<PAGE> 1
ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR
ENDED OCTOBER 31, 1999
LONG-TERM INVESTING IN A SHORT-TERM WORLD(SM)
[MORNINGSTAR RATINGS LOGO]
GROWTH FUND OF SPAIN
"... One of the more positive features of the
Spanish market this year has been the entry of
new players and new sectors. ..."
[KEMPER FUNDS LOGO]
<PAGE> 2
CONTENTS
3
ECONOMIC OVERVIEW
5
PERFORMANCE UPDATE
8
LARGEST HOLDINGS
9
PORTFOLIO STATISTICS
10
PORTFOLIO OF INVESTMENTS
12
FINANCIAL STATEMENTS
14
NOTES TO FINANCIAL STATEMENTS
18
FINANCIAL HIGHLIGHTS
20
REPORT OF INDEPENDENT AUDITORS
AT A GLANCE
ABOUT YOUR REPORT
THE FUND IS THE SUCCESSOR ENTITY TO THE GROWTH FUND OF SPAIN, INC. A CLOSED-END
FUND WHOSE SHARES WERE EXCHANGED FOR CLASS A SHARES OF THE FUND IN CONNECTION
WITH A REORGANIZATION TRANSACTION COMPLETED ON DECEMBER 11, 1998.
GROWTH FUND OF SPAIN TOTAL RETURNS
FOR THE ONE-YEAR PERIOD ENDING OCTOBER 31, 1999
(UNADJUSTED FOR ANY SALES CHARGE)
[BAR GRAPH]
<TABLE>
<CAPTION>
KEMPER GROWTH FUND OF KEMPER GROWTH FUND OF LIPPER EUROPEAN REGION
KEMPER GROWTH FUND OF SPAIN CLASS A SPAIN CLASS B SPAIN CLASS C FUNDS CATEGORY AVERAGE*
- ----------------------------------- --------------------- --------------------- -----------------------
<S> <C> <C> <C>
- -3.38 -10.07 -10.07 10.72
</TABLE>
RETURNS ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE OF
CLASS A SHARES PRIOR TO THE FUND'S CONVERSION ON 12/11/98 REFLECTS THAT OF THE
CLOSED-END FUND, THE CLASS B AND CLASS C SHARE PERFORMANCE IS FOR THE TIME
PERIOD OF 12/14/98 TO 10/31/99. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL
COST.
NET ASSET VALUE
<TABLE>
<CAPTION>
AS OF AS OF
10/31/99 10/31/98
.........................................................
<S> <C> <C>
GROWTH FUND OF SPAIN CLASS A $20.86 $23.42
.........................................................
GROWTH FUND OF SPAIN CLASS B $20.67 --
.........................................................
GROWTH FUND OF SPAIN CLASS C $20.67 --
.........................................................
</TABLE>
INVESTMENT IN FOREIGN SECURITIES PRESENTS SPECIAL RISK CONSIDERATIONS INCLUDING
FLUCTUATING CURRENCY EXCHANGE RATES, GOVERNMENT REGULATION AND DIFFERENCES IN
LIQUIDITY.
TERMS TO KNOW
YOUR FUND'S STYLE
MORNINGSTAR EQUITY STYLE BOX
<TABLE>
<S> <C>
[MORNINGSTAR EQUITY STYLE Source: Morningstar, Inc., Chicago, IL (312)
BOX] 696-6000. The Equity Style Box placement is based
on a fund's price-to-earnings and price-to-book
ratios relative to the S&P 500, as well as the
size of the companies in which it invests, or
median market capitalization.
PLEASE NOTE THAT STYLE BOXES DO NOT REPRESENT AN
EXACT ASSESSMENT OF RISK AND DO NOT REPRESENT
FUTURE PERFORMANCE. THE FUND'S PORTFOLIO CHANGES
FROM DAY TO DAY. A LONGER-TERM VIEW IS
REPRESENTED BY A FUND'S MORNINGSTAR CATEGORY,
WHICH IS BASED ON ACTUAL INVESTMENT STYLE AS
MEASURED BY ITS UNDERLYING PORTFOLIO OVER THE
LAST THREE YEARS CATEGORY PLACEMENTS OF NEW FUNDS
ARE ESTIMATED. MORNINGSTAR HAS PLACED KEMPER
GROWTH FUND OF SPAIN IN THE WORLD STOCK CATEGORY.
PLEASE CONSULT THE PROSPECTUS FOR A DESCRIPTION
OF INVESTMENT POLICIES.
</TABLE>
EUROPEAN ECONOMIC AND MONETARY UNION An economic and monetary unification of
European countries to introduce a single currency at a single interest rate in
order to create a more economically competitive region.
CYCLICAL STOCKS Stock of a company in an industry whose earnings tend to rise
quickly when the economy strengthens and fall quickly when the economy weakens.
Examples are automobiles, housing, paper and steel. Noncyclical industries, such
as food, insurance and drugs are normally not as directly affected by economic
changes.
LIQUIDITY The ease with which an investment or an asset can be converted into
cash within a reasonably short period of time.
MACROECONOMICS The analysis of a nation's economy as a whole, using such
aggregate data as price levels, unemployment, inflation and industrial
production.
<PAGE> 3
SCUDDER KEMPER INVESTMENTS, THE INVESTMENT MANAGER FOR KEMPER FUNDS, IS ONE OF
THE LARGEST AND MOST EXPERIENCED INVESTMENT MANAGEMENT ORGANIZATIONS IN THE
WORLD, MANAGING MORE THAN $290 BILLION IN ASSETS FOR INSTITUTIONAL AND CORPORATE
CLIENTS, RETIREMENT AND PENSION PLANS, INSURANCE COMPANIES, MUTUAL FUND
INVESTORS AND INDIVIDUALS. SCUDDER KEMPER INVESTMENTS OFFERS A FULL RANGE OF
INVESTMENT COUNSEL AND ASSET MANAGEMENT CAPABILITIES BASED ON A COMBINATION OF
PROPRIETARY RESEARCH AND DISCIPLINED, LONG-TERM INVESTMENT STRATEGIES.
ECONOMIC Overview
DEAR KEMPER FUNDS SHAREHOLDER:
Markets have been aquiver about inflation risks. Growth in the United States
continues to exceed most expectations. Labor markets are visibly tight. These
are the precursors to inflation -- everybody knows it.
