<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE PERIOD
ENDED OCTOBER 31, 1998
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
Seeks to provide long-term capital growth
[LOGO]
KEMPER
THE GROWTH FUND OF SPAIN, INC.
"The macroeconomic environment in Spain
remains strong, with declining interest rates,
high consumer confidence, and expected
1998 growth of near 4 percent ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
Economic Overview
5
Performance Update
7
Largest Holdings
8
Portfolio Statistics
9
Portfolio of Investments
11
Report of Independent Auditors
12
Financial Statements
14
Notes to Financial Statements
16
Financial Highlights
17
Description of Dividend Reinvestment Plan
20
Shareholders' Meeting
AT A GLANCE
ABOUT YOUR REPORT
YOUR FUND'S FISCAL YEAR END CHANGED IN 1998 FROM NOVEMBER 30 TO OCTOBER 31. THE
FINANCIAL STATEMENTS INCLUDED HEREIN ARE FOR THE PERIOD DECEMBER 1, 1998,
THROUGH OCTOBER 31, 1998. CERTAIN OTHER INFORMATION CONTAINED IN THIS REPORT
COVERS THE 12 MONTHS ENDED OCTOBER 31, 1998. THIS CHANGE DOES NOT AFFECT YOUR
INVESTMENT.
- --------------------------------------------------------------------------------
TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR THE 11-MONTH
PERIOD ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
BASED ON BASED ON
NET ASSET MARKET
VALUE PRICE
- --------------------------------------------------------------------------------
<S> <C> <C>
THE GROWTH FUND OF SPAIN 32.90% 41.48%
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NET ASSET VALUE AND MARKET PRICE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AS OF
10/31/98 10/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE $23.42 $17.99
- --------------------------------------------------------------------------------
MARKET PRICE $22.06 $15.50
- --------------------------------------------------------------------------------
</TABLE>
Investment by the fund in securities of Spanish companies involves certain
considerations not typically associated with investing in securities of United
States companies, including: currency fluctuations, potential price volatility,
less liquidity and concentration in the Spanish equities market. The fund may
also invest up to 25% of its total assets in securities of emerging or nonpublic
Spanish companies. The risk of investing in such companies generally is greater
than the risk of investing in established companies.
- --------------------------------------------------------------------------------
DIVIDEND REVIEW
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE SHOWS PER SHARE DIVIDEND INFORMATION FOR THE FUND AS OF
OCTOBER 31, 1998.
<TABLE>
<CAPTION>
THE GROWTH FUND
OF SPAIN
- --------------------------------------------------------------------------------
<S> <C>
INCOME DIVIDEND: $ 0.11
- --------------------------------------------------------------------------------
SHORT-TERM CAPITAL GAIN: $ 0.43
- --------------------------------------------------------------------------------
LONG-TERM CAPITAL GAIN: $ 0.93
- --------------------------------------------------------------------------------
</TABLE>
Statistical Note: Total return measures aggregate change in net asset
value/market price assuming reinvestment of dividends. Returns are historical
and do not guarantee future performance. Market price, net asset value and
investment returns fluctuate. Additional information concerning performance is
contained in the Financial Highlights appearing at the end of this report.
TERMS TO KNOW
EMERGING MARKET A developing or emerging country can be considered to be a
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.
EUROPEAN MONETARY UNION An economic and monetary unification of European
countries whose goal is to ultimately introduce a single European currency and
create a more economically competitive region.
LIQUIDITY A characteristic of an investment or an asset referring to the ease of
its convertibility into cash within a reasonably short period of time.
VOLATILITY The tendency of a security, commodity, or market to rise and fall in
price over time. Volatility is inherent in almost all investments but differs in
degree from investment to investment and from market to market. For example, in
the United States, money-market mutual funds strive to maintain a fixed price
and thus experience very little volatility, if any. By comparison, stocks can be
very volatile.
SOURCES: SCUDDER KEMPER INVESTMENTS, INC.; BARRON'S DICTIONARY OF FINANCE AND
INVESTMENT TERMS
<PAGE> 3
ECONOMIC OVERVIEW
[SILVIA PHOTO]
DR. JOHN E. SILVIA IS A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC.
HIS PRIMARY RESPONSIBILITIES INCLUDE ANALYSIS, MODELING AND FORECASTING OF
ECONOMIC DEVELOPMENTS AND FEDERAL RESERVE ACTIVITY THAT AFFECT FINANCIAL
MARKETS, ESPECIALLY INTEREST RATE TRENDS. THIS EFFORT INCLUDES CLOSE
COLLABORATION WITH BOTH INCOME AND EQUITY MUTUAL FUND MANAGERS AND PENSION FUND
MANAGERS.
