<PAGE>
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED NOVEMBER 30, 1997
THE GROWTH FUND OF
SPAIN, INC.
"...It was a strong year for Spain due largely
to falling interest rates and a buoyant
economy that saw the gross domestic product
expand by more than three percent. ..."
[LOGO] KEMPER FUNDS
LONG-TERM INVESTING IN A SHORT-TERM WORLD-SM-
<PAGE>
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
7
LARGEST HOLDINGS
8
PORTFOLIO OF INVESTMENTS
10
REPORT OF INDEPENDENT
AUDITORS
11
FINANCIAL STATEMENTS
13
NOTES TO FINANCIAL STATEMENTS
16
FINANCIAL HIGHLIGHTS
17
DESCRIPTION OF DIVIDEND
REINVESTMENT PLAN
- --------------------------------------------------------------------------------
AT A GLANCE
- --------------------------------------------------------------------------------
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<S> <C>
..................................
BASED ON NAV 29.86%
..................................
BASED ON MARKET PRICE 46.49%
..................................
</TABLE>
- --------------------------------------------------------------------------------
NET ASSET VALUE AND MARKET PRICE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
11/30/97 11/30/96
<S> <C> <C>
............................................
NET ASSET VALUE $19.06 $ 15.67
............................................
MARKET PRICE $17.00 $ 12.50
............................................
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE SHOWS PER SHARE DIVIDEND INFORMATION FOR THE FUND AS OF
NOVEMBER 30, 1997.
<TABLE>
<CAPTION>
<S> <C>
............................................
INCOME DIVIDEND $0.17
............................................
SHORT-TERM CAPITAL GAIN $0.32
............................................
LONG-TERM CAPITAL GAIN $0.51
</TABLE>
STATISTICAL NOTE: TOTAL RETURN MEASURES AGGREGATE CHANGE IN NET ASSET
VALUE/MARKET PRICE ASSUMING REINVESTMENT OF DIVIDENDS. RETURNS ARE HISTORICAL
AND DO NOT REPRESENT FUTURE PERFORMANCE. MARKET PRICE, NET ASSET VALUE AND
RETURNS FLUCTUATE. ADDITIONAL INFORMATION CONCERNING PERFORMANCE IS CONTAINED IN
THE FINANCIAL HIGHLIGHTS APPEARING AT THE END OF THIS REPORT.
- --------------------------------------------------------------------------------
TERMS TO KNOW
EMERGING MARKETS A developing or emerging country that is in the initial
stages of its industrial cycle. Developing or "emerging" markets involve
exposure to economic structures that are generally less diverse and mature than
in the United States and to political systems that may be less stable.
EURO CURRENCY The ultimate goal of the economic and monetary union of Europe
is to introduce a single currency for the region called the Euro.
GROSS DOMESTIC PRODUCT Total value of goods and services produced in a
domestic economy over a particular period of time, usually one year.
<PAGE>
ECONOMIC OVERVIEW
[PHOTO]
MAUREEN F. ALLYN, A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.,
SERVES AS THE FIRM'S CHIEF ECONOMIST. ALLYN GRADUATED SUMMA CUM LAUDE FROM
OAKLAND UNIVERSITY NEAR DETROIT, WITH A BACHELOR'S DEGREE IN PSYCHOLOGY. SHE
RECEIVED HER MASTER'S IN ECONOMICS, WITH A SPECIALIZATION IN INTERNATIONAL TRADE
AND FINANCE, FROM THE NEW SCHOOL FOR SOCIAL RESEARCH IN NEW YORK.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT ADVISOR FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $200 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS. IT IS ONE OF
THE 10 LARGEST MUTUAL FUND COMPANIES IN THE UNITED STATES.
DEAR SHAREHOLDERS,
We start 1998 optimistic about the long-term prospects of the U.S. economy and
financial markets but cautious about the next several months. The Asian
financial crisis that dominated the global investment environment in the second
half of 1997 promises to continue, posing significant risks to the economy and
investors. We look for the strength of the American consumer -- currently
enjoying rising real incomes, better employment opportunities, lower mortgage
rates and easy access to credit -- and the secular strength of the trend toward
capital spending on high technology to be sufficient to override the influence
of Asia on the U.S. In short, our best case scenario calls for the U.S. to
muddle through an unsettling period.
As it has for several years, the country should continue to enjoy relatively
low interest rates and low inflation. But the new year will be different in at
least two ways, both of which can be expected to have direct bearing on
investment opportunities.
First, the economy should grow at a much slower pace. A slowdown in Asia will
depress capital goods spending and heighten import pricing pressure, putting a
damper on American corporations' pricing and profit growth at least through
1999. While the U.S. economy grew at an almost 4 percent rate in 1997, we look
for no better than 2 percent growth for the next two years -- with more than
half of the change attributable to the effect of the Asian fallout.
Disappointing corporate profits is another given for 1998. Profits had begun
to slow last year even before the height of the Asian crisis. High current
valuations, however, seem to suggest that Wall Street has yet to recognize this.
The clash between Wall Street profit expectations and actual reported earnings
is part of the risk likely to be associated with equity investing in 1998.
Volatility, such as we experienced in 1997, should continue. In fact, the
overall market volatility is not likely to reflect the turmoil that individual
equities may experience. There will be a narrowing of the number of companies
able to meet analysts' expectations and this market will be absolutely
unforgiving to those companies that fall far short.