Everybody except us, that is. We don't buy it in principle, and reality is
proving our theory correct.
First, let's look at growth. The traditional economic view is that growth
causes inflation. Today, we're seeing exactly the opposite: Low inflation is
causing growth. Low inflation keeps interest rates down, and low interest rates
spur investment by making borrowing money cheap. Investment allows companies to
add capacity, keeping competition fierce. As a result, companies aren't raising
prices; they're competing for business by keeping goods attractive and prices
low. That's true for the old economy, in which consumers were buying t-shirts,
and the new economy, in which consumers are buying Internet services. Everywhere
they look, consumers see bargains -- in the malls, in the auto showrooms, at the
mortgage companies.
As for tight labor markets, the traditional economic view is that tight
labor -- i.e., many "help-wanted" signs -- forces companies to pay a premium for
talent. That, in turn, forces companies to raise their prices in order to
protect their profits. And raising prices results in inflation. In contrast, we
believe that tight labor markets won't cause wages to surge. Why?
To start with, temporary agencies have proliferated, accounting for 2.2
percent of jobs, up from 0.5 percent in the early 1980s. They get just the right
amount and type of labor to the right spot at the right time to get the job
done.
Immigration also keeps a lid on wage rates, since it replenishes the work
force much faster than births. Immigration is at its highest level ever; an
amazing 10 percent of the population is foreign-born. Nearly 1 million people
enter the United States legally each year, and another 300,000 just show up.
When they get here, they look for jobs. And often, they're willing to accept
lower-paying jobs than the average citizen.
Finally, and perhaps most importantly, wage rates are kept in check by
executives' intense profit focus. Payroll is a company's biggest expense. When
payroll skyrockets, profits decline -- and that would be bad for a CEO who
promised Wall Street double-digit earnings growth from now to the end of time.
If investors are disappointed in earnings growth, they sell their stock. And
when they sell their stock, the stock options that are an essential part of many
executives' compensation are as valuable as scrap paper.
Supporting our theory are two distinct and important sets of data released in
late October: The Bureau of Economic Analysis released its third-quarter
estimate of gross domestic product (GDP), the value of all goods and services
produced in the United States, and the Bureau of Labor Statistics released its
employment cost index (ECI), which measures what employers pay for their
workers' wages, salaries and benefits.
GDP grew at a 4.8 percent rate in the third quarter, up sharply from the
revised 1.9 percent second-quarter pace and just slightly above the consensus
estimate of 4.7 percent.
At the same time, however, the ECI rose by 0.8 percent in the July-September
period, down from a 1.1 percent increase in the second quarter. The
third-quarter gain also was lower than the 0.9 percent increase forecast by
economists in a Reuters poll. (The report, by the way, is said to be one of the
favorites of Federal Reserve Chairman Alan Greenspan, who uses it as a key
indicator of inflation pressures in the world's largest economy.)
In essence, then, the U.S. economy posted its strongest growth so far this
year in the third quarter, while wage costs remained tame. The combination of
strong consumer demand and the lowest unemployment in a generation just isn't
igniting wage-driven inflation.
Nevertheless, the Federal Reserve Board raised the federal funds rate and the
discount rate by one quarter of a point (0.25%) each at its Nov. 16 meeting. Do
we think the Fed made a bad decision? Actually, no.
First, the Fed has to guard against the possibility that the old relationship
between growth and inflation will soon reassert itself. Even if the Fed shared
our belief that
3
<PAGE> 4
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>
NOW (11/30/99) 6 MONTHS AGO 1 YEAR AGO 2 YEARS AGO
-------------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
10-year Treasury rate (1) 6.00 5.50 4.80 5.90
Prime rate (2) 8.50 7.75 8.00 8.50
Inflation rate (3)* 2.60 2.30 1.50 2.00
The U.S. dollar (4) -0.7 -0.9 1.20 9.40
Capital goods orders (5)* 12.60 2.50 -0.6 6.40
Industrial production (5)* 3.30 2.90 3.50 6.90
Employment growth (6)* 2.10 2.10 2.30 2.70
</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 10/30/99.
SOURCE: ECONOMICS DEPARTMENT, SCUDDER KEMPER INVESTMENTS, INC.
Economic OVERVIEW
strong consumer demand and low unemployment isn't igniting wage-driven
inflation, the organization wouldn't be doing its job if it didn't act in the
face of any possibility that inflation might reassert itself.
More important, the Fed has to be concerned about the explosion in credit
we've seen during the last year. Almost everyone but Uncle Sam has been loading
up on debt. Companies have borrowed heavily to fund mergers, share buybacks and
new investments. Homeowners have taken out bigger mortgages on their houses and
new home equity loans. Equity shareholders have ramped up their margin debt.
Financial institutions have issued record amounts of new paper to fund their
aggressive growth. The Fed's decision to raise interest rates, thereby making
borrowing costlier, should take the frenzy out of this borrowing binge. That is
a good thing for future financial stability.
Indeed, the early positive market reaction to the Fed's move suggests that the
markets share our views that the Fed made the right decision.
Thank you for your continued support. We appreciate the opportunity to serve
your investment needs.
Sincerely,
Scudder Kemper Investments Economics Group
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 THE ECONOMIC ADVISORS OF SCUDDER KEMPER
INVESTMENTS, INC. AS OF NOVEMBER 18, 1999, AND MAY NOT ACTUALLY COME TO PASS.
THIS INFORMATION IS SUBJECT TO CHANGE. NO PART OF THIS MATERIAL IS INTENDED AS
AN INVESTMENT RECOMMENDATION.
TO OBTAIN A KEMPER FUNDS PROSPECTUS, DOWNLOAD ONE FROM WWW.KEMPER.COM, TALK TO
YOUR FINANCIAL REPRESENTATIVE OR CALL SHAREHOLDER SERVICES AT (800) 621-1048.
THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, INCLUDING MANAGEMENT FEES AND
EXPENSES. PLEASE READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
4
<PAGE> 5
PERFORMANCE UPDATE
[GREGORY PHOTO]
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 GROWTH
FUND OF SPAIN AND SEVERAL INSTITUTIONAL INTERNATIONAL PORTFOLIOS. SHE JOINED
SCUDDER KEMPER INVESTMENTS IN 1992, GREGORY WORKED IN U.S. TRUST'S INTERNATIONAL
INVESTMENT DEPARTMENT.
