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<PAGE> PAGE 2
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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SIGNATURE JEROME L. DUFFY
TITLE TREASURER
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1996
ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000858998
<NAME> GROWTH FUND OF SPAIN, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 194,831
<INVESTMENTS-AT-VALUE> 255,493
<RECEIVABLES> 4,705
<ASSETS-OTHER> 5,170
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 265,368
<PAYABLE-FOR-SECURITIES> 1,156
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<OTHER-ITEMS-LIABILITIES> 277
<TOTAL-LIABILITIES> 1,433
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 187,360
<SHARES-COMMON-STOCK> 16,840
<SHARES-COMMON-PRIOR> 17,099
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<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 263,935
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<INTEREST-INCOME> 2,285
<OTHER-INCOME> 0
<EXPENSES-NET> (2,957)
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<REALIZED-GAINS-CURRENT> 11,311
<APPREC-INCREASE-CURRENT> 33,898
<NET-CHANGE-FROM-OPS> 51,058
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,157)
<DISTRIBUTIONS-OF-GAINS> (4,942)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (259)
<SHARES-REINVESTED> 0
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<PER-SHARE-NAV-BEGIN> 13.33
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</TABLE>
SUPPLEMENTARY REPORT OF INDEPENDENT AUDITORS
Board of Trustees
Kemper Funds
In planning and performing our audit of the financial statements of
each of the Kemper Funds listed in Exhibit A attached hereto (the
"Funds") for the year ended as of the date listed in Exhibit A
attached hereto ("Report Date"), we considered their internal control
structure, including procedures for safeguarding securities, in order
to determine our auditing procedures for the purpose of expressing
our opinion on their financial statements and to comply with the
requirements of Form N-SAR, not to provide assurance on the internal
control structure.
The management of the Funds is responsible for establishing and
maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to
assess the expected benefits and related costs of internal control
structure policies and procedures. Two of the objectives of an
internal control structure are to provide management with reasonable,
but not absolute, assurance that assets are safeguarded against loss
from unauthorized use or disposition and that transactions are
executed in accordance with management's authorization and recorded
properly to permit preparation of financial statements in conformity
with generally accepted accounting principles.
Because of inherent limitations in any internal control structure,
errors or irregularities may occur and not be detected. Also,
projection of any evaluation of the structure to future periods is
subject to the risk that it may become inadequate because of changes
in conditions or that the effectiveness of the design and operation
may deteriorate.
Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control structure
that might be material weaknesses under standards established by the
American Institute of Certified Public Accountants. A material
weakness is a condition in which the design or operation of the
specific internal control structure elements does not reduce to a
relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial
statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving the
internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses as defined
above as of Report Date.
This report is intended solely for the information and use of
management and the Securities and Exchange Commission.
ERNST & YOUNG LLP
Chicago, Illinois
January 17, 1997
Kemper Funds Exhibit A
November 30, 1996
Kemper High Income Trust
Kemper Intermediate Government Trust
Kemper Multi-Market Income Trust
Kemper Strategic Municipal Income Trust
Kemper Municipal Income Trust
Kemper Strategic Income Fund
Kemper Asian Growth Fund
Kemper Europe Fund
The Growth Fund of Spain, Inc.
Exhibit 77Q1(e)
The Growth Fund of Spain, Inc.
Form N-SAR for the period ended 11/30/96
File No. 811-6022
SUB-ADVISORY AGREEMENT
(Form 2)
AGREEMENT made this 1st day of December, 1996, by and
between ZURICH KEMPER INVESTMENTS, INC., a Delaware corporation
(the "Adviser") and ZURICH INVESTMENT MANAGEMENT LIMITED, an
English corporation (the "Sub-Adviser").
WHEREAS, THE GROWTH FUND OF SPAIN, INC., a Massachusetts
business trust (the "Fund") is a management investment company
registered under the Investment Company Act of 1940;
WHEREAS, the Fund has retained the Adviser to render to it
investment advisory and management services with regard to the
Fund's sole series (the "initial series") pursuant to an
Investment Management Agreement (the "Management Agreement"); and
WHEREAS, the Adviser desires at this time to retain the
Sub-Adviser to render investment advisory and management services
with respect to that portion of the portfolio of the Fund's
initial series allocated to the Sub-Adviser by the Adviser for
management of foreign securities, including foreign currency
transactions and related investments, and the Sub-Adviser is
willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants
hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. The Adviser hereby employs the Sub-Adviser to manage
the investment and reinvestment of the assets of the initial
series of the Fund allocated by the Adviser in its sole
discretion to the Sub-Adviser for management of foreign
securities, including foreign currency transactions and related
investments, in accordance with the applicable investment
objectives, policies and limitations and subject to the
supervision of the Adviser and the Board of Trustees of the Fund
for the period and upon the terms herein set forth, and to place
orders for the purchase or sale of portfolio securities for the
Fund's account with brokers or dealers selected by the
Sub-Adviser; and, in connection therewith, the Sub-Adviser is
authorized as the agent of the Fund to give instructions to the
Custodian of the Fund as to the deliveries of securities and
payments of cash for the account of the Fund. In connection with
the selection of such brokers or dealers and the placing of such
orders, the Sub-Adviser is directed to seek for the Fund best
execution of orders. Subject to such policies as the Board of
Trustees of the Fund determines and subject to satisfying the
requirements of Section 28(e) of the Securities Exchange Act of
1934, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this
Agreement or otherwise, solely by reason of its having caused the
Fund to pay a broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of
commission another broker or dealer would have charged for
effecting that transaction, if the Sub-Adviser determined in good
faith that such amount of commission was reasonable in relation
to the value of the brokerage and research services provided by
such broker or dealer viewed in terms of either that particular
transaction or the Sub-Adviser's overall responsibilities with
respect to the clients of the Sub-Adviser as to which the
Sub-Adviser exercises investment discretion. The Adviser
recognizes that all research services and research that the
Sub-Adviser receives are available for all clients of the
Sub-Adviser, and that the Fund and other clients of the
Sub-Adviser may benefit thereby. The investment of funds shall
be subject to all applicable restrictions of the Agreement and
Declaration of Trust and By-Laws of the Fund as may from time to
time be in force.