SILVIA HOLDS A BACHELOR'S DEGREE AND PH.D. IN ECONOMICS FROM NORTHEASTERN
UNIVERSITY IN BOSTON AND A MASTER'S DEGREE IN ECONOMICS FROM BROWN UNIVERSITY IN
PROVIDENCE, R.I. PRIOR TO HIS CAREER AT SCUDDER KEMPER, HE WAS WITH THE HARRIS
BANK AND ALSO TAUGHT AT INDIANA UNIVERSITY.
SCUDDER KEMPER INVESTMENTS, INC. IS THE INVESTMENT MANAGER FOR KEMPER FUNDS. IT
IS ONE OF THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS
WORLDWIDE, MANAGING MORE THAN $245 BILLION IN ASSETS GLOBALLY FOR MUTUAL FUND
INVESTORS, RETIREMENT AND PENSION PLANS, INSTITUTIONAL AND CORPORATE CLIENTS,
INSURANCE COMPANIES, AND PRIVATE, FAMILY AND INDIVIDUAL ACCOUNTS.
DEAR SHAREHOLDERS,
If you're like most investors, you may be wondering if you should allow yourself
to breathe a sigh of relief as 1998 comes to a close. After several months of
generally declining stock prices and extreme volatility, the U.S. stock market
seems to have rediscovered its resiliency. In the fourth quarter, the Standard &
Poor's 500, an unmanaged index generally representative of the U.S. stock
market, bounced back into the 1100-point range, up nearly 20 percent from its
third-quarter low of 957. The blue chip Dow Jones Industrial Average enjoyed a
comparable rise. Investor confidence suddenly overtook the investor uncertainty
that had plagued the markets at summer's end. While financial volatility appears
to be continuing, the mood for investors definitely has improved.
To what can we attribute the change? Simply this -- the cumulative effect of
some good news, not the least of which was a long-awaited series of interest
rate reductions by the Federal Reserve Board. In September, the Fed reduced the
federal funds rate a modest quarter of a percentage point, however, this first
cut disappointed some investors who were expecting a more dramatic gesture. Two
weeks later, the Fed came back with an additional quarter of a percentage point
reduction. This was an unexpected cut that seemed to have a positive effect on
Wall Street. In November, a third rate cut of a quarter of a percentage point
also boosted investor confidence. Investors were further surprised by
better-than-expected corporate earnings reports early in the fourth quarter.
Finally, economic data regarding retail sales, employment and home sales
suggested continued economic growth and very little prospect of recession.
Although there was no good news to be garnered from the sensationalized
presidential scandal, as the shock of Kenneth Starr's report wore off, the
nation seemed to refocus its attention on other matters. In this sense, another
veil of despair was lifted.
In many ways, 1998's market activity provides a study in how investor
perceptions can upstage economic realities. Certainly, the tumultuous lessons of
Russia and Southeast Asia renewed investors' awareness of risk in 1998, which
was an important wake-up call. At all times, investors must understand and
consider risk. But over the course of 1998, U.S. economic fundamentals have
essentially remained strong. In fact, inflation has remained low for the entire
year. Economic growth has been solid. Our consumer confidence has remained
fairly high, although not quite as high as last year. The nation's budget
surplus for 1998 came in at $60 billion, with another budget surplus expected
for fiscal 1999.
Growth in the nation's gross domestic product (GDP), which represents the
total value of all goods and services produced within the U.S. economy, has
remained remarkably steady. GDP is expected to have grown at an annualized rate
of between 2.5 percent and 3.5 percent for the second half of 1998 and is
anticipated to hover around 2 percent for the first half of 1999. The consumer
price index (CPI) remains in a range of 1.5 percent to 2 percent.
While employment growth has slowed a bit, the slowdown in wage gains may
provide the Fed with an incentive to reduce interest rates even further. U.S.
corporate profits have generally been flat, so we may see a decrease in capital
spending. Banks appear to be only a little less willing to lend, so the threat
of a general credit crunch is minimal.
Investors may take comfort in the fact that the U.S. markets and economy have
withstood the test of 1998's tumultuous third quarter. Similarly, while certain
countries, such as Malaysia, Indonesia, Brazil and Russia, are still suffering
from economic crises, others, including the Philippines, South Korea, Thailand
and China, appear to have survived. As long as the Fed and the Group of Seven
leading industrial nations (G7) are committed to avoiding recession on national
and global levels respectively, investors have a good chance of experiencing a
more stable economic environment.
At home, there has been somewhat of a slowdown in manufacturing, as reduced
U.S. exports reflect foreign economic turmoil. But the global impact of the
Asian crisis still has not hit the U.S. as hard as was expected. Indeed, Asian
turmoil has not affected U.S. trade as much as it has lowered import prices and
helped reduce global interest rates.