[BRATT PHOTO]
NICK BRATT, A MANAGING DIRECTOR OF SCUDDER KEMPER INVESTMENTS, IS THE DIRECTOR
OF THE GLOBAL EQUITY GROUP. HE JOINED SCUDDER KEMPER INVESTMENTS IN 1976, AND
HAS MORE THAN 20 YEARS OF INVESTMENT EXPERIENCE.
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 HAS EXPERIENCED MUCH TRANSITION OVER THE PAST YEAR, LARGELY
IN RESPONSE TO THE BIRTH OF THE EUROPEAN ECONOMIC AND MONETARY UNION. LEAD
PORTFOLIO MANAGER JOAN GREGORY OFFERS HER INSIGHTS ON THE PERFORMANCE OF THE
MARKET.
Q COULD YOU PROVIDE AN OVERVIEW OF THE EVENTS THAT IMPACTED THE SPANISH
MARKET DURING THIS PERIOD?
A After several years of excellent performance driven by falling interest
rates, falling inflation and better control of government finances as Spain
prepared for realization of the European Economic and Monetary Union, we saw a
slowdown in the Spanish market over the past year for a number of reasons. A
weaker euro was part of it, but also, concerns about higher interest rates in
the United States and Europe put significant pressure on most European markets.
Spain, perhaps more so than others, was caught in the downturn. The Spanish
market is a narrow one and thus especially sensitive to interest-rate concerns.
Additionally, the Spanish market suffered from a lack of liquidity as a large
number of domestic investors broadened their portfolios by investing in other
European markets when introduction of the euro eliminated currency risk.
Q GIVEN THESE CHALLENGES, IT'S NOT SURPRISING THAT THE SPANISH MARKET AS
MEASURED BY THE IBEX 35* WAS DOWN 1.31% FOR THE FISCAL YEAR. GROWTH FUND OF
SPAIN, HOWEVER, LOST 3.38% (CLASS A SHARES, UNADJUSTED FOR ANY SALES CHARGE).
CAN YOU EXPLAIN THIS DISCREPANCY?
A This past year was a very transitional period for Growth Fund Of Spain.
The decision to open-end the fund last year has resulted in heavy cash outflows
for an extended period of time as former closed-end shareholders have elected to
take profits (the fund sold at a significant discount as a closed-end offering).
To handle these redemptions in a market experiencing the challenges I just
described, we had to periodically sell securities at prices we would not have
accepted otherwise. Moving forward, we expect that managing the fund with a more
stable asset base will bring the fund's relative performance more in line with
that of its benchmark.
* THE IBEX 35 INDEX IS COMPOSED OF THE 35 MOST ACTIVELY TRADED STOCKS IN CASH
PESTAS AMONG THE SECURITIES ON THE JOINT STOCK EXCHANGE SYSTEM OF THE FOUR
SPANISH STOCK EXCHANGES. SOURCE IS IBEX 35.
Q WITH RESPECT TO SECTORS, WHICH INDUSTRIES IN SPAIN SUCCEEDED OVER THE PAST
YEAR AND WHICH SEEMED TO POSE SOME CHALLENGES?
A The utility sector, representing a significant portion of the Spanish
market, had a dampening effect when the government unexpectedly lowered tariffs
to offset inflationary fears. The recent global shift to more cyclical stocks
also hurt relative returns, as the Spanish market has very few companies with a
cyclical flavor. Unlike the phenomenon experienced by other European countries,
consolidation in the banking and energy sectors did little to push the Spanish
market ahead, though several stocks performed well on an individual basis.
Repsol, in the chemicals and energy sector, purchased a major stake in Argentine
oil company YPF, giving
5
<PAGE> 6
PERFORMANCE UPDATE
the company a leading position in Spain and Argentina. What's more,
consolidation in the banking sector was completed with the mergers of BCH and
Banco Santander, and more recently the merger between BBV and Argentaria.
One of the more positive features of the Spanish market this year has been the
entry of new players and new sectors. Telefonica, the incumbent telephone
operator, floated its yellow and white pages subsidiary, TPI, and more recently,
its Internet business, Terra Networks. Sogecable, the first media stock to trade
in Spain, also came to the market.
Q WHAT IS YOUR OUTLOOK FOR THE MACROECONOMIC ENVIRONMENT IN SPAIN?
A The macroeconomic environment in Spain remains buoyant. The inflation
environment is benign, and lower prices for electricity, gas and telephone calls
in the wake of deregulation should offset any potential overheating. Consumer
and business confidence are at record levels, driven by falling unemployment and
low interest rates. What's more, Spain has undergone a considerable amount of
deregulation since 1994. Reforms include the introduction of part-time jobs, the
reduction in redundancy payments, an end to rent control, capital gains and
income tax reform, as well as the rapid liberalization of key sectors of the
economy such as telecommunications and utilities.
6
<PAGE> 7
PERFORMANCE UPDATE
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED OCTOBER 31, 1999 (ADJUSTED FOR THE MAXIMUM SALES CHARGE)
<TABLE>
<CAPTION>
1-YEAR 5-YEAR LIFE OF CLASS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GROWTH FUND OF SPAIN CLASS A -8.95% 17.14% 10.61% (since 2/14/90)
.....................................................................................................
GROWTH FUND OF SPAIN CLASS B N/A N/A -13.65 (since 12/14/98)
.....................................................................................................
GROWTH FUND OF SPAIN CLASS C N/A N/A -10.95 (since 12/14/98)
.....................................................................................................