The Sub-Adviser accepts such employment and agrees during
such period to render such investment management services, to
furnish related office facilities and equipment and clerical,
bookkeeping and administrative services for the Fund, to permit
any of its officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions and
to assume the obligations herein set forth for the compensation
herein provided. The Sub-Adviser shall for all purposes herein
provided be deemed to be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no
authority to act for or represent the Fund or the Adviser in any
way or otherwise be deemed an agent of the Fund or the Adviser.
It is understood and agreed that the Sub-Adviser, by separate
agreements with the Fund, may also serve the Fund in other
capacities.
The Sub-Adviser will keep the Fund and the Adviser informed
of developments materially affecting the Fund and shall, on the
Sub-Adviser's own initiative and as reasonably requested by the
Adviser or the Fund, furnish to the Fund and the Adviser from
time to time whatever information the Adviser reasonably believes
appropriate for this purpose.
The Sub-Adviser agrees that, in the performance of the
duties required of it by this Agreement, it will comply with the
Investment Advisers Act of 1940 and the Investment Company Act of
1940, and all rules and regulations thereunder, and all
applicable laws and regulations and with any applicable
-2-
procedures adopted by the Fund's Board of Trustees and identified
in writing to the Sub-Adviser.
The Sub-Adviser shall provide the Adviser with such
investment portfolio accounting and shall maintain and provide
such detailed records and reports as the Adviser may from time to
time reasonably request, including without limitation, daily
processing of investment transactions and cash positions,
periodic valuations of investment portfolio positions as required
by the Adviser, monthly reports of the investment portfolio and
all investment transactions and the preparation of such reports
and compilation of such data as may be required by the Adviser to
comply with the obligations imposed upon it under Management
Agreement.
The Sub-Adviser shall provide adequate security with respect
to all materials, records, documents and data relating to any of
its responsibilities pursuant to this Agreement including any
means for the effecting of securities transactions.
The Sub-Adviser agrees that it will make available to the
Adviser and the Fund promptly upon their request copies of all of
its investment records and ledgers with respect to the Fund to
assist the Adviser and the Fund in monitoring compliance with the
Investment Company Act of 1940 and the Investment Advisers Act of
1940, as well as other applicable laws. The Sub-Adviser will
furnish the Fund's Board of Trustees such periodic and special
reports with respect to the Fund's portfolio as the Adviser or
the Board of Trustees may reasonably request.
In compliance with the requirements of Rule 31a-3 under the
Investment Company Act of 1940, the Sub-Adviser hereby agrees
that any records that it maintains for the Fund are the property
of the Fund and further agrees to surrender promptly to the Fund
copies of any such records upon the Fund's request. The Sub-
Adviser further agrees to preserve for the periods prescribed by
Rule 31a-2 under the Investment Company Act of 1940 any records
with respect to the Sub-Adviser's duties hereunder required to be
maintained by Rule 31a-1 under the such Act to the extent that
the Sub-Adviser prepares and maintains such records pursuant to
this Agreement and to preserve the records required by Rule 204-2
under the Investment Advisers Act of 1940 for the period
specified in that Rule.
The Sub-Adviser agrees that it will immediately notify the
Adviser and the Fund in the event that the Sub-Adviser: (i)
becomes subject to a statutory disqualification that prevents the
Sub-Adviser from serving as an investment adviser pursuant to
this Agreement; or (ii) is or expects to become the subject of an
administrative proceeding or enforcement action by the United
States Securities and Exchange Commission, the Investment
Management Regulatory Organization ("IMRO") or other regulatory
authority.
-3-
The Sub-Adviser represents that it is an investment adviser
registered under the Investment Advisers Act of 1940 and other
applicable laws and it is regulated by IMRO and will treat the
Fund as a Non-Private Customer as defined by IMRO. The Sub-
Adviser agrees to maintain the completeness and accuracy of its
registration on Form ADV in accordance with all legal
requirements relating to that Form. The Sub-Adviser acknowledges
that it is an "investment adviser" to the Fund within the meaning
of the Investment Company Act of 1940 and the Investment Advisers
Act of 1940.