3
<PAGE> 4
ECONOMIC OVERVIEW
- --------------------------------------------------------------------------------
ECONOMIC GUIDEPOSTS
- --------------------------------------------------------------------------------
Economic activity is a key influence on investment performance and shareholder
decision-making. Periods of recession or boom, inflation or deflation, credit
expansion or credit crunch have a significant impact on mutual fund performance.
The following are some significant economic 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.
[BAR GRAPH]
<TABLE>
<CAPTION>
NOV 98 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
<S> <C> <C> <C> <C>
10-YEAR TREASURY RATE(1)* 4.53 5.64 6.03 6.53
PRIME RATE(2)* 8.12 8.50 8.50 8.25
INFLATION RATE(3)* 1.49 1.50 2.08 2.99
THE U.S. DOLLAR(4) 0.83 6.86 9.65 3.46
CAPITAL GOODS ORDERS(5)* 2.51 7.47 10.64 9.19
INDUSTRIAL PRODUCTION(5)* 2.12 4.97 6.72 4.93
EMPLOYMENT GROWTH(6) 2.28 2.65 2.70 2.33
</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) AN INFLUENCE ON FAMILY INCOME AND RETAIL SALES.
* DATA AS OF OCTOBER 31, 1998.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
In Europe, the much anticipated Economic and Monetary Union (EMU) is on the
move, with a focus on more flexibility and growth potential for the region.
European equities may be the beneficiaries of increased spending, as governments
seek to foster growth and reduce unemployment.
If you're a long-term investor in today's short-term world, go ahead and
breathe that sigh of relief as 1998 comes to an end -- but get ready for 1999.
It's going to be an interesting year as the EMU emerges, the race for the next
presidency heats up and the year 2000 approaches. And, remember: Investors don't
like uncertainty, be it economic or political. The threat of impeachment, new
acts of terrorism or any other hints of crisis could prompt a downward spike in
our markets in the short run. In the long run, the keys to investment
performance remain moderate growth, low inflation and limited taxation and
regulation.
I would like to take this opportunity to thank you for choosing to invest with
Kemper Funds. We appreciate the opportunity to serve your investment needs.
Sincerely,
/s/ John E. Silvia
JOHN E. SILVIA
MANAGING DIRECTOR
SCUDDER KEMPER INVESTMENTS, INC
THE INFORMATION CONTAINED IN THIS PIECE HAS BEEN TAKEN FROM SOURCES BELIEVED TO
BE RELIABLE, BUT THE ACCURACY OF THE INFORMATION IS NOT GUARANTEED. THE OPINIONS
AND FORECASTS EXPRESSED ARE THOSE OF DR. JOHN SILVIA AS OF DECEMBER 2, 1998, AND
MAY NOT ACTUALLY COME TO PASS. THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF
THIS MATERIAL IS INTENDED AS AN INVESTMENT RECOMMENDATION.
4
<PAGE> 5
PERFORMANCE UPDATE
JOAN GREGORY, A VICE PRESIDENT OF SCUDDER KEMPER INVESTMENTS, INC., IS A MEMBER
OF THE GLOBAL EQUITY GROUP, WHERE SHE SERVES AS LEAD PORTFOLIO MANAGER OF THE
GROWTH FUND OF SPAIN, INC. AND SEVERAL INSTITUTIONAL INTERNATIONAL PORTFOLIOS.
SHE JOINED THE ORGANIZATION IN 1992. GREGORY RECEIVED A BACHELORS DEGREE FROM
UNIVERSITY COLLEGE IN DUBLIN AND A MASTERS DEGREE FROM COLUMBIA UNIVERSITY.
NICK BRATT, A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, INC., IS THE
DIRECTOR OF THE GLOBAL EQUITY GROUP. WITH OVER 20 YEARS OF EXPERIENCE IN
INTERNATIONAL INVESTMENTS, BRATT IS A MEMBER OF THE PORTFOLIO MANAGEMENT TEAM OF
THE GROWTH FUND OF SPAIN, INC. HE JOINED THE ORGANIZATION IN 1976. BRATT
RECEIVED A BACHELOR'S DEGREE WITH HONORS FROM ST. JOHNS COLLEGE, OXFORD
UNIVERSITY AND AN MIA DEGREE AS A FULBRIGHT SCHOLAR FROM COLUMBIA UNIVERSITY.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT, AS STATED ON THE COVER. THE
MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME, BASED ON MARKET AND OTHER
CONDITIONS.