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER GROWTH FUND OF SPAIN CLASS A
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class A shares from 2/28/90 to
10/31/99
<TABLE>
<CAPTION>
KEMPER GROWTH FUND OF U.S. CONSUMER PRICE
SPAIN CLASS A1 IBEX 35 INDEX+ INDEX++
--------------------- -------------- -------------------
<S> <C> <C> <C>
2/28/90 9425.00 10000.00 10000.00
9063.00 9288.00 10453.00
10520.00 10602.00 10773.00
12/31/92 8051.00 8024.00 11083.00
10369.00 9937.00 11391.00
10700.00 9128.00 11695.00
12/31/95 13175.00 11766.00 11984.00
17421.00 15575.00 12391.00
20960.00 18708.00 12602.00
31546.00 27301.00 12805.00
10/31/99 26621.00 24216.00 13180.00
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER GROWTH FUND OF SPAIN CLASS B
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class A shares from 2/28/90 to
10/31/99
<TABLE>
<CAPTION>
KEMPER GROWTH FUND OF U.S. CONSUMER PRICE
SPAIN CLASS B1 IBEX 35 INDEX+ INDEX++
--------------------- -------------- -------------------
<S> <C> <C> <C>
12/31/98 10000 10000 10000
9688 9716 10024
9369 9501 10037
3/31/99 8875 9103 10067
8693 9136 10140
8519 9090 10140
6/30/99 8648 9119 10140
8341 8701 10171
8438 8970 10195
8357 8763 10244
10/31/99 8043 8870 10293
</TABLE>
[LINE GRAPH]
- --------------------------------------------------------------------------------
KEMPER GROWTH FUND OF SPAIN CLASS C
- --------------------------------------------------------------------------------
Growth of an assumed $10,000 investment in Class A shares from 2/28/90 to
10/31/99
<TABLE>
<CAPTION>
KEMPER GROWTH FUND OF U.S. CONSUMER PRICE
SPAIN CLASS C1 IBEX 35 INDEX+ INDEX++
--------------------- -------------- -------------------
<S> <C> <C> <C>
12/31/98 10000 10000 10000
9688 9716 10024
9373 9501 10037
3/31/99 8879 9103 10067
8693 9136 10140
8519 9090 10140
6/30/99 8648 9119 10140
8345 8701 10171
8438 8970 10195
8357 8763 10244
10/31/99 8365 8870 10293
</TABLE>
PAST PERFORMANCE IS NOT A GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT
SHARES,WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN ORIGINAL COST.
RETURNS ARE HISTORICAL AND DO NOT
GUARANTEE FUTURE RESULTS. THE
PERFORMANCE OF CLASS A SHARES PRIOR TO
THE FUND'S CONVERSION ON 12/14/98
REFLECTS THAT OF THE CLOSED-END FUND,
THE CLASS B AND CLASS C SHARE
PERFORMANCE IS FOR THE TIME PERIOD OF
12/14/98 TO 10/31/99. INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO
THAT SHARES, WHEN REDEEMED, MAY BE WITH
MORE OR LESS THAN ORIGINAL COST.
*AVERAGE ANNUAL TOTAL RETURN AND TOTAL
RETURN MEASURE NET INVESTMENT INCOME
AND CAPITAL GAIN OR LOSS FROM
PORTFOLIO INVESTMENTS OVER THE PERIODS
SPECIFIED, ASSUMING REINVESTMENT OF
ALL DIVIDENDS AND, WHERE INDICATED,
ADJUSTMENT FOR THE MAXIMUM SALES
CHARGE. THE MAXIMUM SALES CHARGE FOR
CLASS A SHARES IS 5.75%. FOR CLASS B
SHARES, THE MAXIMUM CONTINGENT
DEFERRED SALES CHARGE (CDSC) IS 4%.
CLASS C SHARES HAVE NO SALES CHARGE
ADJUSTMENT, BUT REDEMPTIONS WITHIN ONE
YEAR OF PURCHASE MAY BE SUBJECT TO A
CONTINGENT DEFERRED SALES CHARGE OF
1%. SHARE CLASSES INVEST IN THE SAME
UNDERLYING PORTFOLIO. AVERAGE ANNUAL
TOTAL RETURN REFLECTS ANNUALIZED
CHANGE, WHILE TOTAL RETURN REFLECTS
AGGREGATE CHANGE. DURING THE PERIODS
NOTED, SECURITIES PRICES FLUCTUATED.
FOR ADDITIONAL INFORMATION, SEE THE
PROSPECTUS AND STATEMENT OF ADDITIONAL
INFORMATION AND THE FINANCIAL
HIGHLIGHTS AT THE END OF THIS REPORT.
(1)PERFORMANCE INCLUDES REINVESTMENT OF
DIVIDENDS AND ADJUSTMENT FOR THE
MAXIMUM SALES CHARGE FOR CLASS A
SHARES AND THE CONTINGENT DEFERRED
SALES CHARGE IN EFFECT AT THE END OF
THE PERIOD FOR CLASS B SHARES. IN
COMPARING KEMPER GROWTH FUND OF
SPAIN CLASS A SHARES WITH THE IBEX
35 INDEX, YOU SHOULD ALSO NOTE THAT
THE FUND'S PERFORMANCE REFLECTS THE
MAXIMUM SALES CHARGE, WHILE NO SUCH
CHARGE IS REFLECTED IN THE
PERFORMANCE OF THE INDEX.
+IBEX 35 INDEX IS COMPOSED OF THE 35
MOST ACTIVELY TRADED STOCKS IN CASH
PESTAS AMONG THE SECURITIES ON THE
JOINT STOCK EXCHANGE SYSTEM OF THE
FOUR SPANISH STOCK EXCHANGES. SOURCE
IS IBEX 35.
++THE U.S. CONSUMER PRICE INDEX IS A
STATISTICAL MEASURE OF CHANGE, OVER
TIME, IN THE PRICES OF GOODS AND
SERVICES IN MAJOR EXPENDITURE GROUPS
FOR ALL URBAN CONSUMERS. SOURCE IS
WIESENBERGER.
7
<PAGE> 8
LARGEST HOLDINGS
GROWTH FUND OF SPAIN'S TOP 10 HOLDINGS*
Representing 87.1 percent of the fund's total common stocks on October 31, 1999.
