote against shareholder proposals seeking additional disclosure of executive and director compensation, including proposals that seek to specify the measurement of performance-based compensation, if the company is subject to SEC rules. Finally, we will support requiring a shareholder vote on management proposals to provide severance packages that exceed 2.99 times the sum of an executive officer’s base salary plus bonus that are triggered by a change in control. Finally, we will support shareholder proposals requiring a company to expense compensatory employee stock options (to the extent the jurisdiction in which the company operates does not already require it) because we view this form of compensation as a significant corporate expense that should be appropriately accounted for.
| 2.9. | Social and Corporate Responsibility |
These types of shareholder proposals often raise complex and controversial issues that may have both a financial and non-financial effect on the company. They reflect increasing shareholder concern about Socially Responsible Investing, which may include environmental, social and governance-related issues, as well as other forms of responsible investing and proxy voting. These proposals present a special set of challenges because, beyond distinctions between legal and illegal activity, perspectives on social good vary widely, not only across borders but also from shareholder to shareholder.
Maximizing long-term shareholder value is the overriding concern in considering these proposals, so AllianceBernstein will review and analyze them on a case-by-case basis to determine what effect, if any, they will have on the future earnings of the company. We will vote against proposals that are unduly burdensome or result in unnecessary and excessive costs to the company with no discernable benefits to shareholders. We may abstain from voting on social proposals that do not have a readily determinable financial impact on shareholder value.
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| 3. | Proxy Voting Procedures |
| 3.1. | Proxy Voting Committees |
Our growth and value investment groups have formed separate proxy voting committees to establish general proxy policies for AllianceBernstein 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, interested shareholder groups and others as necessary to discuss proxy issues. Members of the committees 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.
| 3.2. | Conflicts of Interest |
AllianceBernstein 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 administer, who distributes AllianceBernstein-sponsored mutual funds, or with whom we have, or one of our employees has, a business or personal relationship that may affect (or may be reasonably viewed as affecting) how we vote on the issuer’s proxy. Similarly, AllianceBernstein may have a potentially 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 based solely on our clients’ best interests. Additionally, we have implemented procedures to ensure that our votes are not the product of a material conflict of interest, including: (i) on an annual basis, the proxy committees taking reasonable steps to evaluate (A) the nature of AllianceBernstein’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 (B) any client that has sponsored or has a 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
11
potential conflict that he or she is aware of (including personal relationships) and any contact that he or she has 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 third party research services to ensure that our voting decision is consistent with our clients’ best interests.
Because under certain circumstances AllianceBernstein considers the recommendation of third party research services, the proxy committees take reasonable steps to verify that any third party research service is, in fact, independent taking into account 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 recommendations in an impartial manner and in the best interests of our clients.
| 3.3. | Proxies of Certain Non-U.S. 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 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. Absent compelling reasons to the contrary, AllianceBernstein believes that the benefit to the client of exercising the vote is outweighed by the cost of voting (i.e., not being able to sell the shares during this period). Accordingly, if share blocking is required we generally choose not to vote those shares.
AllianceBernstein seeks to vote all proxies for securities held in client accounts for which we have proxy voting authority. However, in non-US markets administrative issues beyond our control may at times prevent AllianceBernstein from voting such proxies. For example, AllianceBernstein may receive meeting notices after the cut-off date for voting or without sufficient time to fully consider the proxy. As another
12
example, certain markets require periodic renewals of powers of attorney that local agents must have from our clients prior to implementing AllianceBernstein’s voting instructions.
| 3.4. | Loaned Securities |
Many clients of AllianceBernstein have entered into securities lending arrangements with agent lenders to generate additional revenue. AllianceBernstein will not be able to vote securities that are on loan under these types of arrangements. However, under rare circumstances, for voting issues that may have a significant impact on the investment, we may request that clients recall securities that are on loan if we determine that the benefit of voting outweighs the costs and lost revenue to the client or fund and the administrative burden of retrieving the securities.
| 3.5. | Proxy Voting Records |
Clients may obtain information about how we voted proxies on their behalf by contacting their AllianceBernstein administrative representative. Alternatively, clients may make a written request for proxy voting information to: Mark R. Manley, Senior Vice President & Chief Compliance Officer, AllianceBernstein L.P., 1345 Avenue of the Americas, New York, NY 10105.