THE SPANISH MARKET, AS MEASURED BY THE UNMANAGED MADRID GENERAL INDEX, WAS UP
AN IMPRESSIVE 42.67 PERCENT FOR THE YEAR ENDED OCTOBER 31, 1998. THE GROWTH FUND
OF SPAIN, INC. GAINED 40.74 PERCENT IN NET ASSET VALUE AND 55.18 PERCENT ON
MARKET VALUE FOR THE SAME ONE YEAR PERIOD ENDED OCTOBER 31, 1998. FOLLOWING,
LEAD PORTFOLIO MANAGER JOAN GREGORY DISCUSSES THE MARKET.
Q COULD YOU PROVIDE AN OVERVIEW OF THE EVENTS THAT IMPACTED THE SPANISH
MARKET DURING THIS PERIOD AND HOW YOU POSITIONED THE GROWTH FUND OF SPAIN, INC.
IN THIS ENVIRONMENT?
A Spain was excessively punished during the global turmoil that marked much
of the period due to exposure to Latin America on the part of major Spanish
corporations. Latin American markets were tarred by the Asian brush earlier in
the period and then were hit hard again when Russia defaulted on its debt in
August, causing a ripple of panic that seeped into all emerging markets. In mid-
September however, sentiment changed dramatically as rate cuts in the United
States, a rescue plan for the Japanese banks, and the likelihood of Brazil
presenting a serious and coherent austerity package resulted in the
stabilization of global financial markets. The Spanish market bounced off lows
and ended the period as a top performer among European and world markets.
The fund withstood much of the volatility quite well due to our defensive
positioning. Holdings in the portfolio are generally high-quality, liquid, blue
chip stocks. The fund's sector concentration also had a defensive bent with a
large utilities allocation. Financial stocks, which were also prominent in the
portfolio, did plunge on the back of the Russian debt default but recovered
quite quickly as interest rate cuts in several key markets seemed to signal a
global commitment to preventing similar debt crises in other markets.
Q WHAT IS DRIVING THE SPANISH ECONOMY?
A The macroeconomic environment in Spain remains buoyant. In the first half
of 1998, the Spanish economy grew at a rate of 4 percent, and growth of 3.8
percent is anticipated for the full year. Spanish interest rates have been
falling and we expect further downward adjustments prior to the launch of EMU
(European Monetary Union). Inflation rose at a year-on-year rate of 1.6 percent,
and inflation of 1.9 percent is projected for 1998. The inflation environment is
benign and a slower global growth environment should offset any potential
overheating. Consumer and business confidence is at record levels driven by job
creation and a competitive currency. Household spending should remain strong in
1999 as a cut in the personal income tax rate lifts disposable income.
Q HOW HAS DEREGULATION IMPACTED SPAIN?
A Spain has undergone a considerable amount of deregulation since 1994.
Reforms include the introduction of part-time jobs, a reduction in redundancy
payments, capital gains and income tax reform, in addition to the rapid
liberalization of key sectors of the economy such as telecommunications and
<PAGE> 6
PERFORMANCE UPDATE
utilities. These reforms have been very positive for Spain.
Q YOU MENTIONED SPAIN'S STOCK MARKET WAS HURT BY ITS LATIN AMERICA EXPOSURE.
WHAT PORTION OF THE STOCK MARKET DOES THIS EXPOSURE REPRESENT AND WHAT IMPACT DO
YOU FORESEE IF THIS VOLATILITY CONTINUES?
A Spanish exposure to Latin America represents approximately 9 percent of
total corporate revenues. While Spanish corporations will suffer from a slowdown
in growth in Latin America, much of this risk has been discounted in stock
prices. Stability is returning to Latin American markets in response to recent
policy decisions.
Q WHAT IS YOUR OUTLOOK FOR SPAIN?
A Barring a severe global meltdown, Spain will probably emerge relatively
intact from the recent global crisis and, due to the domestic nature of the
Spanish economy, profit growth will be less affected than other European
markets. In addition, a significant part of the negative shock on Spain has been
offset by the easier monetary conditions which have remained intact in the
recent volatility.