<TABLE>
<CAPTION>
HOLDINGS PERCENT
<S> <C> <C>
- ---------------------------------------------------------------------------
1. TELEFONICA S. A. 15.9%
- ---------------------------------------------------------------------------
2. BANCO BILBRO VIZCAYA 13.2%
- ---------------------------------------------------------------------------
3. BANCO SANTANDER 10.4%
- ---------------------------------------------------------------------------
4. ENDESA S.A. 10.2%
- ---------------------------------------------------------------------------
5. REPSOL S.A 10.0%
- ---------------------------------------------------------------------------
6. CIA DE SEGUROS MUNDIAL CONFIANCE 8.7%
- ---------------------------------------------------------------------------
7. ARGENTARIA 6.2%
- ---------------------------------------------------------------------------
8. UNION ELECTRICA FENOSA 4.8%
- ---------------------------------------------------------------------------
9. ACERINOX 4.4%
- ---------------------------------------------------------------------------
10. BANCO POPULAR ESPANOL 3.3%
- ---------------------------------------------------------------------------
</TABLE>
*PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
8
<PAGE> 9
PORTFOLIO STATISTICS
PORTFOLIO COMPOSITION*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ON 10/31/99 ON 10/31/98
- --------------------------------------------------------------------------------
<S> <C> <C>
SPANISH EQUITIES 89% 91%
- --------------------------------------------------------------------------------
SPANISH PESETA TIME DEPOSITS -- 1
- --------------------------------------------------------------------------------
CASH AND EQUIVALENTS 11 8
- --------------------------------------------------------------------------------
100% 100%
</TABLE>
[PIE CHART] [PIE CHART]
ON 10/31/99 ON 10/31/98
*PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
9
<PAGE> 10
PORTFOLIO OF INVESTMENTS
GROWTH FUND OF SPAIN
PORTFOLIO OF INVESTMENTS AT OCTOBER 31,1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENT--.3% PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Chase Euro Time Deposit
5.063%, due 11/1/99
(Cost: $121) $ 121 $ 121
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
SHORT-TERM NOTES--10.5%
Federal Home Loan Bank
5.16%* 11/1/99
(Cost: $5,000) 5,000 5,000
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
COMMON STOCK--89.2% NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMUNICATIONS--14.2%
TELEPHONE/COMMUNICATIONS
(a)Telefonica Publicidad e Informacion 1,003 22
(a)Telefonica S.A. 407,713 6,723
---------------------------------------------------------------------------
6,745
- --------------------------------------------------------------------------------------------------------------------
CONSTRUCTION--3.8%
BUILDING MATERIALS
Autopistas Concesionaria Espanol S.A. 64,457 697
Fomento de Construcciones y Contratas S.A. 43,418 1,092
---------------------------------------------------------------------------
1,789
- --------------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--1.5%
DEPARTMENT & CHAIN STORES
Modelo Continente 40,817 691
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
DURABLES--2.2%
AUTOMOBILES
SIVA 76,234 1,028
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
ENERGY--8.9%
OIL & GAS PRODUCTION
Repsol S.A. 204,799 4,232
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL--41.4%
BANKS 31.8%
Argentaria 116,906 2,601
Banco Bilbao Vizcaya, S.A. 413,437 5,571
Banco Intercontinental International 29,600 1,141
Banco Popular Espanol 20,825 1,405
Banco Santander 421,380 4,385
---------------------------------------------------------------------------
15,103
INSURANCE 7.8%
(a)Cia. de Seguros Mundial Confiance, S.A. 81,474 3,685
---------------------------------------------------------------------------
OTHER FINANCIAL COMPANIES 1.8%
Corporacion Financiera Al 29,010 844
---------------------------------------------------------------------------
19,632
- --------------------------------------------------------------------------------------------------------------------
MANUFACTURING--3.9%
INDUSTRIAL SPECIALTY
Acerinox 61,030 1,859
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
UTILITIES--13.3%
ELECTRIC UTILITIES
Endesa S.A. 214,596 4,305
Union Electrica Fenosa 137,951 2,023
---------------------------------------------------------------------------
6,328
---------------------------------------------------------------------------
TOTAL COMMON STOCKS--89.2%
(Cost: $29,762) 42,304
---------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO--100%
(Cost: $34,883) $47,425
---------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
(a) Non-income producing security.
* Annualized yield at time of purchase; not a coupon rate (unaudited).
Based on the cost of investments of $35,230,000 for federal income tax purposes
at October 31, 1999, the gross unrealized appreciation was $13,057,000, the
gross unrealized depreciation was $862,000 and the net unrealized appreciation
on investments was $12,195,000.
The accompanying Notes are an integral part of the financial statements.
11
<PAGE> 12
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- -----------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------
Investments, at value
(Cost: $34,883) $47,425
- -----------------------------------------------------------------------
Foreign currency, at value
(Cost: $57) 57
- -----------------------------------------------------------------------
Receivable for:
Investments sold 19,326
- -----------------------------------------------------------------------
Foreign taxes 80
- -----------------------------------------------------------------------
TOTAL ASSETS 66,888
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
LIABILITIES AND NET ASSETS
- -----------------------------------------------------------------------
Payable for:
Due to Custodian Bank 12
- -----------------------------------------------------------------------
Management fee 126
- -----------------------------------------------------------------------
Other accrued expenses 482
- -----------------------------------------------------------------------
Total liabilities 620
- -----------------------------------------------------------------------
ANALYSIS OF NET ASSETS $66,268
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -----------------------------------------------------------------------
Paid-in capital $29,988
- -----------------------------------------------------------------------
Accumulated net realized gain (loss) 23,706
- -----------------------------------------------------------------------
Net unrealized appreciation (depreciation) on:
Investments 12,542
- -----------------------------------------------------------------------
Foreign currency related transactions (17)
- -----------------------------------------------------------------------
Undistributed net investment income 49
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $66,268
- -----------------------------------------------------------------------
THE PRICING OF SHARES
CLASS A SHARES
Net asset value and redemption price per share ($66,005 /
3,164 shares outstanding) $20.86
- -----------------------------------------------------------------------
Maximum offering price per share (net asset value, plus
6.10% of net asset value or 5.75% of offering price) $22.13
- -----------------------------------------------------------------------
CLASS B SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share ($151 / 7
shares outstanding) $20.67
- -----------------------------------------------------------------------
CLASS C SHARES
Net asset value and redemption price (subject to
contingent deferred sales charge) per share ($112 / 5
shares outstanding) $20.67
- -----------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of the Financial Statements.
