(As filed with the Securities and Exchange Commission on September 26, 1995)
Registration No. 33-
Registration No. 811-4692
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 20 [X]
(Check appropriate box or boxes.)
EMERGING MARKETS GROWTH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
11100 Santa Monica Blvd., 15th Floor
Los Angeles, California 90025
(Addresses of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (310) 996-6000
ROBERTA A. CONROY
VICE PRESIDENT AND SECRETARY
EMERGING MARKETS GROWTH FUND, INC.
11100 SANTA MONICA BLVD., 15TH FLOOR
LOS ANGELES, CALIFORNIA 90025
(Name and Address of Agent for Service)
COPIES OF COMMUNICATIONS TO:
SYDNEY H. MENDELSOHN, ESQ.
THOMAS C. MIRA, ESQ.
JORDEN BURT & BERENSON
1025 THOMAS JEFFERSON STREET, N.W.
SUITE 400 EAST
WASHINGTON, D.C. 20007
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box. [X]
This Post-Effective Amendment shall become effective on such date as the
Commission, acting pursuant to Section 8(c) of the Securities Act of 1933, may
determine.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Title of Amount Being Proposed Maximum Proposed Maximum Amount of
Securities Registered Offering Aggregate Registration
Being Registered Price Per Offering Fee
Share/1/ Price/1/
Common Stock 28,755,000 $54.92 $1,579,224,600.00 $544,560.21
$.01 par value
</TABLE>
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus included
in this Registration Statement will also be used in connection with sales of
securities registered by the Registrant on a Registration Statement on Form
N-2, File No. 33-84794.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall become effective in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become effective on such date as
the Commission, acting pursuant to said Section 8(a) may determine.
- - -----------------------
/1/ Estimated solely for purposes of calculating registration fee. The price
per share to the public shall be equal to the net asset value next determined
after the order to purchase shares has been received by the Fund.
EMERGING MARKETS GROWTH FUND, INC.
CROSS REFERENCE SHEET
Parts A and B - Prospectus*
<TABLE>
<CAPTION>
Item in Parts A and B of Form N-2 Location in Prospectus
<S> <C> <C>
1. Outside Front Cover Cover Page
2. Inside Front and Outside Back Covering Page Cover Page
3. Fee Table and Synopsis Summary of Fund Expenses; Prospectus Summary
4. Financial Highlights Financial Highlights
5. Plan of Distribution Prospectus Summary; The Offering
6. Selling Shareholders Not Applicable
7. Use of Proceeds Use of Proceeds; Investment Objective and Policies
8. General Description of Registrant Prospectus Summary; The Fund; Investment Objective and Policies
9. Management Prospectus Summary; Management
10. Capital Stock, Long-Term Debt and Other Securities Common Stock
11. Defaults and Arrearage on Senior Securities Not Applicable
12. Legal Proceedings Not Applicable
13. Table of Contents of the Statement of Not Applicable
Additional Information
14. Cover Page Not Applicable
15. Table of Contents Table of Contents
16. General Information and HistoryProspectus Summary; The Fund
* Pursuant to General Instruction H of Form N-2, all information required to be set forth in Part B: Statement of
Additional Information has been included in Part A: The Prospectus.
17. Investment Objective and Policies Prospectus Summary; Investment Objective and Policies; Risk Factors and Other
Considerations
18. Management Management
19. Control Persons and Principal Holders of Securities Management; Principal Shareholders
20. Investment Advisory and Other Services Management; Custodian, Dividend Paying Agent, Transfer Agent and Registrar;
Independent Accountants and Legal Counsel
21. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage
22. Tax Status Dividends and Distributions; Tax Considerations
23. Financial Statements Financial Statements
</TABLE>
All Items Required to be set forth in Part C are set forth in Part C
PROSPECTUS
EMERGING MARKETS GROWTH FUND, INC.
Common Stock
Emerging Markets Growth Fund, Inc. (the "Fund") was established in March, 1986
in the United States under the laws of the State of Maryland. The Fund is a
diversified, closed-end management investment company. The investment
objective of the Fund is to seek long-term capital growth through investment in
developing country equity securities. Investment in developing country
securities involves certain risks and other considerations which are not
normally involved in investment in securities of U.S. companies. See
"Investment Objective and Policies" and "RISK FACTORS AND OTHER
CONSIDERATIONS." The address of the Fund is 11100 Santa Monica Boulevard, Los
Angeles, California USA 90025. Telephone: (310) 996-6000.
The Fund's investment adviser is Capital International, Inc. (the "Manager").
Prior to this offering there has been no public trading market for the Shares
and none is expected to develop. Accordingly, the Shares should not be
considered readily marketable. In addition, all Shareholders are required to
enter into a Shareholders Agreement which imposes certain limitations and
restrictions on the transfer of Shares. See "Shareholders Agreement and
Restrictions on Transfer."
This Prospectus sets forth concisely the information an investor should know
before investing and should be retained for future reference. Additional
information about the Fund has been filed with the U.S. Securities and Exchange
Commission ("SEC") and is available from the Fund upon written or oral request
and without charge.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Price to Sales Proceeds to
Public(1) Load (2) The Fund(3)
Per Share $53.44 $ N/A $53.44
Total (2) $53.44 $ N/A $1,620,963,189
</TABLE>
(1) The Shares are offered on a best efforts basis by the officers and
directors of the Fund. No commission or remuneration will be paid to such
persons in connection with the sale of Shares. The Shares being sold include
28,755,000 shares currently being registered and 1,577,395 shares previously
registered by the Fund that remained unsold as of August 31, 1995. The price to
public is equal to the net asset value, next determined after the order to
purchase Shares has been received by the Fund. As of August 31, 1995 the net
asset value and price per Share was $53.44.
(2) Assuming all Shares currently registered are sold pursuant to continuous
offering.
(3) Before deducting expenses of the offering borne by the Fund estimated to be
$554,860.21
The date of this Prospectus is , 1995.
TABLE OF CONTENTS
Item Page
<TABLE>
<CAPTION>
<S> <C>
Summary of Fund Expenses 3
Prospectus Summary 4
Financial Highlights 7
The Fund 8
Use of Proceeds 9
Risk Factors and Other Considerations 9
Investment Objective and Policies 11
Management 16
Common Stock 22
Principal Shareholders 23
The Offering 24
Shares Eligible for Future Sale 25
Valuation 25
Dividends and Distributions 26
Repurchase of Shares 26
Shareholders Agreement and Restrictions on Transfer 28
Portfolio Transactions and Brokerage 28
Reports, Listing and Publication of Value 29
Tax Considerations 29
Custodian, Dividend Paying Agent, Transfer Agent and Registrar 33
Independent Accountants and Legal Counsel 34
Supplemental Information 34
Available Information 34
</TABLE>
SUMMARY OF FUND EXPENSES
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
<S> <C> <C>
Sales Load (as a percentage of offering price) None
Dividend Reinvestment and Cash Purchase Plan Fees None
Annual Fund Operating Expenses (as a percentage of net assets)
Management Fees* 0.69%
Other Expenses**
0.25%
Total Annual Fund Operating Expenses*** 0.94%
</TABLE>
The purpose of the table above is to help you understand all fees and expenses
that you, as a Fund shareholder, would bear directly or indirectly.
* The Manager's fee, which is payable monthly, is assessed at the annual rates
of 0.90% of the first $400 million of aggregate net assets; 0.80% of aggregate
net assets from $400 million to $1 billion; 0.70% of aggregate net assets from
$1 billion to $2 billion; 0.65% of aggregate net assets from $2 billion to $4
billion; 0.625% of aggregate net assets from $4 billion to $6 billion; 0.60% of
aggregate net assets from $6 billion to $8 billion; 0.58% of aggregate net
assets from $8 billion to $11 billion; and 0.56% of aggregate net assets in
excess of $11 billion.
** "Other Expenses" are estimated and include non-U.S. taxes paid or accrued
on net investment income as a result of investing in certain foreign countries.
*** The expenses shown in the table are for the current fiscal year and are
based upon the net assets of the Fund after giving effect to the anticipated
net proceeds from sales of Shares being offered by this Prospectus. Total
expenses excluding non-U.S. taxes (as a percentage of net assets) are
anticipated to be 0.91% for the current fiscal year.
Example
An investor would directly or indirectly pay the following expenses on a $1,000
investment in the Fund, assuming a 5% annual return:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
One Year Three Years Five Years Ten Years
$9 $29 $50 $112
</TABLE>
This "Example" assumes that all dividends and other distributions are
reinvested at net asset value and that the percentage amounts listed under
Annual Fund Operating Expenses remain the same in the years shown. The above
tables and the assumption in the Example of a 5% annual return are required by
regulation of the SEC applicable to all investment companies; the assumed 5%
annual return is not a prediction of, and does not represent, the projected or
actual performance of the Fund's Shares.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed information
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
<S> <C>
The Fund
Emerging Markets Growth Fund, Inc. (the "Fund") was established in March, 1986 as a corporation in the United States under the laws
of the State of Maryland. The Fund is registered with the U.S. Securities and Exchange Commission as a closed-end diversified
management investment company under the Investment Company Act of 1940 (the "Act").
Investment Objective and Policies
The investment objective of the Fund is to seek long-term capital growth through
investment in developing country equity securities.
A developing country security is a security of an issuer that is domiciled and has its principal place of business in a country
which, in the opinion of the Fund's Board of Directors, is generally considered to be a developing country by the international
financial community, including the International Bank for Reconstruction and Development
("The World Bank") and the International Monetary Fund. The Fund intends to invest principally in developing country securities
that are listed on a bona fide securities exchange or are actively traded in an over-the-counter ("OTC") market and whose issuers
are domiciled in countries that have securities markets approved for investment by the Fund's Board of Directors ("qualified
markets"). In determining whether to approve markets for investment, the Board of
Directors will take into account, among other things, market liquidity, investor information and government regulation, including
fiscal and foreign exchange repatriation rules. The following countries currently have qualified markets: Argentina, Brazil,
Chile, Colombia, Greece, Hungary, India, Indonesia, Jordan, Malaysia, Mexico, Pakistan, the People's Republic of China, Peru, the
Philippines, Poland, Portugal, Republic of China (Taiwan), South Africa, South Korea, Sri
Lanka, Thailand, Turkey and Venezuela. Consistent with the Fund's investment objective, the Fund also engages in foreign currency
hedging transactions. See "Investment Objective and Policies."