6
<PAGE> 7
LARGEST HOLDINGS
THE FUND'S 15 LARGEST HOLDINGS*
Representing 78.7 percent of the fund's total common stocks on October 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
COUNTRY PERCENT
- -------------------------------------------------------------------------
<S> <C> <C>
1. TELEFONICA DE ESPANA 12.5%
2. BANCO BILBAO VIZCAYA 9.6%
3. EMPRESA NACIONAL DE ELECTRICIDAD (ENDESA) 6.2%
4. FOMENTO DE CONSTRUCCIONES Y CONTRATAS (FCC) 5.6%
5. IBERDROLA 5.5%
6. GAS NATURAL 5.3%
7. ARGENTARIA 5.0%
8. REPSOL 5.0%
9. VALLEHERMOSO 4.7%
10. BANKINTER 3.8%
11. COMPANIA SEVILLANA DE ELECTRICIDAD 3.8%
12. CENTROS COMMERCIALES PRYCA 3.7%
13. UNION ELECTRICA FENOSA 2.9%
14. AUTOPISTAS CONCESIONARIA (ACESA) 2.6%
15. ALBA 2.5%
</TABLE>
*PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
7
<PAGE> 8
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
[PIE CHART] [PIE CHART]
ON 10/31/98 ON 10/31/97
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 10/31/98 ON 10/31/97
- --------------------------------------------------------------------------------
<S> <C> <C>
SPANISH EQUITIES 91% 99%
- --------------------------------------------------------------------------------
SPANISH PESETA TIME DEPOSITS 1 1
- --------------------------------------------------------------------------------
CASH AND EQUIVALENTS 8 --
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
*Portfolio holdings and composition are subject to change.
8
<PAGE> 9
PORTFOLIO OF INVESTMENTS
THE GROWTH FUND OF SPAIN, INC.
Portfolio of Investments at October 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
COMMON STOCKS SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BANKING--23.3%
Argentaria 820,000 $ 17,843
Banco Bilbao Vizcaya 2,502,000 33,747
Banco Central Hispano 435,900 4,812
Banco de Andalucia 88,952 4,231
Banco de Valencia 140,000 3,727
Banco Pastor, S.A. 67,700 3,619
Banco Popular Espanol 142,800 8,820
Bankinter 440,000 13,463
-----------------------------------------------------------------------
90,262
- -----------------------------------------------------------------------------------------------------------------------
CHEMICALS AND ENERGY--4.5%
Repsol 350,000 17,567
-----------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
CONSTRUCTION AND PROPERTY
DEVELOPMENT--11.7%
Fomento de Construcciones y Contratas (FCC) 376,132 19,760
Grupo Acciona 27,650 7,145
Inmobiliaria Metropolitana Vasco Central
(Metrovascesa) 63,000 1,818
Vallehermoso 1,326,765 16,389
-----------------------------------------------------------------------
45,112
- -----------------------------------------------------------------------------------------------------------------------
CONSUMER GOODS--5.8%
Aldeasa, S.A. 50,000 1,704
Baron de Ley, S.A. 15,000 501
Centros Commerciales Pryca 590,000 13,089
Prosegur, Cia de Seguridad, S.A. 402,415 4,871
Vidrala, S.A. 180,000 2,102
-----------------------------------------------------------------------
22,267
- -----------------------------------------------------------------------------------------------------------------------
ELECTRIC AND OTHER UTILITIES--23.4%
Compania Sevillana de Electricidad 1,050,000 13,380
Electricas Reunidas de Zaragoza, S.A. 51,944 2,397
Empresa Nacional de Electricidad (ENDESA) 867,000 21,850
Gas Natural 217,823 18,758
Gas y Electricidad (GESA) 57,000 4,836
Iberdrola 1,200,000 19,381
Union Electrica Fenosa 625,000 10,139
-----------------------------------------------------------------------
90,741
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES--2.3%
Alba 70,800 8,891
-----------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
METALS AND ENGINEERING--6.3%
Acerinox 325,000 7,326
Azkoyen 61,000 8,228
Zardoya Otis 305,497 8,805
-----------------------------------------------------------------------
24,359
- -----------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS AND
MOTORWAYS--13.7%
Autopistas Concesionaria (ACESA) 551,250 9,021
Telefonica de Espana 973,000 43,932
-----------------------------------------------------------------------
52,953
-----------------------------------------------------------------------
TOTAL COMMON STOCKS--91.0%
(Cost: $181,018) 352,152
-----------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY MARKET Yield--4.25%
INSTRUMENT--1.2% Due--November 1998
(Cost: $4,789)
Banco Exterior Internacional
(PRINCIPAL AMOUNT IN SPANISH PESETAS) 673,427,585 $ 4,781
-----------------------------------------------------------------------
TOTAL INVESTMENTS--92.2%
(Cost: $185,807) 356,933
-----------------------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--7.8% 30,193
-----------------------------------------------------------------------
NET ASSETS--100% $387,126
-----------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
NOTE TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Based on the cost of investments of $185,807,000 for federal income tax purposes
at October 31, 1998, the gross unrealized appreciation was $172,417,000, the
gross unrealized depreciation was $1,291,000 and the net unrealized appreciation
on investments was $171,126,000.
See accompanying Notes to Financial Statements.