The Sub-Adviser shall be responsible maintaining an
appropriate compliance program to ensure that the services
provided by it under this Agreement are performed in a manner
consistent with applicable laws and the terms of this Agreement.
Furthermore, the Sub-Adviser shall maintain and enforce a Code of
Ethics that is in form and substance satisfactory to the Adviser.
Sub-Adviser agrees to provide such reports and certifications
regarding its compliance program as the Adviser or the Fund
shall reasonably request from time to time.
2. In the event that there are, from time to time, one or
more additional series of the Fund with respect to which the
Adviser desires to retain the Sub-Adviser to render investment
advisory and management services hereunder, the Adviser shall
notify the Sub-Adviser in writing. If the Sub-Adviser is willing
to render such services, it shall notify the Adviser in writing
whereupon such additional series shall become subject to this
Agreement.
3. For the services and facilities described in Section 1,
the Adviser will pay to the Sub-Adviser, at the end of each
calendar month, a sub-advisory fee computed at an annual rate of
.35% of that portion of the average daily net assets of the
initial series of the Fund that is allocated by the Adviser to
the Sub-Adviser for management.
For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration
on the basis of the number of days that the Agreement is in
effect during the month and year, respectively.
4. The services of the Sub-Adviser under this Agreement
are not to be deemed exclusive, and the Sub-Adviser shall be free
to render similar services or other services to others so long as
its services hereunder are not impaired thereby.
5. The Sub-Adviser shall arrange, if desired by the Fund,
for officers or employees of the Sub-Adviser to serve, without
compensation from the Fund, as trustees, officers or agents of
the Fund if duly elected or appointed to such positions and
subject to their individual consent and to any limitations
imposed by law.
-4-
6. The net asset value for each series of the Fund
subject to this Agreement shall be calculated as the Board of
Trustees of the Fund may determine from time to time in
accordance with the provisions of the Investment Company Act of
1940. On each day when net asset value is not calculated, the
net asset value of a series shall be deemed to be the net asset
value of such series as of the close of business on the last day
on which such calculation was made for the purpose of the
foregoing computations.
7. Subject to applicable statutes and regulations, it is
understood that certain trustees, officers or agents of the Fund
are or may be interested in the Sub-Adviser as officers,
directors, agents, shareholders or otherwise, and that the
officers, directors, shareholders and agents of the Sub-Adviser
may be interested in the Fund otherwise than as a trustee,
officer or agent.
8. The Sub-Adviser shall not be liable for any error of
judgment or of law or for any loss suffered by the Fund or the
Adviser in connection with the matters to which this Agreement
relates, except loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser in the
performance of its obligations and duties or by reason of its
reckless disregard of its obligations and duties under this
Agreement.
9. This Agreement shall become effective with respect to
the initial series of the Fund on the date hereof and shall
remain in full force until April 1, 1998, unless sooner
terminated as hereinafter provided. This Agreement shall
continue in force from year to year thereafter with respect to
each such series, but only as long as such continuance is
specifically approved for each series at least annually in the
manner required by the Investment Company Act of 1940 and the
rules and regulations thereunder; provided, however, that if the
continuation of this Agreement is not approved for a series, the
Sub-Adviser may continue to serve in such capacity for such
series in the manner and to the extent permitted by the
Investment Company Act of 1940 and the rules and regulations
thereunder.
This Agreement shall automatically terminate in the event of
its assignment or in the event of the termination of the
Management Agreement and may be terminated at any time with
respect to any series subject to this Agreement without the
payment of any penalty by the Adviser or by the Sub-Adviser on
sixty (60) days written notice to the other party. The Fund may
effect termination with respect to any such series without
payment of any penalty by action of the Board of Trustees or by
vote of a majority of the outstanding voting securities of such
series on sixty (60) days written notice to the Adviser and the
Sub-Adviser.
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This Agreement may be terminated with respect to any series
at any time without the payment of any penalty by the Board of
Trustees of the Fund, by vote of a majority of the outstanding
voting securities of such series or by the Adviser in the event
that it shall have been established by a court of competent
jurisdiction that the Sub-Adviser or any officer or director of
the Sub-Adviser has taken any action which results in a breach of
the covenants of the Sub-Adviser set forth herein.
The terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth
in the Investment Company Act of 1940 and the rules and
regulations thereunder.
Termination of this Agreement shall not affect the right of
the Sub-Adviser to receive payments on any unpaid balance of the
compensation described in Section 3 earned prior to such
termination.
10. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
11. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for the
receipt of such notice.
12. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Illinois.
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13. This Agreement is the entire contract between the
parties relating to the subject matter hereof and supersedes all
prior agreements between the parties relating to the subject
matter hereof.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have
caused this Agreement to be executed as of the day and year first
above written.
ZURICH KEMPER INVESTMENTS, INC.
By:
--------------------------------
Title:
-----------------------------
ZURICH INVESTMENT MANAGEMENT LIMITED
By:
---------------------------------
Title:
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LKW|W:\FUNDS\NSAR.EXH\GSP\SUBZIML.F-2|011597
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