The Offering
Shares will be offered by the Fund on a continuous basis until all Shares offered hereunder have been sold; provided, however, the
Fund may not sell shares in any month following a month end on which the Fund is not at least approximately 90% invested in
developing country securities. This limitation may be modified at any time by the Board of Directors of the Fund. The Shares
offered under this Prospectus include 28,755,000 Shares currently registered with the SEC as well
as the unsold portion of 20,000,000 Shares that were previously registered (a total of 1,577,395 shares were unsold as of August 31,
1995). Shares may be purchased by notifying Abbe Shapiro by telephone (310-996-6153) or telecopy (310-996-6200). Assuming the
investor suitability and minimum purchase requirements described herein have been met and the order has been accepted, the price of
Shares will be the net asset value per Share next determined (on the last
business day of each week and month). Payment, which may be in the form of check or by wire, must be received on or prior to the
third business day following the date on which the price is determined at the direction of the Fund's officers. At the sole
discretion of Capital International, Inc. (the "Manager"), investors may be permitted to purchase Shares by tendering to the Fund
developing country securities which are determined by the Manager to be appropriate for the
Fund's investment portfolio. See "The Offering."
Investor Suitability Requirements and Minimum Purchases
The Fund has established suitability standards which require that each investor that is a "company" (as that term is defined in the
Act) must have total assets in excess of U.S. $5 million. A prospective investor that is a natural person must be an "accredited
investor" within the meaning of Regulation D under the Securities Act of 1933. That is, such person must have an individual net
worth in excess of U.S. $1 million or an individual income in excess of U.S. $200,000 during each
of the two most recent years. The minimum initial purchase pursuant to this offering (for companies and natural persons) is
$100,000 (approximately 1,871 Shares based on the offering price at the date of this Prospectus) and $25,000 thereafter. No
investor may purchase or otherwise acquire an amount of Shares that would result in its owning, together with affiliates (as such
term is defined under the Securities Exchange Act of 1934), more than 15% of the Fund's outstanding
Shares (provided that this limitation shall not apply to the acquisition of Shares by reinvestment of dividends or capital gain
distributions; and provided further, that any Shareholder of the Fund may purchase its pro rata portion of all Shares authorized for
issuance and sale by the Fund without regard to this limitation).
Board of Directors
The Fund's Board of Directors is responsible for the overall supervision of the operations of the Fund. See "Management."
Investment Adviser
Capital International, Inc. manages the investment portfolio and business affairs of the Fund subject to policies established by the
Fund's Board of Directors. See "Management."
Manager's Fees and Other Expenses
The Fund pays the Manager monthly a fee at the annual rate of 0.90% of the first $400 million of the aggregate net assets of the
Fund. The annual rate is reduced to .80% of the aggregate net assets from $400 million to $1 billion; and to 0.70% of such
aggregate net assets from $1 billion to $2 billion; 0.65% of aggregate net assets from $2 billion to $4 billion; 0.625% of aggregate
net assets from $4 billion to $6 billion; 0.60% of aggregate net assets from $6 billion to $8 billion; 0.58%
of aggregate net assets from $8 billion to $11 billion; and 0.56% of aggregate net assets in excess of $11 billion. The Manager's
fee is higher than that paid by most other U.S. investment companies primarily because of the additional time and expense required
of the Manager in pursuing the Fund's investment objective of seeking long-term capital growth through investment in developing
country equity securities. In addition, other Fund expenses are borne by the Fund.
Restrictions on Transfer
All Shares of the Fund--including the Shares to be issued in this offering--rank pari passu with all other Shares with respect to
dividends, voting rights, liquidation rights and other matters. See "Management" and "Common Stock."
Each current holder of the Fund's Shares has entered into a Shareholders Agreement. Among other things, the Shareholders Agreement
provides with respect to transfers of Shares that no Shareholder may transfer any Shares to a third party that is a company unless
(i) the prospective purchaser represents that it has total assets in excess of U.S. $5 million; if the prospective purchaser is a
natural person no Shares may be transferred unless the prospective purchaser satisfies
(ii) and (iii) below, and the prospective purchaser has an individual net worth in excess of U.S. $1 million or an individual income
in excess of U.S. $200,000 during each of the two most recent years; (ii) the seller transfers a sufficient number of Shares that
their current net asset value, in the aggregate, equals or exceeds $100,000; and (iii) the prospective purchaser will not own upon
the transfer of Shares, either alone or together with any affiliate of the prospective purchaser,
more than 15% of the Fund's Shares (provided that this limitation shall not apply to the acquisition of Shares by reinvestment of
dividends or capital gain distributions; and provided further, that any Shareholder of the Fund may purchase its pro rata portion of
all Shares authorized for issuance and sale by the Fund without regard to this limitation).
All investors purchasing Shares pursuant to this offering are required to enter into the Shareholders Agreement. See "Shareholders
Agreement and Restrictions on Transfer."
In light of the risks involved in an investment in the Fund and the limited market for the Shares, Shares should not be purchased
unless the purchaser is capable of bearing the significant risk of maintaining such an investment for an indefinite period.
Tender Offers
The Fund's Board of Directors presently intends to consider, on approximately a quarterly basis, whether to authorize the repurchase
by the Fund of up to 5% of the Fund's issued and outstanding Shares at the then net asset value of such Shares. There is no
guarantee that the Fund will repurchase any Shares or that Shares tendered pursuant to a tender offer made by the Fund will in fact
be purchased. The Fund has received an exemptive order from the SEC permitting the Fund
to repurchase Shares in connection with tender offers while it is engaged in a continuous distribution of Shares. However, pursuant
to that exemptive order the Fund has agreed to discontinue the offer and sale of Shares during the last five business days prior to
termination of any tender offer. See "Repurchase of Shares."
Risk Factors and Other Considerations
Investing in equity securities of issuers in a variety of developing countries involves certain special considerations, which may
include (1) investment and repatriation restrictions, (2) currency fluctuations, (3) potential unusual market volatility, (4)
government involvement in the private sector, (5) limited investor information, (6) shallow securities markets, (7) certain local
tax law considerations, (8) limited regulation of the securities markets, (9) limitations on obtaining
and enforcing judgment against non-U.S. residents, (10) risks associated with investments in loan participations and (11) settlement
risks. Although the foregoing considerations also may be present in the case of investments in securities of issuers located in the
U.S. or other countries that are members of the Organization for Economic Cooperation and Development ("OECD"), they are present to
a greater degree in connection with the Fund's investments in equity securities
of issuers in developing countries. See "Risk Factors and Other Considerations." In addition, to the extent a secondary market for
the Shares develops, investors should be aware that shares of closed-end investment companies frequently trade at a discount from
net asset value. This risk may be greater for investors expecting to sell their Shares in a relatively short period after
completion of the public offering. Accordingly, Shares of the Fund are designed primarily for
long-term investors and should not be considered a vehicle for trading purposes. The net asset value of the Fund's Shares will
fluctuate with price changes of the Fund's portfolio securities.
</TABLE>
FINANCIAL HIGHLIGHTS
The table below provides per share data and ratios for one share of the Fund
for each of the periods shown. This information is supplemented by the
financial statements and accompanying notes which appear elsewhere in this
Prospectus. The financial statements and notes and the financial information
in the table below have been audited by Price Waterhouse LLP, independent
accountants, whose report thereon also is included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
Per-Share Data and Ratios
Years Ended June 30,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $58.75 $44.95 $38.64 $32.73 $32.81
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .87 .53 .62 .55 .83
Net realized and unrealized (losses) gains on (.79) 15.29 7.33 8.87 3.89
investments before non-U.S. taxes
Non-U.S. taxes (.03) (.39) .06 (.28) (.38)
Total income from investment operations .05 15.43 8.01 9.14 4.34
LESS DISTRIBUTIONS:
Dividends from net investment income (.63) (.49) (.56) (.56) (.92)
Distributions from net realized gain (5.81) (1.14) (1.14) (2.67) (3.50)
Total distributions (6.44) (1.63) (1.70) (3..23) (4.42)
Net Asset Value, End of Period $52.36 $58.75 $44.95 $38.64 $32.73
Total Return/1/ (1.22)% 34.33% 21.55% 29.73% 18.08%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in millions) $5,572 $4,170 $2,574 $1,561 $703
Ratio of expenses to average net assets .91% 1.00% 1.01% 1.11% 1.18%
Ratio of expenses and non-U.S. taxes .94% 1.04% 1.07% 1.18% 1.31%
to average net assets
Ratio of net income to average net assets 1.70% .91% 1.82% 1.84% 2.78%
Portfolio turnover rate 23.75% 18.13% 11.97% 16.03% 26.38%
</TABLE>
/1/ Total investment return is calculated assuming a purchase of common stock
at the net asset value (net asset value is used because there has been no
public trading for the shares and none is expected to develop) on the first day
and a sale at the net asset value on the last day of each year reported.
Dividends and distributions, if any, are assumed, for purposes of this
calculation, to be reinvested at prices obtained under the Fund's dividend
reinvestment plan.
THE FUND
Emerging Markets Growth Fund, Inc. (the "Fund") is a corporation organized
under Maryland law on March 10, 1986 for the purpose of investing in developing
country securities (as that term is defined below). The Fund is designed for
institutional investors and "accredited investors" (see "Investor Suitability
Requirements and Minimum Purchases," above) desiring to achieve international
diversification by participating in the economies of various countries with
emerging securities markets. By investing in the securities of several such
markets, the Fund is intended to complement and provide an alternative to
certain other investment companies which invest exclusively in the securities
of issuers in a single country.