10
<PAGE> 11
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
October 31, 1998, and the related statements of operations for the eleven months
then ended and changes in net assets for the eleven months then ended and year
ended November 30, 1997, and the financial highlights for each of the fiscal
periods since 1994. 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
October 31, 1998, 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 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 October 31, 1998, the results of its operations
for the eleven months then ended, the changes in its net assets for the eleven
months then ended and year ended November 30, 1997, and the financial highlights
for each of the fiscal periods since 1994, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 16, 1998
11
<PAGE> 12
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------
Investments, at value
(Cost: $185,807) $356,933
- ------------------------------------------------------------------------
Cash (including foreign currency of $30,322 with a cost of
$28,014) 30,404
- ------------------------------------------------------------------------
Receivable for dividends and interest 923
- ------------------------------------------------------------------------
TOTAL ASSETS 388,260
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- ------------------------------------------------------------------------
Payable for:
Management fee 302
- ------------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 193
- ------------------------------------------------------------------------
Reorganization expenses 591
- ------------------------------------------------------------------------
Directors' fees and other 48
- ------------------------------------------------------------------------
Total liabilities 1,134
- ------------------------------------------------------------------------
NET ASSETS $387,126
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- ------------------------------------------------------------------------
Paid-in capital $183,252
- ------------------------------------------------------------------------
Undistributed net realized gain on investments and foreign
currency transactions 28,047
- ------------------------------------------------------------------------
Net unrealized appreciation on investments and assets and
liabilities in foreign currency 173,538
- ------------------------------------------------------------------------
Undistributed net investment income 2,289
- ------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $387,126
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
NET ASSET VALUE PER SHARE, $.01 PAR VALUE
($387,126 / 16,530 shares outstanding) $23.42
- ------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
Eleven months ended October 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
NET INVESTMENT INCOME
- -----------------------------------------------------------------------
Dividends $ 7,415
- -----------------------------------------------------------------------
Interest 358
- -----------------------------------------------------------------------
7,773
- -----------------------------------------------------------------------
Less foreign taxes withheld 1,096
- -----------------------------------------------------------------------
Total investment income 6,677
- -----------------------------------------------------------------------
Expenses:
Management fee 3,341
- -----------------------------------------------------------------------
Custodian and transfer agent fees and related expenses 442
- -----------------------------------------------------------------------
Professional fees 127
- -----------------------------------------------------------------------
Reports to shareholders 60
- -----------------------------------------------------------------------
Reorganization expenses 655
- -----------------------------------------------------------------------
Directors' fees and other 176
- -----------------------------------------------------------------------
Total expenses 4,801
- -----------------------------------------------------------------------
NET INVESTMENT INCOME 1,876
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
- -----------------------------------------------------------------------
Net realized gain on sales of investments and foreign
currency transactions 28,911
- -----------------------------------------------------------------------
Change in net unrealized appreciation on investments and
assets and liabilities in foreign currency 65,579
- -----------------------------------------------------------------------
Net gain on investments 94,490
- -----------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $96,366
- -----------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
OCTOBER 31, 1998 NOVEMBER 30, 1997
- ---------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 1,876 3,670
- ---------------------------------------------------------------------------------------------------------
Net realized gain 28,911 20,740
- ---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation 65,579 47,441
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 96,366 71,851
- ---------------------------------------------------------------------------------------------------------
Distribution from net investment income (1,818) (2,854)
- ---------------------------------------------------------------------------------------------------------
Distribution from net realized gain (22,481) (13,931)
- ---------------------------------------------------------------------------------------------------------
Total dividends to shareholders (24,299) (16,785)
- ---------------------------------------------------------------------------------------------------------
Payment for shares repurchased (310 shares for year
ended November 30, 1997) -- (3,942)
- ---------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 72,067 51,124
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Beginning of period 315,059 263,935
- ---------------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed
net investment income of
$2,289 and $1,625, respectively) $387,126 315,059
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 SIGNIFICANT
ACCOUNTING POLICIES DESCRIPTION OF FUND. The fund is registered under
the Investment Company Act of 1940 as a closed-end
management investment company. Pursuant to
shareholder vote on October 28, 1998, the fund
changed its classification from diversified to
non-diversified. In 1998, the fund changed its
fiscal year end for financial reporting and federal
income tax purposes to October 31 from November 30.
SECURITY VALUATION. Investments are stated at
value. Portfolio securities which are traded on
U.S. or foreign stock exchanges are valued at the
most recent sale price reported on the exchange on
which the security is traded most extensively. If
no sale occurred, the security is then valued at
the calculated mean between the most recent bid and
asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation is
used. Forward foreign currency contracts are valued
at the prevailing forward exchange rate of the
underlying currencies on that day.