12
<PAGE> 13
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
(IN THOUSANDS)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------
Income:
Dividends (less foreign taxes withheld of $391) $ 2,448
- -------------------------------------------------------------------------
Interest 364
- -------------------------------------------------------------------------
2,812
- -------------------------------------------------------------------------
Expenses:
Management fee 1,200
- -------------------------------------------------------------------------
Distribution services 2
- -------------------------------------------------------------------------
Administrative services fee 247
- -------------------------------------------------------------------------
Custodian, accounting and transfer agent fees and related
expenses 580
- -------------------------------------------------------------------------
Auditing 98
- -------------------------------------------------------------------------
Legal 182
- -------------------------------------------------------------------------
Reports to shareholders 75
- -------------------------------------------------------------------------
Director's fees and other 82
- -------------------------------------------------------------------------
Expenses, before expense reductions 2,466
- -------------------------------------------------------------------------
Expense reductions (15)
- -------------------------------------------------------------------------
Expenses, net 2,451
- -------------------------------------------------------------------------
NET INVESTMENT INCOME 361
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- -------------------------------------------------------------------------
Net realized gain (loss) on:
Investments 185,818
- -------------------------------------------------------------------------
Foreign currency related transactions 1,992
- -------------------------------------------------------------------------
187,810
- -------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period
on:
- -------------------------------------------------------------------------
Investments (158,584)
- -------------------------------------------------------------------------
Foreign currency related transactions (2,429)
- -------------------------------------------------------------------------
(161,013)
- -------------------------------------------------------------------------
Net gain (loss) on investments 26,797
- -------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 27,158
- -------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998 NOVEMBER 30, 1997
- ----------------------------------------------------------------------------------------------------------
OPERATIONS, DIVIDENDS AND CAPITAL SHARE ACTIVITY
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income $ 361 $ 1,876 3,670
- ----------------------------------------------------------------------------------------------------------
Net realized gain (loss) 187,810 28,911 20,740
- ----------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) (161,013) 65,579 47,441
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 27,158 96,366 71,851
- ----------------------------------------------------------------------------------------------------------
Distribution from net investment income (2,232) (1,818) (2,854)
- ----------------------------------------------------------------------------------------------------------
Distribution from net realized gain (28,432) (22,481) (13,931)
- ----------------------------------------------------------------------------------------------------------
Total dividends to shareholders (30,664) (24,299) (16,785)
- ----------------------------------------------------------------------------------------------------------
Net decrease from capital share transactions (317,352) -- (3,942)
- ----------------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (320,858) 72,067 51,124
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Beginning of period 387,126 315,059 263,935
- ----------------------------------------------------------------------------------------------------------
END OF PERIOD (including undistributed net
investment income of $49 and $2,289,
respectively) $ 66,268 387,126 315,059
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying Notes are an integral part of the Financial Statements
13
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 DESCRIPTION OF
THE FUND Growth Fund of Spain (the "fund") is a
non-diversified series of Kemper
Global/International Series, Inc. (the
"Corporation") which is registered under the
Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end management investment
company organized as a Maryland corporation. Until
December 11, 1998, the fund was organized as a
single series of The Growth Fund of Spain, Inc.
("GSP"), a Maryland Corporation and was registered
under the 1940 Act as a diversified, closed-end
management investment company. Effective December
14, 1998, all of the common stock of GSP was
exchanged for Class A shares of the fund and, on
December 14, 1998, the fund commenced a public
offering of its Class A, Class B and Class C
shares.
The fund offers multiple classes of shares. Class A
shares are offered to investors subject to an
initial sales charge. Class B shares are offered
without an initial sales charge but are subject to
higher ongoing expenses than Class A shares and a
contingent deferred sales charge payable upon
certain redemptions. Class B shares automatically
convert to Class A shares six years after issuance.
Class C shares are offered without an initial sales
charge but are subject to higher ongoing expenses
than Class A shares and a contingent deferred sales
charge payable upon certain redemptions within one
year of purchase. Class C shares do not convert
into another class.
Investment income, realized and unrealized gains
and losses, and certain fund-level expenses and
expense reductions, if any, are borne pro rata on
the basis of relative net assets by the holders of
all classes of shares except that each class bears
certain expenses unique to that class such as
distribution services, shareholder services,
administrative services and certain other class
specific expenses. Differences in class expenses
may result in payment of different per share
dividends by class. All shares of the fund have
equal rights with respect to voting subject to
class specific arrangements.
The fund's financial statements are prepared in
accordance with generally accepted accounting
principles which require the use of management
estimates. The policies described below are
followed consistently by the fund in the
preparation of its financial statements.
- --------------------------------------------------------------------------------
2 SIGNIFICANT
ACCOUNTING POLICIES SECURITY VALUATION. Investments are stated at value
determined as of the close of regular trading on
the New York Stock Exchange. 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. Securities quoted on the Nasdaq
Stock Market ("Nasdaq"), for which there have been
sales, are valued at the most recent sale price
reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are
not quoted on Nasdaq but are traded in another
over-the-counter market are valued at the most
recent sale price, or if no sale occurred, at the
calculated mean between the most recent bid and
asked quotations on such market. If there are no
such bid and asked quotations, the most recent bid
quotation shall be used. Money market instruments
purchased with an original maturity of sixty days
or less are valued at amortized cost.
14
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
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 TRANSLATIONS. The books and
records of the fund are maintained in U.S. dollars.
Investment securities and other assets and
liabilities denominated in a foreign currency are
translated into U.S. dollars at the prevailing
exchange rates at period end. Purchases and sales
of investment securities, income and expenses are
translated into U.S. dollars at the prevailing
exchange rates on the respective dates of the
transactions.
Net realized and unrealized gains and losses on
foreign currency transactions represent net gains
and losses between trade and settlement dates on
securities transactions, the disposition of forward
foreign currency exchange contracts and foreign
currencies, and the difference between the amount
of net investment income accrued and the U.S.
dollar amount actually received. That portion of
both realized and unrealized gains and losses on
investments that results from fluctuations in
foreign currency exchange rates is not separately
disclosed but is included with net realized and
unrealized gains and losses on investment
securities.
REPURCHASE AGREEMENTS. The fund may enter into
repurchase agreements with certain banks and
broker/dealers whereby the fund, through its
custodian or sub-custodian bank, receives delivery
of the underlying securities, the amount of which
at the time of purchase and each subsequent
business day is required to be maintained at such a
level that the market value is equal to at least
the principal amount of the repurchase price plus
accrued interest.
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.
DISTRIBUTION OF INCOME AND GAINS. Distributions of
net investment income, if any, are made annually.
Net realized gains from investment transactions, in
excess of available capital loss carryforwards,
would be taxable to the fund if not distributed,
and, therefore, will be distributed to shareholders
at least annually.
The timing and characterization of certain income
and capital gains distributions are determined
annually in accordance with federal tax regulations
which may differ from generally accepted accounting
principles. These differences primarily relate to
differing treatments for certain transactions such
as foreign currency transactions. As a result, net
investment income (loss) and net realized gain
(loss) on investment transactions for a reporting
period may differ significantly from distributions
during such period. Accordingly, the fund may
periodically make reclassifications among certain
of its capital accounts without impacting the net
asset value of the fund.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME.