The Fund was created to take advantage of a perceived growing potential for
foreign portfolio investment in emerging securities markets. While the
management of the Fund believes there may be regulatory, financial, technical
and other barriers to the development of this potential, in the opinion of Fund
management, substantial investment opportunities exist in these markets. The
management of the Fund believes that the existence of these opportunities is
supported by, among other things:
1) the performance in certain periods of a number of actively traded stocks of
certain issuers in these markets;
2) the relatively low valuations, from time to time, of certain securities in
these markets;
3) a growing desire for and knowledge concerning international diversification
among portfolio investors; and
4) a growing receptiveness to foreign portfolio investment among policy makers
in many developing countries, based on their growing appreciation for the
important role of equity capital and the contribution of securities markets to
a strong financial sector.
The Fund's assets are invested in a relatively limited number of emerging
securities markets. The Fund will seek access to securities markets in certain
developing countries that are currently effectively closed to foreigners
(non-residents). It is hoped that the Fund's activities will result in
improvement in the terms of access to various markets.
The management of the Fund believes that the Fund may provide investors with
an opportunity to participate in the price appreciation of developing country
securities. The management of the Fund also believes that the Fund will allow
investors to diversify their portfolios by country and industry, thus reducing
the risks associated with downturns in any one industry or market.
Additionally, the Fund will allow for international diversification away from
the more well-known securities of issuers located in countries that are members
of OECD. HOWEVER, THERE CAN BE NO ASSURANCE THAT THESE OBJECTIVES WILL BE MET.
Capitalization
To obtain its initial capitalization of $50,000,000, the Fund in June 1986
sold 5,000,000 shares at a price of $10.00 each in a private offering to a
limited number of institutional investors. Since that time, the Fund has
issued additional shares in several private offerings and several public
offerings and pursuant to reinvestment of dividends and capital gain
distributions to its Shareholders.
As of August 31, 1995, there were 470 holders of Shares, and 109,347,110
Shares outstanding. The Fund's aggregate net assets were approximately $5,844
million. If all Shares offered by the Fund pursuant to this Prospectus are
sold, the Fund would have 139,679,505 Shares outstanding and approximately
$7,464 million in aggregate net assets (assuming all Shares had been sold at
prices based on the net asset value per Share as of August 31, 1995).
Currently, there are no outstanding warrants, rights, options or similar
features relating to the purchase of the Fund's Shares (see "Common Stock").
The Board of Directors may from time to time permit the issuance of Shares for
reinvestment of dividends or capital gain distributions or in additional
private or public offerings. The Fund reserves the right to make additional
private or public offerings in the future if it believes that such offerings
would be in the best interests of the Fund and the Fund's Shareholders. In
addition, the Fund expects to continue its current practice of issuing
additional Shares for purposes of reinvestment of dividends and capital gain
distributions.
USE OF PROCEEDS
The net proceeds to be paid to the Fund (estimated to be approximately
$1,620,963,189 based on the price per Share as of August 31, 1995 if the
30,332,395 shares being offered in this Prospectus are sold) will be invested
in accordance with the policies set forth under "Investment Objective and
Polices." Pending investment in developing country equity securities, it is
expected that the proceeds will be invested in money market instruments or
other highly liquid debt instruments denominated in U.S. dollars or other
freely convertible currencies. See "Investment Objective and Policies." The
Fund expects that substantially all of the proceeds will be invested in
accordance with its investment objective within three months after receipt
thereof and, in any case, no more than six months after receipt.
RISK FACTORS AND OTHER CONSIDERATIONS
The Fund faces a number of investment risks greater than those normally
associated with international investments in securities. These include:
1) Investment and Repatriation Restrictions. A number of attractive emerging
securities markets restrict, to varying degrees, foreign investment in stocks.
Repatriation of investment income, capital and the proceeds of sales by foreign
investors may require governmental registration and/or approval in some
emerging countries. While the Fund will only invest in markets where these
restrictions are considered acceptable, new or additional repatriation
restrictions might be imposed subsequent to the Fund's investment. If such
restrictions were imposed subsequent to the Fund's investment in the securities
of a particular country, the Fund's response might include, among other things,
applying to the appropriate authorities for a waiver of the restrictions or
engaging in transactions in other markets designed to offset the risks of
decline in that country. Such restrictions will be considered in relation to
the Fund's liquidity needs and all other acceptable positive and negative
factors. Further, some attractive equity securities may not be available to
the Fund because foreign shareholders hold the maximum amount permissible under
current laws.
2) Currency Fluctuations. In accordance with its investment objective, the
Fund's assets will be invested in securities of companies in developing
countries and substantially all income will be received by the Fund in foreign
currencies. A number of the currencies of developing countries have
experienced significant declines against the U.S. dollar in recent years and
devaluation may occur subsequent to investments in these currencies by the
Fund. The value of the assets of the Fund as measured in U.S. dollars would be
adversely affected by devaluations in foreign currencies. Consistent with its
investment objective, the Fund can engage in certain currency hedging
transactions. These transactions involve certain special risks. See
"Investment Objective and Policies--Foreign Currency Hedging Transactions."
3) Potential Market Volatility. Many of the emerging securities markets are
relatively small, have low trading volumes, suffer periods of illiquidity and
are characterized by significant price volatility.
4) Government in the Private Sector. Government involvement in the private
sector varies in degree among the emerging securities markets in which the Fund
may invest. Such involvement may, in some cases, include government ownership
of companies in certain sectors, wage and price controls or imposition of trade
barriers and other protectionist measures. With respect to any developing
country, there is no guarantee that some future economic or political crisis
will not lead to price controls, forced mergers of companies, expropriation, or
creation of Government monopolies, to the possible detriment of the Fund's
investments.
5) Investor Information. The Fund may encounter problems in assessing
investment opportunities in certain emerging securities markets in light of
limitations on available information and different accounting, auditing and
financial reporting standards. In such circumstances, the Manager will seek
alternative sources of information, and to the extent the Manager may not be
satisfied with the sufficiency of the information obtained with respect to a
particular market or security, the Fund will not invest in such market or
security.
6) Taxation. Taxation of dividends and capital gains received by
non-residents varies among developing countries and, in some cases, is
comparatively high. In addition, developing countries typically have less
well-defined tax laws and procedures and such laws may permit retroactive
taxation so that the Fund could in the future become subject to local tax
liability that it had not reasonably anticipated in conducting its investment
activities or valuing its assets.
7) Net Asset Value Discount. To the extent an active secondary market for the
Shares develops, investors should be aware that shares of closed-end investment
companies frequently trade at a discount from net asset value. It is
anticipated that the tender offer policy adopted by the Fund's Board of
Directors will restrict the development of a secondary market (See "Repurchase
of Shares"). This risk may be greater for investors expecting to sell their
Shares in a relatively short period after completion of the public offering.
Accordingly, Shares of the Fund are designed primarily for long-term investors
and should not be considered a vehicle for trading purposes. The net asset
value of the Fund's Shares will fluctuate with price changes of the Fund's
portfolio securities.
8) Litigation. The Fund and its Shareholders may encounter substantial
difficulties in obtaining and enforcing judgments against non-U.S. resident
individuals and companies.
9) Fraudulent Securities. It is possible, particularly in emerging markets,
that securities purchased by the Fund may subsequently be found to be
fraudulent or counterfeit and as a consequence the Fund could suffer a loss.
10) Loan Participations. The Fund may invest, subject to its overall
limitation on debt securities, in loan participations, typically made by a
syndicate of banks to governmental or corporate borrowers for a variety of
purposes. The underlying loans to emerging market governmental borrowers may
be in default and may be subject to restructuring under the Brady Plan. The
underlying loans may be secured or unsecured, and will vary in term and legal
structure. When purchasing such instruments the Fund may assume the credit
risks associated with the original bank lender as well as the credit risks
associated with the borrower. Investments in loan participations present the
possibility that in the U.S., the Fund could be held liable as a co-lender
under emerging legal theories of lender liability. In addition, if the loan is
foreclosed, the Fund could be part owner of any collateral, and could bear the
costs and liabilities of owning and disposing of the collateral. Loan
participations are generally not rated by major rating agencies and may not be
protected by securities laws. Also, loan participations are often considered
to be illiquid.
11) Settlement Risks. Settlement systems in emerging markets are generally
less well organized than in developed markets. Supervisory authorities may
also be unable to apply standards which are comparable with those in developed
markets. Thus there may be risks that settlement may be delayed and that cash
or securities belonging to the Fund may be in jeopardy because of failures of
or defects in the systems. In particular, market practice may require that
payment shall be made prior to receipt of the security which is being purchased
or that delivery of a security must be made before payment is received. In
such cases, default by a broker or bank (the "Counterparty") through whom the
relevant transaction is effected might result in a loss being suffered by the
Fund. The Fund will seek, where possible, to use Counterparties whose
financial status is such that this risk is reduced. However, there can be no
certainty that the Fund will be successful in eliminating this risk,
particularly as Counterparties operating in emerging markets frequently lack
the substance or financial resources of those in developed countries. There
may also be a danger that, because of uncertainties in the operation of
settlement systems in individual markets, competing claims may arise in respect
of securities held by or to be transferred to the Fund.
The Fund seeks, as feasible, to reduce these risks by careful management of
its assets. However, there can be no assurance that these efforts will be
successful.