Having stated this, however, we look for the Standard & Poor's 500 to return
about 9.5 percent, including the effect of reinvested dividends. This would be
an average return and in line with the historical long-term 10 percent return of
the stock market. On the heels of the last three 20 percent-plus return years,
an investor in 1998 may weigh the 10 percent prospect against a projected 7
percent total return on bonds and consider the difference insufficient
compensation for the inherent added risk. Adopting a more conservative posture
for the new year may be an appropriate step that you'll want to discuss with
your financial representative in the context of your long-term investing
objectives.
To achieve a 9.5 percent return in 1998, the market's already high valuations
need to move even higher. We expect this to occur for a few reasons: the market
has so far demonstrated a certain complacency about the valuation levels;
American investors don't perceive there's anywhere better to go than the U.S.
equity market; and foreigners think of the U.S. market as a safe haven. All
should help support the market.
Where, then, are the opportunities likely to be in 1998? Expect to see
disparate performance within industry sectors. For example, while the financial
services sector in 1997 tended to provide across-the-board strong performance,
in 1998 we expect the sector to include its share of winners and losers. Stock
selection will be key, too, to benefiting from the technology sector. Over the
long term, we are optimistic about technology and corporate America's continuing
commitment to it. It will be difficult to participate in a market return in 1998
without having some exposure to technology-based companies. One caution: Not all
technology companies will survive the year, which raises the risk of investing
in the sector.
3
<PAGE>
ECONOMIC OVERVIEW
ECONOMIC GUIDEPOSTS
ECONOMIC ACTIVITY IS A KEY INFLUENCE ON INVESTMENT PERFORMANCE AND SHAREHOLDER
DECISION-MAKING. PERIODS OF RECESSION OR BOOM, INFLATION, CREDIT EXPANSION OR
CREDIT CRUNCH HAVE A SIGNIFICANT IMPACT ON MUTUAL FUND PERFORMANCE.
THE FOLLOWING ARE SOME SIGNIFICANT ECONOMIC EXPANSION GUIDEPOSTS AND THEIR
INVESTMENT RATIONALE THAT MAY HELP YOUR INVESTMENT DECISION-MAKING. THE 10-YEAR
TREASURY RATE AND THE PRIME RATE ARE PREVAILING INTEREST RATES. THE OTHER DATA
REPORT YEAR-TO-YEAR PERCENTAGE CHANGES.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NOW (12/31/97) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 5.81 6.22 6.58 5.65
Prime rate (2) 8.50 8.50 8.25 8.50
Inflation rate (3) 1.70 2.23 3.04 2.72
The U.S. dollar (4) 10.43 7.32 4.59 -0.57
Capital goods orders (5)* 11.61 8.58 2.23 9.56
Industrial production (5)* 5.59 3.91 4.70 2.34
Employment growth (6) 2.66 2.30 2.41 1.57
</TABLE>
(1) FALLING INTEREST RATES IN RECENT YEARS HAVE BEEN A BIG PLUS FOR FINANCIAL
ASSETS.
(2) THE INTEREST RATE THAT COMMERCIAL LENDERS CHARGE THEIR BEST BORROWERS.
(3) INFLATION REDUCES AN INVESTOR'S REAL RETURN. IN THE LAST FIVE YEARS,
INFLATION HAS BEEN AS HIGH AS 6 PERCENT. THE LOW, MODERATE INFLATION OF THE
LAST FEW YEARS HAS MEANT HIGH REAL RETURNS.
(4) CHANGES IN THE EXCHANGE VALUE OF THE DOLLAR IMPACT U.S. EXPORTERS AND THE
VALUE OF U.S. FIRMS' FOREIGN PROFITS.
(5) THESE INFLUENCE CORPORATE PROFITS AND EQUITY PERFORMANCE.
(6) AS INFLUENCE ON FAMILY INCOME AND RETAIL SALES.
* DATA AS OF NOVEMBER 30, 1997.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
Conventional wisdom might argue in favor of remaining in the U.S. with your
investment dollars in 1998 and, more specifically, invested in small
capitalization companies with domestic lines of business. We'd challenge such
thinking as slower growth, slower inflation and even deflation and pricing
pressures change the U.S. economic climate. The only real antidote is growth,
and from now on growth is more likely to be found outside the United States.
Today to participate in the growth from global business you'd need to be exposed
to large capitalization companies.
International investing is a promising proposition in 1998, the Asian fallout
notwithstanding. In established markets, there are attractive opportunities to
be found in Europe and in Japan. Several Japanese companies have real cash flows
and even relatively attractive valuations. In addition, the effect of the Asian
problems has not been to discourage all investment into emerging markets; rather
investors have tended to divert investment dollars and business to other
increasingly attractive emerging markets in eastern Europe, the Middle East,
Africa and Latin America.
With that as an economic backdrop, we encourage you to read the following
detailed report of your fund, including an interview with your fund's portfolio
management. Thank you for your continued support. We appreciate the opportunity
to serve your investment needs.
Sincerely,
/s/ MAUREEN ALLYN
MAUREEN ALLYN
CHIEF ECONOMIST, Scudder Kemper Investments, Inc.
January 9, 1998
4
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
BEATING ITS OWN "PERSONAL BEST," THE GROWTH FUND OF SPAIN, INC. RETURNED NEARLY
30 PERCENT (BASED ON NET ASSET VALUE) FOR THE FISCAL YEAR. FOLLOWING, THE
PORTFOLIO MANAGER DISCUSSES THE MARKETS AND THE FUND'S PERFORMANCE.