Portfolio debt securities other than money market
instruments with an original maturity over sixty
days are valued by pricing agents approved by the
officers of the fund, which quotations reflect
broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents
are unable to provide such quotations, the most
recent bid quotation supplied by a bona fide market
maker shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost. All other
securities are valued at their fair value as
determined in good faith by the Valuation Committee
of the Board of Directors.
FOREIGN CURRENCY TRANSLATION. The books and records
of the fund are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in Spanish pesetas are
translated into U.S. dollars at the prevailing rate
of exchange. Purchases and sales of investment
securities, income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the
respective dates of the 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. 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's policy is to
comply with the requirements of the Internal
Revenue Code, as amended, which are applicable to
regulated investment companies, and to distribute
all of its taxable income to its shareholders.
Accordingly, the fund paid no federal income taxes
and no federal income tax provision was required.
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
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
tax principles which may treat certain
transactions, such as foreign currency
transactions, differently from generally accepted
accounting principles.
- --------------------------------------------------------------------------------
2 TRANSACTIONS WITH
AFFILIATES The fund has a management agreement with Scudder
Kemper Investments, Inc. (Scudder Kemper) and pays
a monthly investment management fee of 1/12 of the
annual rate of 1% of average weekly net assets. The
fund incurred a management fee of $3,341,000 for
the eleven months ended October 31, 1998.
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 of 1/12 of the annual rate of
.35% of the fund's average weekly net assets to the
Spanish Adviser. During the eleven months ended
October 31, 1998, Scudder Kemper incurred fees of
$1,169,000 to the Spanish Adviser.
ZURICH/B.A.T MERGER. On September 7, 1998, Zurich
Insurance Company (Zurich), majority owner of
Scudder Kemper, entered into an agreement with
B.A.T Industries p.l.c. (B.A.T) pursuant to which
the financial services businesses of B.A.T were
combined with Zurich's businesses to form a new
global insurance and financial services company
known as Zurich Financial Services. Upon
consummation of the transaction, the fund's
investment management agreement with Scudder Kemper
was deemed to have been assigned and, therefore,
terminated. The Board of Directors of the fund has
approved a new investment management agreement with
Scudder Kemper, which is substantially identical to
the former investment management agreement, except
for the dates of execution and termination.
Shareholders approved the new investment management
agreement through a proxy solicitation that
concluded October 28, 1998.
Pursuant to a services agreement with the fund's
transfer agent, Kemper Service Company (KSvC) is
the shareholder service agent of the fund. Under
the agreement, KSvC received shareholder services
fees of $22,000 for the eleven months ended October
31, 1998.
Certain officers or directors of the fund are also
officers or directors of Scudder Kemper. During the
eleven months ended October 31, 1998, the fund made
no pay-
ments to its officers and incurred directors' fees
of $25,000 to independent directors.
- --------------------------------------------------------------------------------
3 INVESTMENT
TRANSACTIONS For the eleven months ended October 31, 1998,
investment transactions (excluding short-term
instruments) are as follows (in thousands):
Purchases $31,636
Proceeds from sales 68,691
- --------------------------------------------------------------------------------
4 REPURCHASE OF SHARES The Board of Directors of the fund has previously
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. The repurchase plan has been suspended by
the Board of Directors of the fund pending
conversion of the fund to an open-end investment
company (see Note 5 below). For the year ended
November 30, 1997, 310,000 shares of the fund were
repurchased, at a weighted average discount to net
asset value of 19%.
- --------------------------------------------------------------------------------
5 SUBSEQUENT EVENT At the close of business December 11, 1998, the
fund converted from a closed-end investment company
to an open-end investment company and reorganized
as a new series of Kemper Global/International
Series, Inc. The fund's reorganization expenses, as
approved by the fund's Board of Directors, amounted
to $655,000 as of October 31, 1998.
15
<PAGE> 16
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED NOVEMBER 30,
OCTOBER 31, -----------------------------------------
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- ----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $19.06 15.67 13.33 12.40 10.67
- ----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .11 .24 .36 .37 .32
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain 5.72 4.15 2.69 1.01 1.41
- ----------------------------------------------------------------------------------------------------
Total from investment operations 5.83 4.39 3.05 1.38 1.73
- ----------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .11 .17 .42 .45 --
- ----------------------------------------------------------------------------------------------------
Distribution from net realized gain 1.36 .83 .29 -- --
- ----------------------------------------------------------------------------------------------------
Total dividends 1.47 1.00 .71 .45 --
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period $23.42 19.06 15.67 13.33 12.40
- ----------------------------------------------------------------------------------------------------
Market value, end of period $22.06 17.00 12.50 10.88 10.00
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED)
- ----------------------------------------------------------------------------------------------------
Based on net asset value 32.90% 29.86 24.12 11.62 16.21
- ----------------------------------------------------------------------------------------------------
Based on market value 41.48% 46.49 22.38 13.83 3.90
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------------------------
Expenses 1.43% 1.22 1.25 1.22 1.23
- ----------------------------------------------------------------------------------------------------
Net investment income .58% 1.29 2.46 2.89 2.57
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands) $387,126 315,059 263,935 227,997 213,972
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 10% 29 45 69 85
- ----------------------------------------------------------------------------------------------------
</TABLE>
NOTE: Total return based on net asset value reflects changes in the fund's net
asset value during the period. 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 period.