INVESTMENT OBJECTIVE AND POLICIES
Investment Objective
The investment objective of the Fund is to seek long-term capital growth
through investment in developing country equity securities. Developing country
securities are securities whose issuers are domiciled and conduct their
principal business in those countries which, in the opinion of the Board of
Directors, are generally considered to be developing countries by the
international financial community, including The Word Bank and the
International Monetary Fund. The Fund invests its assets primarily in
developing country equity securities of issuers that are domiciled and have
their principal places of business in developing countries that have qualified
markets and where the securities are listed on bona fide securities exchanges
or actively traded on over-the-counter ("OTC") markets. These exchanges or OTC
markets may be either within or outside the issuer's domicile country, and the
securities may be listed or traded in the form of International Depositary
Receipts ("IDR's"), American Depositary Receipts ("ADR's") or other types of
Depositary Receipts. The Fund may invest a portion of its assets (not to
exceed 10%) in securities of issuers that are not domiciled and/or do not have
their principal places of business in developing countries, but that have or
will have substantial assets in developing countries; and/or derive or expect
to derive a substantial proportion of their total revenues from either goods
and services produced in, or sales made in, developing countries.
The Fund may invest, with prior approval of the Board of Directors, in
developing country securities that are not readily marketable due to
contractual or other restrictions on resale or because of the absence of a
secondary market ("illiquid securities") and in securities of issuers that are
not domiciled and/or do not have their principal place of business in
developing countries that have qualified markets ("non-qualified market
developing country securities"). The Fund's Board of Directors currently has
authorized investments by the Fund of up to 10% of the Fund's assets in
aggregate (taken at the time of purchase) (i) in developing country securities
that are not readily marketable due to contractual or other restrictions on
resale or because of the absence of a secondary market ("illiquid securities"),
(ii) in securities of issuers that are not domiciled and/or do not have their
principal places of business in developing countries that have qualified
markets ("non-qualified market developing country"), and (iii) in securities of
issuers domiciled and/or having their principal places of business in the five
new states of the Federal Republic of Germany, formerly known as the German
Democratic Republic, (or investment companies that invest solely in issuers
described in clauses (ii) and (iii)). The Fund's investments in securities of
issuers described in clauses (ii) and (iii) shall also be limited to 1% of the
Fund's assets (taken at the time of purchase) in any one issuer and 2% of the
Fund's assets (taken at the time of purchase) in the aggregate in issuers
located and having their principal places of business in any one country.
Subject to these considerations and the restrictions set forth below under
"Investment Restrictions," the particular mix of securities held by the Fund at
any time will be determined by the Manager under the supervision of, and within
any guidelines established by, the Board of Directors.
The Fund seeks a portfolio that is diversified both geographically and by
industry sector. A variety of issuers are evaluated by the Fund's Manager, and
such evaluations generally focus on past performance and comparisons of the
issuer with appropriate market indices, detailed investigation into the current
operations and future plans of the issuer, and other relevant factors. Pending
the Fund's investment of new money in developing country equity securities, it
typically invests in money market instruments or other highly liquid debt
instruments denominated in U.S. dollars or other freely convertible currencies.
In addition, the Fund may, for liquidity, or for temporary defensive purposes
during periods in which market or economic or political conditions warrant,
purchase highly liquid debt instruments or hold freely convertible currencies,
although the Fund does not expect the aggregate of all such amounts to exceed
20% of its net assets under normal circumstances. The Fund may invest a
portion of its portfolio (not to exceed 10% of total assets) in debt
instruments for other than these purposes, where the investment is consistent
with the Fund's objective of long-term capital growth. Such an investment
could involve, for example, the purchase of bonds issued at a high rate of
interest in circumstances where the government of a developing country employs
programs to reduce inflation, resulting in a decline in interest rates and an
increase in the market value of such bonds. Debt instruments include "loan
participations," which involve the purchase of a "portion" of one or more loans
advanced by a lender (such as a bank) to a corporate or sovereign borrower.
The Fund also may invest in shares of other investment companies that invest in
one or more qualified markets. If the Fund invests in such investment
companies, the Fund's Shareholders will bear not only their proportionate share
of expenses of the Fund (including operating expenses and the fees of the
Manager), but also will bear indirectly similar expenses of the underlying
investment companies.
The Fund may also invest in shares of investment companies for which the
Manager or an affiliate of the Manager serves as investment adviser. The Fund
has received an SEC exemptive order permitting the Fund to invest up to 21/2%
of the Fund's total assets in New Europe East Investment Fund, a closed-end,
Luxembourg investment fund organized by the Manager for the purpose of
investing in securities of companies or commercial operations domiciled in the
countries of East Central Europe and the former Soviet Republics. The Fund
intends to seek an SEC exemptive order permitting the Fund to invest up to 1%
of the Fund's total assets in New Asia East Investment Fund, a closed-end,
Singapore investment fund organized by the Manager for the purpose of investing
in the South East Asia and China regions. With respect to any such investments
in investment companies advised by the Manager or an affiliate thereof, the
Manager will waive all fees attributable to the Fund's holdings in such
investment companies. To effectuate this waiver, the Fund's holdings in any
such investment company would be excluded from the net assets of the Fund in
the calculation of the Manager's fee.
The Fund may invest up to 35% of its assets in a single country. As of August
31, 1995, the Fund had invested approximately 15.9% of its assets in Brazil.
The Manager is not aware of any types of investment risks associated with
investment in Brazil other than those types of risks discussed in this
Prospectus. See, for example, "Risk Factors And Other Considerations."
However, investors should be aware that, given the extent of the Fund's
investment in Brazil, adverse developments in that country could substantially
affect the Fund's investment results.
Qualified Markets
The Fund's Board of Directors will, in its discretion and in consultation with
the Manager, select markets for primary investment by the Fund ("qualified
markets") taking into account, among other things, market liquidity,
availability of information and official regulation, including fiscal and
foreign exchange repatriation rules. Currently, the number of qualified
markets is limited. As of the date of this Prospectus, the markets in the
following countries had been approved by the Board of Directors as qualified
markets: Argentina, Brazil, Chile, Colombia, Greece, Hungary, India,
Indonesia, Jordan, Malaysia, Mexico, Pakistan, the People's Republic of China,
Peru, the Philippines, Poland, Portugal, Republic of China (Taiwan), South
Africa, South Korea, Sri Lanka, Thailand, Turkey and Venezuela. The Board of
Directors will revise its selection of qualified markets as additional markets
are determined by the Board of Directors as being appropriate, or as existing
markets may no longer be deemed qualified for investment by the Fund based on
the foregoing factors.
Foreign Currency Hedging Transactions
For the purpose of hedging foreign currency exchange rate risks, the Fund may
enter into forward foreign exchange contracts and foreign currency futures
contracts. A forward foreign currency exchange contract involves an obligation
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract agreed upon by the parties,
at a price set at the time of the contract. These contracts are traded in the
interbank market conducted directly between currency traders (usually large
commercial banks).
A foreign currency futures contract is a standardized contract for the future
delivery of a specified amount of a foreign currency at a future date at a
price set at the time of the contract. Foreign currency futures contracts
traded in the United States are traded on regulated exchanges. Parties to
futures contracts must make initial "margin" deposits to secure performance of
the contract, which generally range from 2% to 5% of the contract price. The
parties also pay or receive daily "variation" margin payments as the value of
the futures contract fluctuates thereafter.
At the maturity of a forward or futures contract, the Fund may either accept
or make delivery of the currency specified in the contract or, prior to
maturity, enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a party to the original
contract. Closing transactions with respect to futures contracts are effected
on an exchange. The Fund will only enter into such a forward or futures
contract if it is expected that the Fund will be able readily to close out such
contract. There can, however, be no assurance that it will be able in any
particular case to do so, in which case the Fund may suffer a loss.
The Fund intends to engage in foreign currency hedging transactions to a very
limited extent, and only in extraordinary circumstances and for temporary
defensive purposes would it attempt to hedge all the risks involved in holding
assets denominated in a particular currency. To date, the Fund has engaged in
a limited number of foreign currency hedging transactions. Among other things,
it is the Manager's view that the cost of engaging in hedging transactions
frequently equals or exceeds the expected benefits from the potential reduction
in exchange risk. Moreover, even if it were to attempt to do so, the Fund
could not through hedging transactions eliminate all the risks of holding
assets denominated in a currency, as there may be an imperfect correlation
between price movements in the futures or forward contracts and those of the
underlying currency in which the Fund's assets are denominated. Also, where
the Fund enters into a hedging transaction in anticipation of a currency
movement in a particular direction but the currency moves in the opposite
direction, the transaction would result in a poorer overall investment result
than if the Fund had not engaged in any such transaction. In addition, it may
not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates.
Under regulations of the Commodity Futures Trading Commission ("CFTC"), the
futures trading activities described herein will not result in the Fund being
deemed a "commodity pool," as defined under such regulations, provided that the
Fund adheres to certain restrictions. In particular, the Fund may purchase and
sell futures contracts and options thereon only for bona fide hedging purposes,
as defined under CFTC regulations, and may not purchase or sell any such
futures contracts or options, if, immediately thereafter, the sum of the amount
of initial margin deposits on the Fund's existing futures positions and
premiums paid for outstanding options would exceed 5% of the fair market value
of its net assets. Margin deposits may consist of cash or securities
acceptable to the broker and in accordance with the rules governing the
relevant contract market.
The Fund will not enter into forward or futures contracts or maintain an
exposure to such contracts where the consummation of such contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund's portfolio securities or other assets denominated in that
currency. Where the Fund is obligated to make deliveries under futures or
forward contracts, to avoid leverage it will "cover" its obligation by
segregating liquid assets such as cash, U.S. Government securities or other
appropriate high-grade debt obligations in an amount sufficient to meet its
obligations.
Certain provisions of the Internal Revenue Code may limit the extent to which
the Fund may enter into forward or futures contracts. Such transactions may
also affect for U.S. Federal income tax purposes the character and timing of
income, gain, or loss recognized by the Fund.
Options on Securities and Securities Indexes
The Fund may purchase and sell call and put options on individual securities
or on indexes of securities. One purpose of purchasing put options is to
protect holdings in an underlying or related security against a substantial
decline in market value. One purpose of purchasing call options is to protect
against substantial increases in prices of securities the Fund intends to
purchase pending its ability to invest in such securities in an orderly manner.