EDUARDO SUAREZ HAS BEEN THE PORTFOLIO MANAGER OF THE FUND SINCE ITS INCEPTION IN
FEBRUARY 1990. HE IS THE CHIEF EXECUTIVE OFFICER OF BSN GESTION DE PATRIMONIOS,
S.A., S.G.C. (BSN GESTION). SUAREZ RECEIVED A LAW DEGREE FROM DEUSTO UNIVERSITY
IN 1977 AND A BUSINESS ADMINISTRATION DEGREE FROM ICADE IN 1978.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
Q THE GROWTH FUND OF SPAIN,
INC. ENDED THE FISCAL YEAR UP 29.86 PERCENT IN NET ASSET VALUE, PERFORMING
IN LINE WITH THE 30.02 PERCENT RETURN OF THE MADRID STOCK EXCHANGE GENERAL
INDEX*. HOWEVER, THE FUND STILL STRUGGLED TO MATCH THE RETURNS OF ITS PEERS.
WHAT DROVE THE MARKET'S PERFORMANCE AND WHAT PREVENTED THE FUND FROM FULLY
PARTICIPATING?
A It was a strong year for
Spain due largely to falling interest rates and a buoyant economy that saw
the gross domestic product expand by more than 3 percent. But it was also a
volatile year. Early in the period, investors wondered whether the global
economies were overheating. Then near the end of the period, they were faced
with market drops and the possibility of a recession due to the Asian crisis.
Spain has a large exposure to Latin America through exports and direct
investments by many Spanish companies. Because of this, the market got hit quite
hard in August and then again in October when Asian markets crashed and concern
about the stability of all emerging markets grew.
Banks and construction companies were clearly the leading sector performers for
the year. Large banks delivered very good results and merger speculation also
boosted lesser quality bank performance at year end. The banking sector has seen
tremendous outperformance in recent years, up more than 70 percent since the
start of 1997 and up nearly 120 percent since 1995. Unfortunately, it is this
banking sector strength that affected the fund's performance relative to its
peers. The Growth Fund of Spain, Inc. does have a focus in this sector on the
larger, high-quality banks but out-performance also came from the lesser quality
names in 1997. While the fund did have smaller banking holdings such as Banco
Pastor, the fund was not largely exposed to them because of its more high
quality focus.
Within the construction sector, a surge in private investment spending helped
the construction and real estate sector. After many years of cut backs, the
public sector also contributed with the initiation of infrastructure improvement
projects. The fund held an overweight position relative to the index in this
sector with names like Vallehermoso and FCC contributing to fund performance.
*THE MADRID STOCK EXCHANGE (MSE) GENERAL INDEX IS AN UNMANAGED GROUP OF THE MOST
FREQUENTLY TRADED STOCKS ON THE MADRID STOCK EXCHANGE.
Q YOU HAVE MENTIONED THE
STRONG SECTORS BUT WERE THERE OTHERS THAT WERE OUT OF FAVOR?
A The good performance of
the banking sector, which has a nearly 27 percent weighting in the Madrid
Stock Exchange General Index, helped it reach all time highs but this
performance masked the lesser performance of another heavily weighted portion of
the index (25 percent weighting): the utilities sector. With regulatory
5
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE UPDATE
changes imposed by the government depressing earnings in this sector, it's
performance was less than half that of the banking sector for the fiscal year.
The hypermarkets, large supermarkets that also sell non-food items, were also
disappointing stocks in '97 suffering from competition from the supermarkets and
from a general saturation in the large, out-of-town hypermarket area.
Q A LARGE CONTRIBUTOR TO SPAIN'S
GROSS DOMESTIC PRODUCT IS TOURISM. HOW DID THIS INDUSTRY FARE?
A Despite the fact the
Spanish peseta has been strong against most of the European currencies, Spain
grew in popularity as a vacation destination for Europeans. It gained tourism
market share while other popular destinations such as Egypt, Northern Africa and
Turkey, suffered due to their increasingly unstable political environments.
Q YOU MENTIONED MID- AND
SMALL-CAPITALIZATION BANKS WERE GOOD PERFORMERS DURING THE FISCAL YEAR BUT
HOW DID SMALLER COMPANIES DO, IN GENERAL?
A While smaller banks did
show some strength, as was mentioned, this was not a year where mid and
small caps outperformed large caps. The liquidity-driven market in the first
half of the year led to a preference for blue chips. In the second half, larger
companies continued to be favored for their defensive qualities.
Q IS THE SPANISH PESETA
DEFINITELY GOING TO BE INCLUDED IN THE EURO CURRENCY AND WHAT DOES THIS MEAN FOR
THE STOCK MARKET?
A While the formal decision
will be made in April, the peseta is expected to be included. This has
been anticipated for a while and has been reflected in the bond market which is
already discounting for the effects a strong currency and low inflation
environment will have. Inclusion in the Euro will boost confidence in Spain and
in its capital markets.
The political effect will also be significant with the Partido Popular and its
leader, Jose Maria Aznar, being credited for Spain's inclusion because of the
policies set to meet the stringent Maastricht criteria. It is possible that
Aznar will take advantage of his popularity and call early elections this
summer. This could have a very positive effect if the Partido Popular increases
its position in Parliament. The current government is a coalition with the
Catalan party still blocking many reforms.
Q WHAT IS YOUR OUTLOOK FOR 1998?
A The Spanish economy
should continue to grow faster than the larger Continental European
economies with an expected expansion of gross domestic product to 3.6 percent.
Consumer spending is expected to be the main driver of this growth but
investment spending should also remain strong. Inflation should stay at the
current 2 to 2.5 percent level due to further government deregulation, a strong
currency and low commodity prices.