[ALTERNATIVE LANGUAGE FOR U.S. MUTUAL FUNDS]
You may obtain 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, go to the Securities and Exchange Commission’s web site at www.sec.gov or call AllianceBernstein at (800) 227-4618.
| ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
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| Portfolio Manager |
Total Number of Registered Investment Companies Managed |
Total Assets of Registered Investment Companies Managed |
Number of
Registered Investment Companies Managed with Performance-based Fees |
Total Assets
of Registered Investment Companies Managed with Performance-based Fees | ||||
| Liliana Dearth |
1 | $7,000,000 | None | None |
POOLED INVESTMENT VEHICLES
| Portfolio Manager |
Total Number of Pooled Investment Vehicles Managed |
Total Assets of Pooled Investment Vehicles Managed |
Number of Pooled Investment Vehicles Managed with Performance-based Fees |
Total Assets of Pooled Investment Vehicles Managed with Performance-based Fees | ||||
| Liliana Dearth |
None | None | None | None |
OTHER ACCOUNTS
| Portfolio Manager |
Total Number of Other Accounts Managed |
Total Assets of Other Accounts Managed |
Number of Other Accounts Managed with Performance-based Fees |
Total Assets
of Other Accounts with Performance-based Fees | ||||
| Liliana Dearth |
None | None | None | None |
Investment Professional Conflict of Interest Disclosure
As an investment adviser and fiduciary, Alliance (the “Adviser”) owes its clients and shareholders an undivided duty of loyalty. We recognize that conflicts of interest are inherent in our business and accordingly have developed policies and procedures (including oversight monitoring) reasonably designed to detect, manage and mitigate the effects of actual or potential conflicts of interest in the area of employee personal trading, managing multiple accounts for multiple clients, including AllianceBernstein Mutual Funds, and allocating investment opportunities. Investment professionals, including portfolio managers and research analysts, are subject to the above-mentioned policies and oversight monitoring to ensure that all clients are treated equitably. We place the interests of our clients first and expect all of our employees to meet their fiduciary duties.
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Employee Personal Trading. The Adviser has adopted a Code of Business Conduct and Ethics that is designed to detect and prevent conflicts of interest when investment professionals and other personnel of the Adviser own, buy or sell securities which may be owned by, or bought or sold for, clients. Personal securities transactions by an employee may raise a potential conflict of interest when an employee owns or trades in a security that is owned or considered for purchase or sale by a client, or recommended for purchase or sale by an employee to a client. Subject to the reporting requirements and other limitations of its Code of Business Conduct and Ethics, the Adviser permits its employees to engage in personal securities transactions, and also allows them to acquire investments in the AllianceBernstein Mutual Funds through direct purchase and/or notionally in connection with deferred incentive compensation awards. the Adviser’s Code of Ethics and Business Conduct requires disclosure of all personal accounts and maintenance of brokerage accounts with designated broker-dealers (except transactions in open-end mutual funds) approved by the Adviser. The Code also requires preclearance of all securities transactions (except transactions in mutual funds) and imposes a one-year holding period for securities purchased by employees to discourage short-term trading.
Managing Multiple Accounts for Multiple Clients. The Adviser has compliance policies and oversight monitoring in place to address conflicts of interest relating to the management of multiple accounts for multiple clients. Conflicts of interest may arise when an investment professional has responsibilities for the investments of more than one account because the investment professional may be unable to devote equal time and attention to each account. The investment professional or investment professional teams for each client may have responsibilities for managing all or a portion of the investments of multiple accounts with a common investment strategy, including other registered investment companies, unregistered investment vehicles, such as hedge funds, pension plans, separate accounts, collective trusts and charitable foundations. Among other things, the Adviser’s policies and procedures provide for the prompt dissemination to investment professionals of initial or changed investment recommendations by analysts so that investment professionals are better able to develop investment strategies for all accounts they manage. In addition, investment decisions by investment professionals are reviewed for the purpose of maintaining uniformity among similar accounts and ensuring that accounts are treated equitably. No investment professional that manages client accounts carrying performance fees is compensated directly or specifically for the performance of those accounts. Investment professional compensation reflects a broad contribution in multiple dimensions to long-term investment success for our clients and is not tied specifically to the performance of any particular client’s account, nor is it directly tied to the level or change in level of assets under management.
Allocating Investment Opportunities. The Adviser has policies and procedures intended to address conflicts of interest relating to the allocation of investment opportunities. These policies and procedures are designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The investment professionals at the Adviser routinely are required to select and allocate investment opportunities among accounts. Portfolio holdings, position sizes, and
15
industry and sector exposures tend to be similar across similar accounts, which minimize the potential for conflicts of interest relating to the allocation of investment opportunities. Nevertheless, investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
The Adviser’s procedures are also designed to prevent potential conflicts of interest that may arise when the Adviser has a particular financial incentive, such as a performance-based management fee, relating to an account. An investment professional may perceive that he or she has an incentive to devote more time to developing and analyzing investment strategies and opportunities or allocating securities preferentially to accounts for which the Adviser could share in investment gains.