The Fund may sell put or call options it has previously purchased, which could
result in a net gain or loss depending on whether the amount realized on the
sale is more or less than the premium and other transaction costs paid on the
put or call option which is sold. The Fund may write a call or put option only
if the option is "covered" by the Fund holding a position in the underlying
securities or by other means which would permit satisfaction of the Fund's
obligations as writer of the option. Prior to exercise or expiration, an
option may be closed out by an offsetting purchase or sale of an option of the
same series.
The purchase and writing of options involves certain risks. During the option
period, the covered call writer has, in return for the premium paid, given up
the opportunity to profit from a price increase in the underlying securities
above the exercise price, but, as long as its obligations as a writer
continues, has retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over the time when it
may required to fulfill its obligation as a writer of the option. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver the underlying securities at the exercise price. If a put or call
option purchased by the Fund is not sold when it has remaining value, and if
the market price of the underlying security, in the case of a put, remains
equal to or greater than the exercise price or, in the case of a call, remains
less than or equal to the exercise price, the Fund will lose its entire
investment in the option. Also, where a put or call option on a particular
security is purchased to hedge against price movements in a related security,
the price of the put or call option may move more or less than the price of the
related security. There can be no assurance that a liquid market will exist
when the Fund seeks to close out an option position. Furthermore, if trading
restrictions or suspensions are imposed on the options, the Fund may be unable
to close out a position.
Options on non-U.S. securities indexes generally may not be offered or sold to
U.S. persons unless the options have been approved by the CFTC. The Fund
intends to include non-U.S. index options as a part of its investment strategy
as such investments become available for its use.
Financial Futures and Related Options
In addition to foreign currency futures and related options, the Fund may
enter into other financial futures contracts and purchase and sell related
options thereon. Such investments may be standardized and traded on a U.S. or
foreign exchange or board of trade, or similar entity, or quoted on an
automated quotation system. Under applicable CFTC rules, the Fund may enter
into financial futures contracts traded on non-U.S. exchanges, including
related options, only if the contracts have been approved by the CFTC for offer
and sale to U.S. persons. The Fund intends to make relevant futures and
related options part of its investment strategy as such investments are
approved for use by U.S. persons.
The Fund will maintain a segregated account consisting of liquid assets, such
as cash, U.S. Government securities, or other high grade debt obligations (or,
as permitted by applicable regulation, enter into certain offsetting positions)
to cover its obligations under futures contracts and related options. Under
applicable CFTC regulations, the Fund generally may use futures and related
options only for bona fide hedging purposes (as defined in applicable
regulations) and subject to certain limits, other investment and speculative
purposes (as discussed above under "Foreign Currency Hedging Transacations").
There are several risks associated with the use of futures and futures
options. There can be no guarantee that there will be a correlation between
price movements in the hedging vehicle and in the portfolio securities being
hedged. An incorrect correlation would result in a loss on both the hedged
securities in the Fund and the hedging vehicle so that portfolio return might
have been greater had hedging not been attempted. There can be no assurance
that a liquid market will exist at a time when the Fund seeks to close out a
futures contract or a futures option position. Most futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single day; once the daily limit has been reached on a
particular contract, no trades may be made that day at a price beyond that
limit. In addition, certain of these instruments are relatively new and
without a significant trading history. As a result, there is no assurance that
an active secondary market will develop or continue to exist. Lack of a liquid
market for any reason may prevent the Fund from liquidating an unfavorable
position and the Fund would remain obligated to meet margin requirements until
the position is closed.
Swap Agreements
The Fund may enter into interest rate, equity and currency exchange rate swap
agreements. These transactions would be entered into in an attempt to obtain a
particular return when it is considered desirable to do so, possibly at a lower
cost to the Fund than if the Fund had invested directly in the asset that
yielded the desired return, or when regulatory or other restrictions limit or
prohibit the Fund from investing in the asset directly. Swap agreements are
two party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard swap
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments, which may be adjusted for an interest factor. The gross returns
to be exchanged, or "swapped" between the parties are generally calculated with
respect to a "notional amount," i.e., the return on or increase in value of a
particular dollar amount invested at a particular interest rate, in a
particular foreign currency, or in a "basket" of securities representing a
particular index.
Most swap agreements entered into by the Fund would calculate the obligations
of the parties to the agreement on a "net basis." Consequently, the Fund's
current obligations (or rights) under a swap agreement will generally be equal
only to the net amount to be paid or received under the agreement based on the
relative values of the positions held by each party to the agreement (the "net
amount"). In the case of interest rate or currency exchange rate swap
agreements, the Fund's current obligations will be accrued daily (offset
against amounts owed to the Fund) and any accrued but unpaid net amounts owed
to a swap counterparty will be covered by the maintenance of a segregated
account consisting of liquid assets such as cash, U.S. Government securities,
or high grade debt obligations, to avoid any potential leveraging of the Fund's
portfolio. Any swap agreement so covered will not be construed to be "senior
securities" for purposes of the Fund's investment restriction concerning senior
securities.
In a typical equity swap transaction involving a foreign security (or index of
securities), the Fund would agree to pay to a counterparty the negative return,
if any, on the security (or index of securities), plus an interest factor, in
exchange for an amount equal to any positive return on the same security or
index, with both negative and positive returns calculated with respect to an
agreed reference price. The Fund intends to segregate assets equal to the
maximum potential exposure under an equity swap agreement, plus any net amount
owed with respect to the agreement. As such, the Fund does not believe that
its commitments under equity swap agreements constitute senior securities for
purposes of the Fund's investment restrictions concerning senior securities.
Whether a fund's use of swap agreements will be successful in furthering its
investment objective will depend on the manager's ability to predict correctly
whether certain types of investments are likely to produce greater returns than
other investments. Because they are two-party contracts and because they may
have terms of greater than seven days, swap agreements may be considered to be
illiquid investments. Moreover, the Fund bears the risk of loss of the amount
expected to be received under a swap agreement in the event of the default or
bankruptcy of a swap agreement counterparty. The Fund will enter into swap
agreements only with counterparties that meet certain standards for
creditworthiness adopted by the Manager. Certain restrictions imposed on the
Fund by the Internal Revenue Code may limit the Fund's ability to use swap
agreements. The swaps market is a relatively new market and is largely
unregulated. It is possible that developments in the swaps market, including
potential government regulation, could adversely affect the Fund's ability to
terminate existing swap agreements or to realize amounts to be received under
such agreements.
Equity Linked Notes
The Fund may, subject to compliance with applicable regulatory guidelines,
purchase equity linked notes.
An equity linked note is a note whose performance is tied to a single stock, a
stock index or a basket of stocks. Upon maturity of the note, generally the
holder receives a return of principal based on the capital appreciation of the
linked securities. Depending on the terms of the issuance, equity linked notes
may also have a "cap" or "floor" on the maximum principal amount to be repaid
to holders. For example, a note may guarantee the repayment of the original
principal amount, but may cap the maximum payment at maturity at a certain
percentage of the issuance price. Alternatively, the note may not guarantee a
full return on the original principal, but may offer a greater participation in
any capital appreciation of the underlying linked securities. The terms of an
equity linked note may also provide for periodic interest payments to holders
at either a fixed or floating rate.
The price of an equity linked note is derived from the value of the underlying
linked securities. The level of risk involved in the purchase or sale of an
equity linked note is similar to the risk involved in the purchase or sale of
the underlying securities. However, equity linked notes are dependent on the
individual credit of the issuer of the note, which heightens the risk that the
purchaser of an equity linked note may not be able to receive full principal
cash payment upon maturity. Moreover, the secondary market for equity linked
notes may be limited.
The ability of the Fund to invest in equity linked notes is limited by the
provisions of the U.S. Commodity Exchange Act ("CEA"). Because the return on
equity linked notes is linked to the value of the underlying securities, the
notes may be viewed as having some of the characteristics of futures contracts
with respect to securities, the trading of which by U.S. persons other than on
designated commodities exchanges is prohibited absent an applicable exclusion
or exemption. The CFTC has adopted a statutory interpretation exempting equity
linked notes and other so-called "hybrid instruments" from this prohibition
under certain circumstances. Under the terms of the exemption, equity linked
notes are not considered subject to the CEA provided that they are debt
securities within the meaning of the U.S. Securities Act of 1933 and are
offered by a U.S. financial institution that is insured by a U.S. government
agency or a U.S. chartered corporation, or by a U.S. branch or agency of a
foreign bank that is licensed under U.S. laws and regulated, supervised and
examined by federal authorities having regulatory responsibility for such
financial institutions and marketed and sold directly to customers. The
exemption is further limited to those equity linked notes that are bona fide
debt instruments and that (i) are indexed to a commodity (including a group or
index of securities or a single security) on a no more than one-on-one basis;
(ii) limit the maximum loss on the instrument; (iii) have a
commodity-independent yield that is at least 50%, but no more than 150%, of the
estimated annual yield at the time of issuance for a comparable non-hybrid
debt issued by the same or a similar issuer; (iv) do not have a commodity
component that is severable from the instrument; (v) do not call for delivery
of a commodity by means of an exchange-specified instrument; and (vi) are not
marketed as being or having the characteristics of a futures contract or
commodity option.
Possible Benefits For Host Countries
The Fund expects that it could become an effective conduit for foreign
portfolio investment on terms favorable to both the investor and the host
country. There are several possible benefits to the host countries from the
Fund's investment activities.
First, the Fund may stimulate the measured flow of funds into these securities
markets from institutional investors representing, in the aggregate, a vast
pool of available equity capital.
Second, the additional demand for stocks represented by the Fund's investments
may contribute to improved stock prices and market liquidity, and thus
encourage more issuers to offer shares to the public (including foreign
investors) in their respective national securities markets. Accordingly, the
Fund may contribute to the achievement of national policy goals such as
widening ownership of the corporate sector, increasing the selection of
financial instruments available to investors, and improving the operation of
local capital markets.