Spain continues to attract significant foreign direct investment after falling
out of favor at the beginning of the 1990s. Since then, the rigorous labor
market deregulation has led to a highly competitive unit labor cost structure
making Spain's workers much more productive than the rest of Europe. The market
should continue to attract both domestic and foreign funds since valuations are
still very attractive and earnings growth should continue to be strong.
Q ARE THERE RISKS TO THIS OUTLOOK?
A Some economists are
worried that the economy may start to overheat soon because interest rates are
still falling and fiscal policies are being loosened. While it is true that both
consumer and business confidence are at record levels, we feel there is enough
capacity in the economy especially in the labor market for growth to continue to
be noninflationary.
Another risk is a crisis in Latin America. As we saw during this period,
problems there lead to problems in Spanish capital markets. We don't feel that
such a crisis is imminent since current account deficits and foreign exchange
measures are in better shape than in Asia.
6
<PAGE>
- --------------------------------------------------------------------------------
LARGEST HOLDINGS
THE FUND'S 15 LARGEST HOLDINGS*
Representing 72.7 percent of the fund's total net assets on November 30, 1997
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Holdings Percent
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
1. BANCO BILBAO Banking 9.4%
VIZCAYA
- --------------------------------------------------------------------------------
2. TELEFONICA Telecommunications and motorways 7.8%
- --------------------------------------------------------------------------------
3. ENDESA Electric and other utilities 6.0%
- --------------------------------------------------------------------------------
4. VALLEHERMOSO Construction and property development 5.1%
- --------------------------------------------------------------------------------
5. BANCO Banking 5.1%
POPULAR
- --------------------------------------------------------------------------------
6. IBERDROLA Electric and other utilities 5.1%
- --------------------------------------------------------------------------------
7. REPSOL Chemicals and energy 4.8%
- --------------------------------------------------------------------------------
8. FCC Construction and property development 4.8%
- --------------------------------------------------------------------------------
9. BANKINTER Banking 4.1%
- --------------------------------------------------------------------------------
10. ARGENTARIA Banking 4.0%
- --------------------------------------------------------------------------------
11. GAS NATURAL Electric and other utilities 3.5%
- --------------------------------------------------------------------------------
12. SEVILLANA Electric and other utilities 3.4%
- --------------------------------------------------------------------------------
13. ACERINOX Metals and Engineering 3.2%
- --------------------------------------------------------------------------------
14. BANCO Banking 3.2%
CENTRAL
HISPANO
- --------------------------------------------------------------------------------
15. PRYCA Consumer Goods 3.2%
- --------------------------------------------------------------------------------
</TABLE>
* PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
7
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
THE GROWTH FUND OF SPAIN, INC.
Portfolio of Investments at November 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Number of
Common stocks shares Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BANKING--27.4%
Argentaria 205,000 $ 12,716
Banco Bilbao Vizcaya 985,000 29,756
Banco Central Hispano 525,000 10,069
Banco de Andalucia 22,238 3,460
Banco Pastor, S.A. 20,500 1,457
Banco Popular Espanol 250,810 15,978
Bankinter 225,000 12,779
-----------------------------------------------------------------------------
86,215
- ------------------------------------------------------------------------------------------------------------
CHEMICALS AND ENERGY--4.8%
Repsol 350,000 15,138
-----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
CONSTRUCTION AND PROPERTY
DEVELOPMENT--12.3%
Fomento de Construcciones y Contratas (FCC) 380,000 15,060
Grupo Acciona 27,650 4,895
Inmobiliaria Metropolitana Vasco Central
(Metrovascesa) 59,096 2,548
Vallehermoso 550,625 16,154
-----------------------------------------------------------------------------
38,657
- ------------------------------------------------------------------------------------------------------------
CONSUMER GOODS--4.7%
Centros Commerciales Pryca 625,000 10,059
Prosegur, Cia de Seguridad, S.A. 203,500 2,033
Vidrala, S.A. 60,000 2,567
-----------------------------------------------------------------------------
14,659
- ------------------------------------------------------------------------------------------------------------
ELECTRIC AND OTHER
UTILITIES--24.8%
Cantabrico 128,243 5,899
Compania Sevillana de Electricidad 1,075,000 10,561
Empresa Nacional de Electricidad (ENDESA) 1,000,000 18,810
Fuerzas Electricas de Cataluna (FECSA) 430,075 3,836
Gas Natural 223,895 11,080
Gas y Electricidad (GESA) 57,000 4,090
Iberdrola 1,250,000 15,968
Union Electrica Fenosa 800,000 8,020
-----------------------------------------------------------------------------
78,264
- ------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES--1.8%
Alba 52,500 5,668
-----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
METALS AND ENGINEERING--7.6%
Acerinox 65,000 10,156
Azkoyen 62,329 6,687
Zardoya Otis 61,649 7,173
-----------------------------------------------------------------------------
24,016
- ------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS
AND MOTORWAYS--11.3%
Aumar 245,904 3,982
Autopistas Concesionaria (ACESA) 525,000 7,006
Telefonica de Espana 850,000 24,510
-----------------------------------------------------------------------------
35,498
-----------------------------------------------------------------------------
TOTAL COMMON STOCKS--94.7%
(Cost: $189,601) 298,115
-----------------------------------------------------------------------------
</TABLE>
8
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Principal
amount Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET
INSTRUMENT--1.5%
Yield--5.06%
Due--December, 1997
(Cost: $4,888)
(PRINCIPAL AMOUNT IN SPANISH PESETAS)
Banco Exterior Internacional 726,938,577 $ 4,875
---------------------------------------------------------------------------
TOTAL INVESTMENTS--96.2%
(Cost: $194,489) 302,990
---------------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--3.8% 12,069
---------------------------------------------------------------------------
NET ASSETS--100% $315,059
---------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Based on the cost on investments of $194,489,000 for federal income tax purposes
at November 30, 1997, the gross unrealized appreciation was $110,221,000 the
gross unrealized depreciation was $1,720,000 and the net unrealized appreciation
on investments was $108,501,000.