Investment transactions are accounted for on the
trade date. Interest income is recorded on the
accrual basis. Dividend income is recorded on the
ex-dividend date. Certain dividends from foreign
securities may be recorded subsequent to the
ex-dividend date as soon as the fund is informed of
such dividends. Realized gains and losses from
investment transactions are recorded on an
identified cost basis.
15
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3 TRANSACTIONS
WITH AFFILIATES MANAGEMENT AGREEMENT. The fund had a management
agreement with Scudder Kemper Investments, Inc.
("Scudder Kemper") which was in effect prior to
December 14, 1998 whereby the fund agreed to pay a
monthly investment management fee of 1/12 of the
annual rate of 1% of average weekly net assets.
Effective December 14, 1998, the fund adopted a new
management agreement and pays a monthly investment
management fee of 1/12 of the annual rate of .75%
of the first $250 million of average daily net
assets, declining to .62% of average daily net
assets in excess of $12.5 billion. The fund
incurred a management fee of $1,200,000 for the
year ended October 31, 1999. Prior to December 14,
1998, the fund had a higher management fee
schedule.
Scudder Kemper utilized the investment management
services of BSN Gestion de Patrimonies, S.A.,
S.G.C. (the Spanish Adviser). For services provided
under the Sub-advisory agreement, Scudder Kemper
paid 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 year ended October 31, 1999,
Scudder Kemper incurred fees of $441,000 to the
Spanish Adviser.
UNDERWRITING AND DISTRIBUTION SERVICES
AGREEMENT. Commencing December 14, 1998, the fund
has an underwriting and distribution services
agreement with Kemper Distributors, Inc. (KDI).
Underwriting commissions retained by KDI in
connection with the distribution of Class A shares
for the period December 14, 1998 to October 31,
1999 are $1,000.
For services under the distribution services
agreement, the fund pays KDI a fee of .75% of
average daily net assets of the Class B and Class C
shares pursuant to separate Rule 12b-1 plans for
the Class B and Class C shares. Pursuant to the
agreement, KDI enters into related selling group
agreements with various firms at various rates for
sales of Class B and Class C shares. In addition,
KDI receives any contingent deferred sales charges
from redemptions of Class B and Class C shares.
Distribution fees and CDSC received by KDI for the
period December 14, 1998 to October 31, 1999 are
$48,000 of which $1,000 is unpaid.
ADMINISTRATIVE SERVICES AGREEMENT. Commencing
December 14, 1998, the fund has an administrative
services agreement with KDI. For providing
information and administrative services to
shareholders, the fund pays KDI a fee at an annual
rate of up to .25% of average daily net assets of
each class. KDI in turn has various agreements with
financial services firms that provide these
services and pays these firms based on assets of
fund accounts that the firms service.
Administrative services fees paid by the fund to
KDI for the period December 14, 1998 to October 31,
1999 are $247,000, of which $131,000 is unpaid at
October 31, 1999.
SHAREHOLDER SERVICES AGREEMENT. Pursuant to an
agency agreement with the fund, Kemper Service
Company (KSvC) is the transfer agent and
shareholder service agent for the fund. Under the
agreement, KSvC received shareholder services fees
of $294,000 for the year ended October 31, 1999, of
which $204,000 is unpaid at October 31, 1999.
FUND ACCOUNTING AGENT. Scudder Fund Accounting
Corporation is responsible for determining the
daily net asset value per share and maintaining the
portfolio and general accounting records of the
fund. The fund incurred accounting fees
16
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
of $90,000 for the year ended October 31, 1999, of
which $8,000 is unpaid at October 31, 1999.
OFFICERS AND DIRECTORS. Certain officers or
directors of the fund are also officers or
directors of Scudder Kemper. For the year ended
October 31, 1999, the fund made no direct payments
to its officers and incurred directors' fees of
$60,000 to independent directors.
- --------------------------------------------------------------------------------
4 EXPENSE OFF-SET
ARRANGEMENTS The fund has entered into arrangements with its
custodian and transfer agent whereby credits
realized as a result of uninvested cash balances
were used to reduce a portion of the fund's
expenses. During the period, the fund's custodian
and transfer agent fees were reduced by $15,000
under these arrangements.
- --------------------------------------------------------------------------------
5 INVESTMENT
TRANSACTIONS For the year ended October 31, 1999, investment
transactions (excluding short-term instruments) are
as follows (in thousands):
Purchases $106,530
Proceeds from sales 443,610
The sales of investment securities includes the
market value of securities relating to
redemptions-in-kind during the period, upon which
the fund recognized a net realized gain of
$116,484,000.
- --------------------------------------------------------------------------------
6 CAPITAL SHARE
TRANSACTIONS The following table summarizes the activity in
capital shares of the fund (in thousands):
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998 NOVEMBER 30, 1997
-------------------- ------------------ ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHARES SOLD
Class A 33 $ 117,007 -- -- -- --
---------------------------------------------------------------------------------------
Class B 8 411 -- -- -- --
---------------------------------------------------------------------------------------
Class C 6 300 -- -- -- --
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
SHARES REDEEMED
Class A (13,399) (435,059) -- -- (310) (3,942)
---------------------------------------------------------------------------------------
Class B (1) (8) -- -- -- --
---------------------------------------------------------------------------------------
Class C (1) (3) -- -- -- --
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS $(317,352) $0 $(3,942)
---------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
7 REPURCHASE OF SHARES The Board of Directors of GSP authorized the open
market repurchase and retirement of up to three
million shares of the fund's outstanding stock
prior to conversion of the fund to an open-end
investment company. 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%.
- --------------------------------------------------------------------------------
8 LINE OF CREDIT The fund and several Kemper Funds (the
"Participants") share in a $750 million revolving
credit facility for temporary or emergency
purposes, including the meeting of redemption
requests that otherwise might require the untimely
disposition of securities. The Participants are
charged an annual commitment fee which is allocated
pro rata among each of the Participants. Interest
is calculated based on the market rates at the time
of the borrowing. The fund may borrow up to a
maximum of 33 percent of its net assets under the
agreement.