Third, the Fund's investment activities may be useful in balancing any
speculative influences in these markets, and the Fund's need for a continuous
flow of business and economic information and analysis may contribute to
improved standards in these areas.
Fourth, The Fund's investments may bring equity capital to emerging securities
markets in a way that does not interfere with local control over domestic
business, as is often the case with direct investment. The Fund's ability to
affect or control any particular firm, sector or market not only is restricted
by the Fund's policies concerning diversification and avoidance of management
involvement, but also may be limited by government regulation (e.g.,
limitations on maximum percentages of foreign ownership or requirements that
foreign investors hold only non-voting shares).
Finally, the Fund may represent a pioneering effort in linking emerging
securities markets to international capital markets, thus enhancing future
access by issuers in these countries to international markets.
There can, of course, be no assurance that any of the foregoing expectations
will be realized.
Investment Restrictions
As a matter of fundamental policy the Fund will not, unless authorized by a
vote of a majority of its outstanding Shares:
1) invest in securities having unlimited liability;
2) issue senior securities, except as may arise in connection with certain
security purchases and subject to limits imposed by the Investment Company Act
of 1940, pledge its assets, borrow money, secured or unsecured, except that the
Fund may borrow in connection with hedging a particular currency exposure and
except that the Fund may borrow from a bank for temporary or emergency purposes
in amounts not exceeding 5% (taken at the lower of cost or current value) of
its total assets (not including the amount borrowed) and pledge its assets to
secure such borrowings and except that the Fund may issue warrants to its
shareholders;
3) invest in commodities, commodity contracts or land, although it may
purchase and sell securities which are secured by real estate or commodities
and securities of companies which invest or deal in real estate or commodities,
and it may purchase and sell spot or forward currency contracts or currency
futures contracts for hedging purposes or to minimize currency conversion costs
in connection with specific securities transactions;
4) make investments for the purpose of exercising control or management;
5) engage in short sales or maintain a short position, although for tax
purposes it may sell securities short against the box;
6) purchase any security (other than marketable obligations of a national
government or its agencies or instrumentalities) if as a result: (i) more than
35% of its assets would be invested in the securities of companies domiciled in
any one country, or (ii) more than 5% of its total assets would be invested in
the securities of any single issuer, or (iii) 25% or more of its total assets
would be invested in issuers whose primary business is in a single industry;
7) act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter
under applicable securities laws;
8) make loans, except through repurchase agreements fully collateralized, and
further it may purchase debt securities usually purchased by financial
institutions and it may purchase loan participations; and
9) purchase any securities if as a result the Fund would own more than 10% of
the outstanding voting securities of any one issuer.
In addition to the above restrictions, the Fund also is subject to certain
diversification requirements based on its status as a "diversified" investment
company under the Investment Company Act of 1940, which also may not be changed
without a majority vote of the Fund's outstanding shares. Under these
requirements, at least 75% of the value of the Fund's total assets must consist
of cash and cash items, U.S. Government securities, securities of other
investment companies, and other securities limited in respect of any one issuer
to an amount not greater in value than 5% of the value of the Fund's total
assets. Thus, with respect to 75% of the Fund's total assets, the Fund may not
invest more than 5% of its assets in marketable obligations of a foreign
national government or its agencies or instrumentalities.
With respect to item (iii) of investment restriction 6, it is the position of
the staff of the SEC that only obligations of the U.S. Government and its
agencies and instrumentalities may be excluded for purposes of determining
compliance with that restriction and the Fund will only exclude such U.S.
Government securities for this purpose.
Although the Fund is not prohibited under its investment restrictions from
selling securities short against the box or engaging in repurchase agreements,
the Fund has not, since its inception, entered into any of these transactions
and it has no present intent to do so during the coming year. Also, the Fund's
limitation on borrowing does not prohibit "borrowing in connection with hedging
a particular currency exposure;" the only type of borrowing contemplated
thereby is the use of a letter of credit issued on the Fund's behalf in lieu of
depositing initial margin in connection with currency futures contracts, and
the Fund has no present intent to engage in any other types of borrowing
transactions under this authority.
The Fund interprets its fundamental policies on issuing senior securities,
investing in commodities, and effecting short sales as not prohibiting it from
entering into transactions in swap agreements, options and futures on
securities or securities indexes, provided any such positions are covered by
the maintenance of a segregated account consisting of U.S. Government
securities or other liquid assets, or by maintenance of an appropriate
offsetting position.
Consistent with rules relating to the determination of beneficial ownership
under the Securities Exchange Act of 1934, a conversion feature or right to
acquire a security shall be considered to be ownership of the underlying
security by the Fund for the purposes of investment restrictions 6 and 9. With
respect to the limits described in investment restrictions 6 and 9 above, the
Fund may make purchases of securities in excess of such limits pursuant to the
exercise of warrants or rights that would maintain the Fund's pro rata interest
in an issuer or a class of an issuer's securities and provided the Manager has
determined that such exercise is in the best interests of the Fund. The Fund
will dispose of the securities so acquired within a reasonable time after
acquisition (presumptively, within approximately 90 days), unless compliance
with the limits otherwise has been restored.
Notwithstanding any of the above investment restrictions, the Fund may
establish wholly-owned subsidiaries or other similar vehicles for the purpose
of conducting its investment operations in qualified markets, where such
subsidiaries or vehicles are required by local laws or regulations governing
foreign investors such as the Fund. The Fund would "look through" any such
vehicle to determine compliance with its investment restrictions.
MANAGEMENT
The Board of Directors, which is elected by the Shareholders, sets the overall
investment policies and generally oversees the investment activities and
management of the Fund. The By-Laws of the Fund provide that Shareholders are
required to elect members of the Board of Directors only to the extent required
by the Act. The Fund does not intend to hold annual shareholder meetings,
although it will do so whenever it is required to under the Act or state law or
when it is otherwise deemed necessary or appropriate by the Board. The Manager
has the responsibility of implementing the policies set by the Board and is
responsible for the Fund's day-to-day operations and investment activities. It
is expected that both the Board of Directors and the Manager will cooperate in
the effort to achieve the investment objective, policies and purposes of the
Fund. The Manager and the Shareholders recognize that the main purpose of the
Fund is to invest in those companies domiciled in developing countries which
will result in a favorable financial record for the Fund and which, at the same
time, will assist in expanding the respective securities markets and increasing
their liquidity.
The Fund does not currently pay any compensation to its Directors or Officers.
In the future, however, the Fund may determine that compensation to its
Directors or Officers is warranted. The Fund pays the expenses of attendance
at Board and Committee meetings for the Directors who are not affiliated with
the Manager. Four Directors own Fund Shares, three of whom are affiliated with
the Manager. The majority of the non-affiliated Directors have a business
affiliation with an investor that owns shares of the Fund. Directors and
certain of their family members are permitted to purchase shares of mutual
funds advised by an affiliate of the Manager without paying a sales charge.
<TABLE>
<CAPTION>
DIRECTORS
<S> <C> <C>
Name, Address and Age Position with Registrant Principal Occupation During
Past Five Years
Issa Al-Sowaidi Director Director, Abu Dhabi Investment
Corniche Road Authority
Abu Dhabi, U.A.E.
Age: 38
R. Michael Barth Director Director, Controller's and
1850 I Street, N.W. Budgeting Department,
Washington, DC 20433 International Finance
Age: 46 Corporation
Robert B. Egelston* Vice Chairman of the Board Senior Partner,
333 South Hope Street and Director Capital Group Partners,
Los Angeles, CA 90071 Limited Partnership
Age: 64
Nancy Englander* President and Director Senior Vice President,
11100 Santa Monica Blvd. Capital International, Inc.
Los Angeles, CA 90025
Age: 51
David I. Fisher* Vice Chairman of the Board Chairman of the Board,
11100 Santa Monica Blvd. The Capital Group Companies,
Los Angeles, CA 90025 Inc.
Age: 56
Beverly L. Hamilton Director President, ARCO Investment
515 Flower Street Management Company
Los Angeles, CA 90071 (previously Deputy Comptroller,
Age: 49 City of New York)
Marinus W. Keijzer Director Chief Economist & Strategist,
Kroostweg-Noord 149 Pensioenfonds PGGM
P.O. Box 117, 3700 AC Zeist
The Netherlands
Age: 57
Hugh G. Lynch Director Managing Director,
767 Fifth Avenue International Investments,
New York, NY 10153 General Motors Investment
Age: 57 Management Corporation
Helmut Mader Director Senior Vice President,
Taunusanlage 12 Deutsche Bank AG
60325 Frankfurt
Germany
Age: 53
Teresa E. Martini Director Vice President,
One Oak Way International Equity,
Berkeley Heights, NJ 07922 AT&T Corporation
Age: 39
John G. McDonald** Director The IBJ Professor of Finance,
Graduate School of Business Graduate School of Business,
Stanford University Stanford University
Stanford, CA 94305
Age: 58
James K. Peterson Director Director of Investment
3001 Summer Street Management,
Stamford, CT 06905 IBM Retirement Fund
Age: 54
William Robinson Director Director, Aga Khan Fund for
Aiglemont Economic Development
60270 Gouvieux
France
Age: 57
Patricia A. Small Director The Associate Treasurer, The
300 Lakeside Drive Regents of the University of
Oakland, CA 94612-3550 California
Age: 49
Walter P. Stern* Chairman of the Board Chairman of the Board,
630 Fifth Avenue and Director Capital Group International, Inc.
New York, NY 10111
Age: 66
OTHER OFFICERS
Roberta A. Conroy Vice President and Secretary Assistant General Counsel,
11100 Santa Monica Blvd. The Capital Group Companies,
Los Angeles, CA 90025 Inc.
Age: 41
Hartmut Giesecke Vice President Chairman and Director,
1 Raffles Place Capital International K.K. and
#24-00 OUB Centre Senior Vice President and
Singapore 0104 Director, Capital International,
Age: 58 Inc.