See accompanying Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
THE GROWTH FUND OF SPAIN, INC.
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of The Growth Fund of Spain, Inc. as of
November 30, 1997, and the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the fiscal periods since 1993.
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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
November 30, 1997, by correspondence with the custodian and brokers. 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 audits provide 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
Growth Fund of Spain, Inc. at November 30, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the fiscal
periods since 1993, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 20, 1998
10
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- --------------------------------------------------
ASSETS
- --------------------------------------------------
Investments, at value
(Cost: $194,489) $302,990
- --------------------------------------------------
Cash (including foreign currency of
$15,107 with a cost of $15,430) 15,213
- --------------------------------------------------
Receivable for:
Investments sold 596
- --------------------------------------------------
Dividends and interest 439
- --------------------------------------------------
TOTAL ASSETS 319,238
- --------------------------------------------------
- --------------------------------------------------
LIABILITIES AND NET ASSETS
- --------------------------------------------------
Payable for:
Investments purchased 3,876
- --------------------------------------------------
Management fee 251
- --------------------------------------------------
Custodian and transfer agent fees and
related expenses 39
- --------------------------------------------------
Directors' fees and other 13
- --------------------------------------------------
Total liabilities 4,179
- --------------------------------------------------
NET ASSETS $315,059
- --------------------------------------------------
- --------------------------------------------------
ANALYSIS OF NET ASSETS
- --------------------------------------------------
Paid-in capital $183,418
- --------------------------------------------------
Undistributed net realized gain on
investments and foreign currency
transactions 22,057
- --------------------------------------------------
Net unrealized appreciation on
investments and assets and liabilities
in foreign currency 107,959
- --------------------------------------------------
Undistributed net investment income 1,625
- --------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $315,059
- --------------------------------------------------
NET ASSET VALUE PER SHARE, $.01 PAR
VALUE
($315,059 DIVIDED BY 16,530 shares
outstanding) $19.06
- --------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Year ended November 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------
NET INVESTMENT INCOME
- -------------------------------------------------
Dividends $ 7,461
- -------------------------------------------------
Interest 723
- -------------------------------------------------
8,184
- -------------------------------------------------
Less foreign taxes withheld 1,051
- -------------------------------------------------
Total investment income 7,133
- -------------------------------------------------
Expenses:
Management fee 2,846
- -------------------------------------------------
Custodian and transfer agent fees and
related expenses 358
- -------------------------------------------------
Professional fees 156
- -------------------------------------------------
Reports to shareholders 30
- -------------------------------------------------
Registration fees 16
- -------------------------------------------------
Directors' fees and other 57
- -------------------------------------------------
Total expenses 3,463
- -------------------------------------------------
NET INVESTMENT INCOME 3,670
- -------------------------------------------------
- -------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- -------------------------------------------------
Net realized gain on sales of
investments and foreign currency
transactions 20,740
- -------------------------------------------------
Change in net unrealized appreciation
on investments
and assets and liabilities in foreign
currency 47,441
- -------------------------------------------------
Net gain on investments 68,181
- -------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $71,851
- -------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER
30,
-------------------
1997 1996
<S> <C> <C>
- -------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- -------------------------------------------------------------
Net investment income $ 3,670 5,849
- -------------------------------------------------------------
Net realized gain 20,740 11,311
- -------------------------------------------------------------
Change in net unrealized appreciation 47,441 33,898
- -------------------------------------------------------------
Net increase in net assets resulting
from operations 71,851 51,058
- -------------------------------------------------------------
Distribution from net investment
income (2,854) (7,157)
- -------------------------------------------------------------
Distribution from net realized gain (13,931) (4,942)
- -------------------------------------------------------------
Total dividends to shareholders (16,785) (12,099)
- -------------------------------------------------------------
Payment for shares repurchased
(310 shares and 259 shares,
respectively) (3,942) (3,021)
- -------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 51,124 35,938
- -------------------------------------------------------------
- -------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------
Beginning of year 263,935 227,997
- -------------------------------------------------------------
END OF YEAR (including undistributed
net investment
income of $1,625 and $2,654,
respectively) $315,059 263,935
- -------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES
DESCRIPTION OF FUND. The Fund is registered under
the Investment Company Act of 1940 as a
diversified, closed-end management investment
company.
INVESTMENT VALUATION. Investments are stated at
value. All securities that are traded on a Spanish
securities exchange and for which market quotations
are readily available are valued at the closing
value on the principal exchange on which the
securities are traded on the day of valuation or,
if no such closing price is available, at the last
bid price quoted on such day. If there are no
quotations available for the day of valuation, the
last available closing price will be used. Fixed
income securities are valued by using market
quotations, or independent pricing services that
use prices provided by market makers or estimates
of market values obtained from yield data relating
to instruments or securities with similar
characteristics. Equity options are valued at the
last sale price unless the bid price is higher or
the asked priced is lower, in which event such bid
or asked price is used. Financial futures and
options thereon are valued at the settlement price
established each day by the exchange on which they
are traded. Over-the-counter traded options are
valued based upon current prices provided by market
makers. Forward foreign currency contracts and
foreign currency are valued at the forward and
current exchange rates, respectively, prevailing on
the day of valuation. Other securities and assets
are valued at fair value as determined in good
faith by the Board of Directors.