To address these conflicts of interest, the Adviser’s policies and procedures require, among other things, the prompt dissemination to investment professionals of any initial or changed investment recommendations by analysts; the aggregation of orders to facilitate best execution for all accounts; price averaging for all aggregated orders; objective allocation for limited investment opportunities (e.g., on a rotational basis) to ensure fair and equitable allocation among accounts; and limitations on short sales of securities. These procedures also require documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account.
(a)(3) Portfolio Manager Compensation
The Adviser’s compensation program for investment professionals is designed to be competitive and effective in order to attract and retain the highest caliber employees. The compensation program for investment professionals is designed to reflect their ability to generate long-term investment success for our clients, including shareholders of the AllianceBernstein Mutual Funds. Investment professionals do not receive any direct compensation based upon the investment returns of any individual client account, nor is compensation tied directly to the level or change in level of assets under management. Investment professionals’ annual compensation is comprised of the following:
(i) Fixed base salary: This is generally the smallest portion of compensation. The base salary is a relatively low, fixed salary within a similar range for all investment professionals. The base salary is determined at the outset of employment based on level of experience, does not change significantly from year-to-year and hence, is not particularly sensitive to performance.
(ii) Discretionary incentive compensation in the form of an annual cash bonus: The Adviser’s overall profitability determines the total amount of incentive compensation available to investment professionals. This portion of compensation is determined subjectively based on qualitative and quantitative factors. In evaluating this component of an investment professional’s compensation, the Adviser considers the contribution to his/her team or discipline as it relates to that team’s overall contribution to
16
the long-term investment success, business results and strategy of the Adviser. Quantitative factors considered include, among other things, relative investment performance (e.g., by comparison to competitor or peer group funds or similar styles of investments, and appropriate, broad-based or specific market indices), and consistency of performance. There are no specific formulas used to determine this part of an investment professional’s compensation and the compensation is not tied to any pre-determined or specified level of performance. The Adviser also considers qualitative factors such as the complexity and risk of investment strategies involved in the style or type of assets managed by the investment professional; success of marketing/business development efforts and client servicing; seniority/length of service with the firm; management and supervisory responsibilities; and fulfillment of the Adviser’s leadership criteria.
(iii) Discretionary incentive compensation in the form of awards under the Adviser’s Partners Compensation Plan (“deferred awards”): The Adviser’s overall profitability determines the total amount of deferred awards available to investment professionals. The deferred awards are allocated among investment professionals based on criteria similar to those used to determine the annual cash bonus. There is no fixed formula for determining these amounts. Deferred awards, for which, prior to 2010, there were various investment options, vest over a four-year period and are generally forfeited if the employee resigns or the Adviser terminates his/her employment. Prior to 2009, investment options under the deferred awards plan included many of the same AllianceBernstein Mutual Funds offered to mutual fund investors. Beginning in 2009, all deferred awards are in the form of the Adviser’s publicly traded equity securities. Prior to 2002, investment professional compensation also included discretionary long-term incentive in the form of restricted grants of the Adviser’s Master Limited Partnership Units.
(iv) Contributions under the Adviser’s Profit Sharing/401(k) Plan: The contributions are based on the Adviser’s overall profitability. The amount and allocation of the contributions are determined at the sole discretion of the Adviser.
(v) Compensation under the Adviser’s Special Option Program: Under this program, certain investment professionals may be permitted to allocate a portion of their deferred awards to options to buy the Adviser’s publicly traded equity securities, and to receive a two-for-one match of such allocated amount. The determination of who may be eligible to participate in the Special Option Program is made at the sole discretion of the Adviser.
(a) (4) The dollar range of the Fund’s equity securities owned directly or beneficially by the Fund’s portfolio managers as of the Fund’s fiscal year ended November 30, 2010 is set forth below:
| DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND | ||
| Liliana Dearth |
None |
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| ITEM 9. | 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 10. | 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 this item.
| ITEM 11. | 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-3 (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 changes in the registrant’s internal controls over financial reporting that occurred during the second fiscal quarter of the period that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
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| ITEM 12. | EXHIBITS. |
The following exhibits are attached to this Form N-CSR:
| EXHIBIT NO. |
DESCRIPTION OF EXHIBIT | |
| 12 (a) (1) | Code of Ethics that is subject to the disclosure of Item 2 hereof | |
| 12 (b) (1) | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 12 (b) (2) | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 12 (c) | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
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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 Ibero-America Fund, Inc. | ||
| By: | /S/ ROBERT M. KEITH | |
| Robert M. Keith President | ||
Date: January 28, 2011
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: | /S/ ROBERT M. KEITH | |
| Robert M. Keith President |
Date: January 28, 2011
| By: | /S/ JOSEPH J. MANTINEO | |
| Joseph J. Mantineo Treasurer and Chief Financial Officer | ||
Date: January 28, 2011
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