Thomas W. Trimborn Vice President Vice President,
25 Bedford Street Capital International, Inc.
London, England WC2E 9HN
Age: 33
Shaw B. Wagener Vice President Executive Vice President
333 South Hope Street and Director,
Los Angeles, CA 90071 Capital International, Inc.
Age: 36
Steven N. Kearsley Treasurer Vice President and Treasurer,
135 S. State College Blvd. Capital Research and Management
Brea, CA 92621 Company
Age: 53
Michael A. Felix Assistant Treasurer Vice President,
135 S. State College Blvd. Capital International, Inc.
Brea, CA 92621
Age: 34
</TABLE>
The occupations shown reflect the principal employment of each individual
during the past five years. Corporate positions, in some instances, may have
changed during this period.
* Interested persons within the definition of Section 2(a)(19) of the Act due
to their affiliations with the Manager.
** Professor McDonald received $124,600 in total compensation (including
voluntary deferred compensation) from seven funds managed by an affiliate of
Capital International, Inc. during the calendar year ended December 31, 1994.
The Manager
The Fund's Manager is Capital International, Inc., 11100 Santa Monica
Boulevard, 15th Floor, Los Angeles, California 90025. The Fund's Manager was
organized under the laws of California in 1988 and, in addition to serving as
the Manager of the Fund since July 1, 1988, it has served since May 1989 as the
investment adviser to New World Investment Fund, a registered investment
company with investment objectives and polices similar to those of the Fund.
The Manager has also entered into a contract with Capital International, K.K.,
a Tokyo based subsidiary of Capital Group International, Inc., under which the
Manager provides investment research and portfolio advisory services. From the
Fund's inception in May, 1986 until June 30, 1988, the manager was Capital
Research and Management Company ("CRMC"). CRMC transferred its duties and
obligations to the Manager beginning July 1, 1988. The same essential
personnel have continuously provided investment advice to the Fund throughout
its existence, notwithstanding the transfer of advisory duties and
responsibilities by CRMC to the Manager. Both the Manager and CRMC are direct
or indirect wholly-owned subsidiaries of The Capital Group Companies, Inc., 333
South Hope Street, 52nd Floor, Los Angeles, California 90071 and both are
registered with the U.S. Securities and Exchange Commission under the
Investment Advisers Act of 1940.
The Manager has full access to the research of other companies affiliated with
The Capital Group Companies, Inc. Affiliates of The Capital Group Companies,
Inc. manage over $190 billion of portfolio investments for a wide range of
domestic and international clients, including over $62 billion invested for
accounts with global or international investment policies. These portfolios
are invested world-wide in equity and fixed-income securities, including
investments in emerging countries. The investment management and research
staffs of the companies affiliated with The Capital Group Companies, Inc.
operate from offices in Los Angeles, San Francisco, Atlanta, Washington, New
York, Geneva, London, Hong Kong, Singapore and Tokyo. In addition, one of its
affiliates originated and publishes Morgan Stanley Capital International
Perspective, a monthly and quarterly statistical service which presents
extensive data and analyses relating to worldwide investments and securities
markets.
The affiliates of The Capital Group Companies, Inc. have been developing a
comprehensive data base of information on emerging countries and potential
investments through a number of sources, including investigations of the
operations of particular issuers. These generally include personal discussions
with the issuer's management and on-site examination of its manufacturing and
production facilities.
Under the Investment Advisory and Service Agreement between the Fund and the
Manager (the "Agreement"), the Manager makes investment decisions and
supervises the acquisition and disposition of securities by the Fund, all in
accordance with the Fund's investment objective and policies and under the
general supervision of the Fund's Board of Directors. In addition, the Manager
provides information to the Fund's Board of Directors to assist the Board in
identifying and selecting qualified markets. The Manager also provides and
pays the compensation and travel expenses of the Fund's officers and of the
Directors of the Fund who are affiliated with the Manager; maintains or causes
to be maintained for the Fund all required books and records and furnishes or
causes to be furnished all required reports or other information (to the extent
such books, records, reports and other information are not maintained or
furnished by the Fund's custodian or other agents); determines the net asset
value of the Fund's Shares as required; and supplies the Fund with office
space. The Fund pays all its expenses of operation including, without
limitation, custodian, stock transfer and dividend disbursing fees and expenses
(including fees or taxes relating to stock exchange listing); costs of
preparing, printing and mailing reports, prospectuses, proxy statements and
notices to its shareholders; taxes; expenses of the issuance, sale or
repurchase of Shares (including registration and qualification expenses); legal
and auditing fees and expenses and fees of legal representatives; compensation;
fees and expenses (including travel expenses) of Directors of the Fund who are
not affiliated with the Manager; costs of insurance, including any directors
and officers liability insurance and fidelity bonding; and costs of stationery
and forms prepared exclusively for the Fund.
For its services, the Manager receives from the Fund a fee, payable monthly in
U.S. dollars, at the annual rate of 0.90% of the first $400 million of
aggregate net assets of the Fund. The annual rate is reduced to 0.80% of the
aggregate net assets from $400 million to $1 billion; to 0.70% of the aggregate
net assets from $1 billion to $2 billion; to 0.65% of the aggregate net assets
from $2 billion to $4 billion; to 0.625% of the aggregate net assets from $4
billion to $6 billion; to 0.60% of the aggregate net assets from $6 billion to
$8 billion; to 0.58% of the aggregate net assets from $8 billion to $11
billion; to 0.56% of such aggregate net assets in excess of $11 billion as
determined on the last business day of every week and month. In addition, other
Fund expenses are borne by the Fund. During the fiscal years ended June 30,
1995, 1994 and 1993 the management fees amounted to $34,286,000, $26,662,000
and $14,579,000, respectively. Under the Agreement, the Manager and its
affiliates are permitted to provide investment advisory services to other
clients, including clients which may invest in developing country securities.
In addition, under the Agreement, when the Manager deems the purchase or sale
of a security or other asset to be in the best interests of the Fund as well as
other accounts managed by it or its affiliates, it may, to the extent permitted
by applicable laws and regulations, aggregate the securities or other assets to
be sold or purchased for the Fund with those to be sold or purchased for such
other accounts. In that event, allocation of the securities or other assets
purchased or sold, as well as the expense incurred in the transaction, will be
made by the Manager in the manner it considers to be most equitable and
consistent with its obligations to the Fund under the Agreement and to such
other accounts. The Fund recognizes that in some cases this procedure may
adversely affect the size or price of the position obtainable for the Fund's
portfolio or its sale price of securities sold.
The Agreement is effective for a two-year period from the date of Shareholder
approval and will continue in effect from year-to-year thereafter if approved
annually (a) by the Board of Directors of the Fund or by a majority vote of the
outstanding Shares of the Fund, and (b) by a majority of the Directors who are
not parties to the Agreement or "interested persons" (as defined in the
Investment Company Act of 1940) of any such party. The Agreement may be
terminated without penalty on 60 days written notice at the option of either
party or by a majority vote of the outstanding Shares of the Fund. For this
purpose, a majority vote of the outstanding Shares of the Fund means the lesser
of (a) 67% or more of the outstanding Shares present at a meeting at which more
than 50% of the outstanding Shares are present or represented by proxy or (b)
more than 50% of the outstanding Shares.
The Capital Group Companies, Inc., 333 South Hope Street, 52nd Floor, Los
Angeles, CA 90071, owns (indirectly through another wholly-owned subsidiary)
all of the Manager's outstanding shares of common stock.
While the Fund is a Maryland corporation, certain of its Directors and
officers are not U.S. residents and substantially all of the assets of such
persons are generally located outside the U.S. As a result, it will be
difficult for U.S. investors to effect service of process upon such Directors
or officers within the U.S., or to enforce judgments of courts of the U.S.
predicated upon civil liabilities of such Directors or officers under the
federal securities laws of the U.S. In management's view, it is unlikely that
foreign courts would enforce judgments of U.S. courts predicated upon the civil
liability provisions of the federal securities laws, or, that such courts would
enforce such civil liabilities against foreign Directors or officers in
original actions. The following directors of the Fund are non-U.S. residents:
Issa Al-Sowaidi, Marinus W. Keijzer, Helmut Mader and William Robinson. The
following officers of the Fund are non-U.S. residents: Hartmut Giesecke and
Thomas W. Trimborn.
Portfolio Management
The Manager uses a system of multiple portfolio counselors in managing assets.
Under this system the portfolio of the Fund is divided into segments, and each
segment is assigned to an individual counselor, who decides how the assets in
that segment will be invested (within the limits provided by the Fund's
objectives and the Manager's investment committee). In addition, one segment
is designated as a "research portfolio" and is managed by a number of research
professionals. The following individuals serve as portfolio counselors for the
Fund:
David I. Fisher
Mr. Fisher has served as President and a Director of the Manager since 1988 and
serves as Vice Chairman of the Board and a Director of the Fund. In addition,
he served as Executive Vice President-International from 1985 to 1991, and
Chairman of the Board since 1991, of The Capital Group Companies, Inc., the
Manager's parent company. Mr. Fisher joined The Capital Group organization in
1969. Mr. Fisher has served as lead portfolio counselor for the Fund since the
Fund's inception in 1986. He also has investment management responsibilities
for international and global accounts, as well as emerging markets.
Hartmut Giesecke
Mr. Giesecke has served as a Senior Vice President of the Manager since 1992
and a Director of the Manager since 1991. He is also Vice President of the
Fund. He has also served as Senior Vice President and a Director of Capital
Research International, an international research affiliate of the Manager,
since 1985 and as President of the Manager's Tokyo-based affiliate Capital
International K.K. from 1986 to 1994, as a Director since 1986 and as Chairman
since 1994. Mr. Giesecke joined Geneva-based Capital International S.A. in
1972. Mr. Giesecke has served as a portfolio counselor for the Fund since the
Fund's inception in 1986. He also has investment management responsibilities
for international and global accounts, as well as emerging markets.