CURRENCY TRANSLATION. The books and records of the
Fund are maintained in U.S. dollars. All assets and
liabilities initially expressed in Spanish pesetas
are converted into U.S. dollar values at the mean
between the bid and offered quotations of that
currency against U.S. dollars as last quoted by a
recognized dealer. If such quotations are not
readily available, the rate of exchange is
determined in good faith by the Board of Directors.
Income and expenses and purchases and sales of
investments are translated into U.S. dollars at the
rate of exchange prevailing on the respective dates
of such transactions. The Fund includes that
portion of the results of operations resulting from
changes in foreign exchange rates with net realized
and unrealized gain (loss) on investments, as
appropriate.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date (date the order to buy or sell is
executed). Dividend income is recorded on the
ex-dividend date, except that certain dividends
from foreign securities are recorded as soon as the
information is available to the Fund. Interest
income is recorded on the accrual basis and
includes discount amortization on money market
instruments. Realized gains and losses from
investment transactions are reported on an
identified cost basis.
FEDERAL INCOME TAXES. The Fund has complied with
the special provisions of the Internal Revenue Code
available to investment companies and therefore no
federal income tax provision is required. The Fund
may make an election under the Internal Revenue
Code so that shareholders may claim a tax credit or
deduction for their share of foreign taxes paid by
the Fund.
13
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DIVIDENDS TO SHAREHOLDERS. The Fund declares and
pays dividends of any net investment income and net
realized capital gains annually, which are recorded
on the ex-dividend date. Dividends are determined
in accordance with income tax principles which may
treat certain transactions, such as foreign
currency transactions, differently from generally
accepted accounting principles.
- --------------------------------------------------------------------------------
2 TRANSACTIONS WITH
AFFILIATES
INVESTMENT MANAGER COMBINATION. Zurich Insurance
Company, the parent of Zurich Kemper Investments,
Inc. (ZKI), has acquired a majority interest in
Scudder, Stevens & Clark, Inc. (Scudder), another
major investment manager. At completion of this
transaction on December 31, 1997, Scudder changed
its name to Scudder Kemper Investments, Inc.
(Scudder Kemper) and the operations of ZKI were
combined with Scudder Kemper. In addition, the name
of the Fund's shareholder service agent was changed
to Kemper Service Company (KSvC).
The Fund has a management agreement with Scudder
Kemper and pays a management fee at an annual rate
of 1% of average weekly net assets. The Fund
incurred a management fee of $2,846,000 for the
year ended November 30, 1997.
Scudder Kemper utilizes the investment management
services of BSN Gestion de Patrimonios, S.A.,
S.G.C. (the Spanish Adviser) pursuant to a sub-
advisory agreement entered into between Scudder
Kemper and the Spanish Adviser. For services
provided under the sub-advisory agreement, Scudder
Kemper pays a fee at an annual rate of .35% of the
Fund's average weekly net assets to the Spanish
Adviser. During the year ended November 30, 1997,
Scudder Kemper incurred fees of $996,000 to the
Spanish Adviser.
Pursuant to a services agreement with the Fund's
transfer agent KSvC is the shareholder service
agent of the Fund. Under the agreement, KSvC
received shareholder services fees of $24,000 for
the year ended November 30, 1997.
The Fund has a custodian agreement with Banco
Santander, an affiliate of the Spanish Adviser, for
custody of the Fund's Spanish securities. For the
year ended November 30, 1997, the Fund incurred
custody fees of $254,000 to Banco Santander.
Effective January 30, 1998 the Chase Manhattan Bank
will serve as foreign custodian.
Brokerage commissions paid on securities
transactions to BSN Sociedad de Valores y Bolsa, an
affiliate of the Spanish Adviser, amounted to
$82,000 for the year ended November 30, 1997.
Certain officers or directors of the Fund are also
officers or directors of Scudder Kemper. During the
year ended November 30, 1997, the Fund made no
payments to its officers and incurred directors'
fees of $25,000 to independent directors.
- --------------------------------------------------------------------------------
3 INVESTMENT
TRANSACTIONS
For the year ended November 30, 1997, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
<TABLE>
<S> <C>
Purchases $123,092
Proceeds from sales 129,875
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4 REPURCHASE OF
SHARES
The Board of Directors of the Fund has authorized
the open market repurchase and retirement of up to
three million shares (1,479,000 repurchased to
date) of the Fund's outstanding stock. Shares
repurchased during each of the two periods are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1997 1996
------- -------
<S> <C> <C>
Number of shares 310,000 259,000
Weighted average discount to net asset
value 19% 19%
</TABLE>
- --------------------------------------------------------------------------------
5 FORWARD FOREIGN
CURRENCY CONTRACTS
In order to protect itself against a decline in the
value of the Spanish peseta against the U.S.
Dollar, the Fund has entered into a forward
contract to deliver pesetas in exchange for U.S.
Dollars. The Fund bears the market risk that arises
from changes in foreign exchange rates, and
accordingly, the unrealized gain or loss on this
contract is reflected in the accompanying financial
statements. The Fund also bears the credit risk
(which is limited to the unrealized gain, if any)
if the counterparty fails to perform under the
contract. At November 30, 1997, the Fund had
entered into a forward contract to deliver SP 5
billion with a U.S. Dollar contract amount of
$32,000,000. The settlement date of the contract
occurs in January, 1998, and the unrealized loss
amounted to $210,000 at November 30, 1997.