17
<PAGE> 18
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------------------------
CLASS A
----------------------------------------------------------------
YEAR ELEVEN MONTHS
ENDED ENDED YEAR ENDED NOVEMBER 30,
OCTOBER 31, OCTOBER 31, ----------------------------------
1999(A) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
- --------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $23.42 19.06 15.67 13.33 12.40 10.67
- --------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .05 .11 .24 .36 .37 .32
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (.75) 5.72 4.15 2.69 1.01 1.41
- --------------------------------------------------------------------------------------------------------------
Total from investment operations (.70) 5.83 4.39 3.05 1.38 1.73
- --------------------------------------------------------------------------------------------------------------
Less dividends:
Distribution from net investment income .14 .11 .17 .42 .45 --
- --------------------------------------------------------------------------------------------------------------
Distribution from net realized gain 1.72 1.36 .83 .29 -- --
- --------------------------------------------------------------------------------------------------------------
Total dividends 1.86 1.47 1.00 .71 .45 --
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.86 23.42 19.06 15.67 13.33 12.40
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) (3.38)% 32.90(B) 29.86(B) 24.12(B) 11.62(B) 16.21(B)
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- --------------------------------------------------------------------------------------------------------------
Expenses, before expense reductions 1.97% 1.43 1.22 1.25 1.22 1.23
- --------------------------------------------------------------------------------------------------------------
Expenses, net 1.96% 1.43 1.22 1.25 1.22 1.23
- --------------------------------------------------------------------------------------------------------------
Net investment income .29% .58 1.29 2.46 2.89 2.57
- --------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
FINANCIAL HIGHLIGHTS
For the period from December 14, 1998 (commencement of Class) to October 31,
1999(a).
<TABLE>
<CAPTION>
---------------- -------------------
CLASS B CLASS C
- ----------------------------------------------------------------------------------- ------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------- ------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 22.98 22.98
- ----------------------------------------------------------------------------------- -------------------
Income from investment operations:
Net investment income (loss) (.16) (.14)
- ----------------------------------------------------------------------------------- -------------------
Net realized and unrealized gain (loss) (2.15) (2.17)
- ----------------------------------------------------------------------------------- -------------------
Total from investment operations (2.31) (2.31)
- ----------------------------------------------------------------------------------- -------------------
Net asset value, end of period $ 20.67 20.67
- ----------------------------------------------------------------------------------- ------------------
TOTAL RETURN (NOT ANNUALIZED) (10.05)% (10.05)
- ----------------------------------------------------------------------------------- ------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
- ----------------------------------------------------------------------------------- ------------------
Expenses, before expense reductions 2.86% 2.81
- ----------------------------------------------------------------------------------- -------------------
Expenses, net 2.84% 2.79
- ----------------------------------------------------------------------------------- -------------------
Net investment income (loss) (.84)% (.79)
- ----------------------------------------------------------------------------------- -------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA FOR ALL CLASSES
- -----------------------------------------------------------------------------------------------------------------------
YEAR ELEVEN MONTHS
ENDED ENDED YEAR ENDED NOVEMBER 30,
OCTOBER 31, OCTOBER 31, --------------------------------------------
1999 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in
thousands) $66,268 387,126 315,059 263,935 227,997 213,972
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (annualized) 76% 10 29 45 69 85
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Total return does not reflect the effect of any sales charges.
(a) Per share data was determined based on monthly average shares outstanding
during the period.
(b) The performance of Class A shares reflects performance of the fund in
closed-end form. The fund's performance may have been lower if it had
operated as an open-end fund during these periods.
TAX INFORMATION (UNAUDITED)
The fund paid a distribution of $1.61 per share from net long-term capital gains
during the year ended October 31, 1999, of which 100% represent 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the fund designates
$76,320,000 as capital gain dividends for the year ended October 31, 1999, of
which 100% represent 20% rate gains.
The fund paid foreign taxes of $391,359 and earned $1,551,035 of foreign source
income during the year ended October 31, 1999. Pursuant to Section 853 of the
Internal Revenue Code, the fund designates $0.12 per share as foreign taxes paid
and $0.49 per share as income earned from foreign sources for the year ended
October 31, 1999.
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.
19
<PAGE> 20
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, 1999, the related statements of operations and changes in net assets
and the financial highlights for each of the fiscal periods indicated therein.
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, 1999, 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, 1999, the results of its operations,
the changes in its net assets and the financial highlights for each of the
fiscal periods indicated therein, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LOGO
Chicago, Illinois
December 21, 1999
20
<PAGE> 21
NOTES
21
<PAGE> 22
NOTES
22
<PAGE> 23
NOTES
23
<PAGE> 24
TRUSTEES & OFFICERS
TRUSTEES OFFICERS
JAMES E. AKINS MARK S. CASADY SHERIDAN REILLY
Director President Vice President
JAMES B. EDGAR PHILIP J. COLLORA ISABEL SALTZMAN
Director Vice President and Vice President
Secretary
ARTHUR R. GOTTSCHALK CORNELIA SMALL
Director JOHN R. HEBBLE Vice President
Treasurer
FREDERICK T. KELSEY LINDA J. WONDRACK
Director JOYCE E. CORNELL Vice President
Vice President
FRED B. RENWICK CAROLINE PEARSON
Director DIEGO ESPINOSA Assistant Secretary
Vice President
KATHRYN L. QUIRK MAUREEN E. KANE
Director and Vice President JOAN R. GREGORY Assistant Secretary
Vice President
JOHN G. WEITHERS BRENDA LYONS
Director TARA KENNEY Assistant Treasurer
Vice President
THOMAS W. LITTAUER
Vice President
ANN M. MCCREARY
Vice President
- --------------------------------------------------------------------------------
LEGAL COUNSEL DECHERT PRICE & RHOADS
Ten Post Office Square South
Boston, MA 02109
- --------------------------------------------------------------------------------
TRANSFER AND KEMPER SERVICE COMPANY
SHAREHOLDER P.O. Box 219066
SERVICE AGENT Kansas City, MO 64121
- --------------------------------------------------------------------------------
CUSTODIAN THE CHASE MANHATTAN BANK
Chase Metro Center
Brooklyn, NY 11245
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS ERNST & YOUNG LLP
233 South Wacker Drive
Chicago, IL 60606
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza
Chicago, IL 60606
[KEMPER FUNDS LOGO]
Long-term investing in a short-term world(SM)
Printed on recycled paper in the U.S.A.
This report is not to be distributed unless
preceded or accompanied by a Kemper Global
and International Funds prospectus.
GSP - 2(12/28/99) 1096730