TAX INFORMATION
The fund paid a distribution of $.93 per share from net long-term capital gains
during the period ended October 31, 1998, of which 62% represent 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the fund designates
$26,700,000 as capital gain dividends for the period ended October 31, 1998, of
which 100% represent 20% rate gains.
The fund paid foreign taxes of $1,097,000 and earned $7,415,000 of foreign
source income during the period ended October 31, 1998. Pursuant to Section 853
of the Internal Revenue Code, the fund designates $.07 per share as foreign
taxes paid and $.18 per share as income earned from foreign sources for the
period ended October 31, 1998.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Kemper Fund account, please call 1-800-621-1048.
16
<PAGE> 17
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 and as 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; (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 "Distribution."
- --------------------------------------------------------------------------------
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
17
<PAGE> 18
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
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
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.
18
<PAGE> 19
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
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 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> 20
SHAREHOLDERS' MEETING
ANNUAL SHAREHOLDERS' MEETING
The annual shareholders' meeting was held on October 28, 1998 for The Growth
Fund Of Spain, Inc. Shareholders were asked to vote on six separate issues:
election of two members to the Board of Directors, ratification of Ernst & Young
LLP as independent auditors, approval of a new investment management agreement
with Scudder Kemper Investments, Inc., approval of a new sub-advisory agreement
with BSN Gestion de Patrimonios S.A., S.G.C., approval to change the fund's
classification to a nondiversified fund and approval of a proposal to convert
the fund to an open-end investment company. Following are the results for each
issue:
1) Election of Directors (Class I)
<TABLE>
<CAPTION>
For
<S> <C>
Frederick T. Kelsey 12,498,718
Fred B Renwick 12,495,861
</TABLE>
2) Ratification of the selection of Ernst & Young LLP as independent auditors
for the fund. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
14,194,968 306,615 349,543
</TABLE>
3) Approval of a new investment management agreement with Scudder Kemper
Investments, Inc. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
14,016,940 459,821 374,364
</TABLE>
4) Approval of a new sub-advisory agreement with BSN Gestion de Patrimonios
S.A., S.G.C. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
14,065,696 401,981 383,448
</TABLE>
5) Approval of a change of the fund's classification to a nondiversified fund.
This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
10,772,174 424,540 458,995
</TABLE>
6) Approval of the proposal to convert the fund to an open-end investment
company. This item was approved.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
11,399,716 221,207 34,786
</TABLE>
20
<PAGE> 21
NOTES
21
<PAGE> 22
NOTES
22
<PAGE> 23
NOTES
23
<PAGE> 24
DIRECTORS&OFFICERS
DIRECTORS OFFICERS
JAMES E. AKINS DANIEL PIERCE STEVEN H. REYNOLDS
Director President Vice President
ARTHUR R. GOTTSCHALK MARK S. CASADY KATHRYN L. QUIRK
Director Vice President Vice President
FREDERICK T. KELSEY PHILIP J. COLLORA LINDA J. WONDRACK
Director Vice President and Vice President
Secretary
FRED B. RENWICK CAROLINE PEARSON
Director JOAN R. GREGORY Assistant Secretary
Vice President
JOHN B. TINGLEFF MAUREEN E. KANE
Director JOHN R. HEBBLE Assistant Secretary
Treasurer
JOHN G. WEITHERS ELIZABETH C. WERTH
Director THOMAS W. LITTAUER Assistant Secretary
Vice President
BRENDA LYONS
ANN M. MCCREARY Assistant Treasurer
Vice President
- --------------------------------------------------------------------------------
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 Avenue
Kansas City, MO 64105
- --------------------------------------------------------------------------------
FOREIGN THE CHASE MANHATTAN BANK
CUSTODIAN Chase Metro Center
Brooklyn, N.Y. 11245
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
[RECYCLED LOGO]
Printed on recycled paper.
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
GSP - 2(12/98) 1063060
Printed in the U.S.A.