15
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 15.67 13.33 12.40 10.67 8.99
- -------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .24 .36 .37 .32 .40
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain 4.15 2.69 1.01 1.41 1.28
- -------------------------------------------------------------------------------------------
Total from investment operations 4.39 3.05 1.38 1.73 1.68
- -------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment
income .17 .42 .45 -- --
- -------------------------------------------------------------------------------------------
Distribution from net realized gain .83 .29 -- -- --
- -------------------------------------------------------------------------------------------
Total dividends 1.00 .71 .45 -- --
- -------------------------------------------------------------------------------------------
Net asset value, end of year $ 19.06 15.67 13.33 12.40 10.67
- -------------------------------------------------------------------------------------------
Market value, end of year $ 17.00 12.50 10.88 10.00 9.63
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
TOTAL RETURN
- -------------------------------------------------------------------------------------------
Based on net asset value 29.86% 24.12 11.62 16.21 18.69
- -------------------------------------------------------------------------------------------
Based on market value 46.49% 22.38 13.83 3.90 28.33
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------
Expenses 1.22% 1.25 1.22 1.23 1.22
- -------------------------------------------------------------------------------------------
Net investment income 1.29% 2.46 2.89 2.57 3.97
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------
Net assets at end of year (in
thousands) $315,059 263,935 227,997 213,972 184,884
- -------------------------------------------------------------------------------------------
Portfolio turnover rate 29% 45 69 85 50
- -------------------------------------------------------------------------------------------
</TABLE>
Average commission rates paid per share on stock transactions for the years
ended November 30, 1997 and 1996 were $.0519 and $.0609, respectively.
- --------------------------------------------------------------------------------
NOTE:
Total return based on net asset value reflects changes in the Fund's net asset
value during the year. Total return based on market value reflects changes in
market value. Each figure includes reinvestment of dividends. These figures will
differ depending upon the level of any discount from or premium to net asset
value at which the Fund's shares trade during the year.
16
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
1 PARTICIPATION
We invite you to review the description of the
Dividend Reinvestment Plan (the "Plan") which is
available to you as a shareholder of THE GROWTH
FUND OF SPAIN, INC. (the "Fund"). If you wish to
participate and your shares are held in your own
name, no further action on your part is required;
you are automatically enrolled in the Plan. If your
shares are held in the name of a brokerage firm,
bank, or other nominee, you must instruct that
nominee to re-register your shares in your name so
that you may participate in the Plan, unless your
nominee has made the Plan available on shares held
by them. Shareholders who so elect will be deemed
to have appointed United Missouri Bank, n.a.
("UMB") as their agent for the Fund under the Plan.
- --------------------------------------------------------------------------------
2 DIVIDEND
INVESTMENT ACCOUNT
The Fund's transfer agent and dividend disbursing
agent or its delegate ("Agent") will establish a
Dividend Investment Account (the "Account") for
each shareholder participating in the Plan. Agent
will credit to the Account of each participant
funds it receives from the following sources: (a)
cash dividends and capital gains distributions paid
on shares of beneficial interest (the "Shares") of
the Fund registered in the participant's name on
the books of the Fund; and (b) cash dividends and
capital gains distributions paid on Shares
registered in the name of Agent but credited to the
participant's Account. Sources described in clauses
(a) and (b) of the preceding sentence are
hereinafter called "Distributions."
- --------------------------------------------------------------------------------
3 INVESTMENT OF
DISTRIBUTION FUNDS
HELD IN EACH ACCOUNT
If on the record date for a Distribution (the
"Record Date"), Shares are trading at a discount
from net asset value per Share (according to the
evaluation most recently made on Shares of the
Fund), funds credited to a participant's Account
will be used to purchase Shares (the "Purchase").
UMB will attempt, commencing five days prior to the
Payment Date and ending at the close of business on
the Payment Date ("Payment Date" as used herein
shall mean the last business day of the month in
which such Record Date occurs), to acquire Shares
in the open market. If and to the extent that UMB
is unable to acquire sufficient Shares to satisfy
the Distribution by the close of business on the
Payment Date, the Fund will issue to UMB Shares
valued at net asset value per Share (according to
the evaluation most recently made on Shares of the
Fund) in the aggregate amount of the remaining
value of the Distribution. If, on the Record Date,
Shares are trading at a premium over net asset
value per Share, the Fund will issue on the Payment
Date, Shares valued at net asset value per Share on
the Record Date to Agent in the aggregate amount of
the funds credited to the participants' accounts.
- --------------------------------------------------------------------------------
4 ADDITIONAL
INFORMATION
Address all notices, correspondence, questions, or
other communications regarding the Plan to:
KEMPER SERVICE COMPANY
P.O. Box 419066
Kansas City, Missouri 64141-6066
1-800-294-4366
- --------------------------------------------------------------------------------
5 ADJUSTMENT OF
PURCHASE PRICE
The Fund will increase the price at which Shares
may be issued under the Plan to 95% of the fair
market value of the shares on the Record Date if
17
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
the net asset value per Share of the Shares on the
Record Date is less than 95% of the fair market
value of the Shares on the Record Date.
- --------------------------------------------------------------------------------
6 DETERMINATION OF
PURCHASE PRICE
The cost of Shares and fractional Shares acquired
for each participant's Account in connection with a
Purchase shall be determined by the average cost
per Share, including brokerage commissions as
described in Paragraph 7 hereof, of the Shares
acquired by UMB in connection with that Purchase.
Shareholders will receive a confirmation showing
the average cost and number of Shares acquired as
soon as practicable after Agent has received or UMB
has purchased Shares. Agent may mingle the cash in
a participant's account with similar funds of other
participants of the Fund for whom UMB acts as agent
under the Plan.
- --------------------------------------------------------------------------------
7 BROKERAGE CHARGES
There will be no brokerage charges with respect to
Shares issued directly by the Fund as a result of
Distributions. However, each participant will pay a
pro rata share of brokerage commissions incurred
with respect to UMB's open market purchases in
connection with the reinvestment of Distributions.
Brokerage charges for purchasing small amounts of
Shares for individual Accounts through the Plan can
be expected to be less than the usual brokerage
charges for such transactions, as UMB will be
purchasing Shares for all participants in blocks
and prorating the lower commission thus attainable.
- --------------------------------------------------------------------------------
8 SERVICE CHARGES
There is no service charge by Agent or UMB to
shareholders who participate in the Plan other than
service charges specified in Paragraph 12 hereof.
However, the Fund reserves the right to amend the
Plan in the future to include a service charge.
- --------------------------------------------------------------------------------
9 TRANSFER OF SHARES
HELD BY AGENT
Agent will maintain the participant's Account, hold
the additional Shares acquired through the Plan in
safekeeping and furnish the participant with
written confirmation of all transactions in the
Account. Shares in the Account are transferable
upon proper written instructions to Agent. Upon
request to Agent, a certificate for any or all full
Shares in a participant's Account will be sent to
the participant.
- --------------------------------------------------------------------------------
10 SHARES NOT HELD
IN SHAREHOLDER'S
NAME
Beneficial owners of Shares which are held in the
name of a broker or nominee will not be
automatically included in the Plan and will receive
all distributions in cash. Such shareholders should
contact the broker or nominee in whose name their
Shares are held to determine whether and how they
may participate in the Plan.
- --------------------------------------------------------------------------------
11 AMENDMENTS
Experience under the Plan may indicate that changes
are desirable. Accordingly, the Fund reserves the
right to amend or terminate the Plan, including
provisions with respect to any Distribution paid
subsequent to notice thereof sent to participants
in the Plan at least ninety days before the record
date for such Distribution.
- --------------------------------------------------------------------------------
12 WITHDRAWAL FROM
PLAN
Shareholders may withdraw from the Plan at any time
by giving Agent a written notice. If the proceeds
are $25,000 or less and the proceeds are to be
payable to the shareholder of record and mailed to
the address of record, a signature guarantee
normally will not be required for notices by
individual account owners (including joint account
owners), otherwise a
18
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
signature guarantee will be required. In addition,
if the certificate is to be sent to anyone other
than the registered owner(s) at the address of
record, a signature guarantee will be required on
the notice. A notice of withdrawal will be
effective for the next Distribution following
receipt of the notice by the Agent provided the
notice is received by the Agent at least ten days
prior to the Record Date for the Distribution. When
a participant withdraws from the Plan, or when the
Plan is terminated in accordance with Paragraph 11
hereof, the participant will receive a certificate
for full Shares in the Account, plus a check for
any fractional Shares based on market price; or if
a Participant so desires, Agent will notify UMB to
sell his Shares in the Plan and send the proceeds
to the participant, less brokerage commissions and
a $2.50 service fee.
- --------------------------------------------------------------------------------
13 TAX IMPLICATIONS
Shareholders will receive tax information annually
for personal records and to assist in preparation
of Federal income tax returns. If shares are
purchased at a discount, the amount of the discount
is considered taxable income and is added to the
cost basis of the purchased shares.
19
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS&OFFICERS
LONG-TERM INVESTING IN A SHORT-TERM WORLD-SM-
DIRECTORS
JAMES E. ATKINS
Director
ARTHUR R. GOTTSCHALK
Director
FREDRICK T. KELSEY
Director
GREGORY L. MELVILLE
Director
FRED B. RENWICK
Director
MORITZ SELL
Director
JOHN B. TINGLEFF
Director
JOHN G. WEITHERS
Director
OFFICERS
DANIEL PIERCE
President
PHILIP J. COLLORA
Vice President,
Secretary and Treasurer
MARK S. CASADY
Vice President
JERARD R. HARTMAN
Vice President
THOMAS W. LITTAUER
Vice President
ANN M. MCCREARY
Vice President
KATHRYN L. QUIRK
Vice President
STEVEN H. REYNOLDS
Vice President
LINDA J. WONDRACK
Vice President
JOHN R. HEBBLE
Assistant Treasurer
MAUREEN E. KANE
Assistant Secretary
CAROLINE PEARSON
Assistant Secretary
ELIZABETH C. WERTH
Assistant Secretary
- --------------------------------------------------------------------------------
..............................................................................
LEGAL COUNSEL VEDDER, PRICE, KAUFMAN & KAMMHOLZ
222 North LaSalle Street
Chicago, IL 60601
..............................................................................
SHAREHOLDER KEMPER SERVICE COMPANY
SERVICE AGENT P.O. Box 419066
Kansas City, MO 64141
..............................................................................
CUSTODIAN AND INVESTORS FIDUCIARY TRUST COMPANY
TRANSFER AGENT 801 Pennsylvania
Kansas City, MO 64105
..............................................................................
FOREIGN CUSTODIAN BANCO SANTANDER
Madrid, Spain
..............................................................................
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
[LOGO]
LONG-TERM INVESTING IN A SHORT-TERM WORLD-SM-
Printed in the U.S.A. on recycled paper.
GSP - 2 (1/98) 1042030