Mark E. Denning
Mr. Denning has served as a Vice President of the Manager since 1989. He has
also served as a Senior Vice President of Capital Research International since
1992, a Director of Capital Research International since 1991, and an
Investment Research Analyst for Capital Research International since 1985. Mr.
Denning joined the Capital organization in 1982. He has served as a portfolio
counselor for the Fund since 1990. He also has investment management
responsibilities for international and global accounts, as well as emerging
markets.
Shaw B. Wagener
Mr. Wagener has served as an Executive Vice President of the Manager since 1993
and a Director of the Manager since 1991. He is also a Vice President of the
Fund. In addition, he served as Vice President-Investment Division of Capital
Research and Management Company from 1986 to 1993. Mr. Wagener is also a
regional portfolio counselor investing in Latin American equity and fixed
income securities. He joined the Capital organization 1981. Mr. Wagener has
served as a portfolio counselor for the Fund since 1990.
Expenses
The Fund's ratios of expenses (excluding non-U.S. taxes) to average net assets
for the fiscal years ended June 30, 1995, 1994 and 1993 were 0.91%, 1.00% and
1.01%, respectively. The Fund's normal operating expenses may be higher than
those of other investment companies of comparable size. This is because the
fees and expenses generally charged by certain of the Fund's agents are higher
than those charged to investment companies investing exclusively in the U.S.
There are added custodial, communications and other costs associated with the
Fund's activities, and the advisory fees generally are higher due to the
increased advisory effort required in light of the specialized nature of the
Fund's investment activities.
COMMON STOCK
The authorized capital stock of the Fund is 200,000,000 shares of common stock
($.01 par value) ("shares of common stock"). Shares of the Fund are fully paid
and non-assessable. All shares of common stock are equal as to earnings,
assets and voting privileges. The shares currently have no conversion,
pre-emptive or other subscription rights; rights to purchase shares may be
issued in the future but any such rights would be subject to certain
restrictions under the Act, including that they be issued exclusively and
ratably to all holders of shares and that they expire after not more than 120
days. In the event of liquidation, each share is entitled to its proportion of
the Fund's assets after debts and expenses. See "Risk Factors and Other
Considerations." There are no cumulative voting rights for the election of
directors. See "Management." The shares of common stock are issued in
registered form, and ownership and transfers of the shares are recorded by the
Fund's transfer agent.
Under Maryland law, and in accordance with the By-Laws of the Fund, the Fund
is not required to hold an annual meeting of its Shareholders in any year in
which the election of directors is not required to be acted upon under the Act.
The By-Laws also provide that each director will serve as a director for the
duration of the existence of the Fund or until such director sooner dies,
resigns or is removed in the manner provided by the By-Laws or as otherwise
provided by statute or the Fund's Articles of Incorporation. Consistent with
the foregoing, in addition to the provisions of the By-Laws, the Fund shall
undertake to call a special meeting of Shareholders for the purpose of voting
upon the question of removal of a director or directors when requested in
writing to do so by the holders of at least 10% of the outstanding Shares of
the Fund, and, in connection with such meeting, to comply with the provisions
of section 16(c) of the Act relating to shareholder communications. Holders of
a majority of the outstanding Shares will constitute a quorum for the
transaction of business at such meetings. Attendance and voting at
shareholders meetings may be by proxy, and Shareholders may take action by
unanimous written consent in lieu of holding a meeting.
The Fund's Board of Directors may, in the future, determine to make one or
more additional offerings of Shares, either through private placement or
offerings to the public. A decision by the Board to offer additional shares,
and whether such an offer would be made privately or to the public, would
depend on the considerations the Board at that time deems relevant. Such an
offer may be made on terms and conditions which differ from the terms and
conditions of this offering or any subsequent offering of Shares. In addition,
the Board may seek in the future to amend the Fund's Articles of Incorporation
to make Shares redeemable and the Fund an "open-end" investment company
(although it has no present intention to do so).
As a closed-end investment company registered with the U.S. Securities and
Exchange Commission, the Fund is required in any offering of its Shares to sell
such Shares at a price which is not less than the current net asset value per
Share (see "Valuation," below), except that sales at a price less than the
current net asset value per Share may be made: (i) in connection with an
offering to all current holders of Shares, (ii) with the consent of the holders
of a majority of the Shares, or (iii) as may be permitted by an order of the
U.S. Securities and Exchange Commission. Any issuance or sale of additional
Shares by the Fund at a price less than the current net asset value per Share
would dilute the pro rata interests in the Fund's assets represented by the
Shares outstanding at that time. If the Fund were to convert to an "open-end"
investment company, it would be required under the Investment Company Act of
1940 to sell Shares only at a price based on the current net asset value per
Share.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Shares of common stock of the Shareholders which own beneficially
more than 5% of the outstanding Shares of the Fund as of August 31, 1995.
Beneficial Ownership
<TABLE>
<CAPTION>
Name & Address Number Percentage
of Shares of Outstanding
Common Stock
<S> <C> <C>
The Chase Manhattan Bank, N.A. 13,398,549 12.3%
as Trustee for the
General Motors Employes Global
Group Pension Trust
General Motors Corporation
767 Fifth Avenue
New York, NY 10153
The Chase Manhattan Bank, N.A 9,331,819 8.5%
as Trustee for the
IBM Retirement Plan Trust
262 Harbor Drive
Stamford, CT 06904
New York State Common 5,462,679 5.0%
Retirement Fund
A.E. Smith State Office Building
Albany, NY 12236
Pensioenfonds PGGM 7,195,967 6.6%
Kroostweg-Noord 149
P.O. Box 117, 3700
AC Zeist
The Netherlands
</TABLE>
THE OFFERING
Shares will be offered on a continuous basis until all Shares being offered
pursuant to this Prospectus have been sold; provided, however, the Fund may not
sell shares in any month following a month end on which the Fund is not at
least approximately 90% invested in developing country securities. This
limitation may be modified at any time by the Board of Directors of the Fund.
The current authorization for the issuance of shares imposes a limitation on
the number of shares that may be sold by the Fund in any one calendar year.
This limitation is 25% of the outstanding and subscribed/reserved shares as of
the prior calendar year end. Shares may be purchased by notifying Abbe Shapiro
by telephone (310-996-6000) or telecopy (310-996-6200). Assuming the investor
suitability and minimum purchase requirements described herein have been met
and the order has been accepted, the price of Shares will be the net asset
value per Share next determined (on the last business day of each week and
month). Upon receipt of a purchase order, the Fund will send a confirmation
letter to the investor indicating the name of the purchaser, the dollar amount
of the purchase, the trade date on which the order will be priced and
settlement instructions. On the trade date, once the net asset value has been
calculated, the Fund will notify the purchaser of the purchase price per Share
and total dollar amount of the purchase. Payment must be received on or prior
to the third business day following the date on which the price is determined
at the direction of a Fund officer. Payment for Shares to be sold by the Fund
may be made in the following manner:
Wire: Emerging Markets Growth Fund, Inc.
c/o Wells Fargo Bank (ABA 121000248)
155 Fifth Street
San Francisco, CA 94103
For credit to the account of:
American Funds Service Company
a/c #4600-076178
Emerging Markets Growth Fund, Inc.
Check: Emerging Markets Growth Fund, Inc.
Attn: Abbe Shapiro
11100 Santa Monica Blvd., 15th Floor
Los Angeles, CA 90025-3302
In addition, at the sole discretion of the Manager, investors may be permitted
to purchase Shares by tendering to the Fund developing country securities which
are determined by the Manager to be appropriate for the Fund's investment
portfolio. In determining whether particular securities are suitable for the
Fund's investment portfolio, the Manager will consider the following factors,
among others: the type, quality and value of the securities being tendered;
the extent to which the Fund is already invested in such securities or in
similar securities in terms of industry, geography or other criteria; the
effect the tendered securities would have on the liquidity of the Fund's
investment portfolio and other operational considerations; the Fund's cash
position; and whether the Manager believes that issuing Shares in exchange for
the tendered securities would be in the best interests of the Fund and its
shareholders.
Investors who wish to purchase Shares with securities should send by telecopy
(310-996-6200) to Abbe Shapiro a list of all such securities and the amount of
each security being offered in exchange for Shares. The Fund may accept all, a
portion or none of the tendered securities and will notify investors as to
which, if any, of the securities will be accepted. Investors will be notified
by written communication within five business days as to whether the Fund will
issue Shares in exchange for any of the tendered securities. If any tendered
securities are accepted, investors will receive Shares based on the market
value of the tendered securities and the net asset value of the Fund's Shares
next determined after the decision has been made to accept securities in
exchange for Shares. The tendered securities must be received on or prior to
the fifth business day following the date on which the price is determined at
the direction of the Fund's officers. An investor should consult with its own
tax adviser on the consequences of exchanging securities for Fund Shares.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Fund would have outstanding 139,679,505
Shares of common stock (if all Shares offered in this Prospectus are sold).
The Shares sold in this offering may be freely traded without restriction under
the Securities Act of 1933, as amended (the "1933 Act"). Shareholders are,
however, subject to contractual restrictions on transfer pursuant to the
Shareholders Agreement. Certain of the Shares issued prior to this offering
not pursuant to a public offering are "restricted securities" within the
meaning of Rule 144 promulgated under the 1933 Act, and may not be sold without
registration or an exemption from registration such as Rule 144 or Rule 144A
under the 1933 Act.
In general, under Rule 144, as currently in effect, a person who holds
restricted securities is entitled to sell, within any three-month period, a
number of restricted shares that does not exceed the greater of 1% of the then
outstanding shares of common stock of the Fund or the average weekly trading
volume during the four calendar weeks preceding such sale, provided a minimum
of two years has elapsed between the later of the date of acquisition of such
shares from the issuer or from an "affiliate" of the issuer, and any resale of
such shares in reliance on Rule 144 for the account of either the acquirer or
any subsequent holder of those shares. A person not deemed to be an
"affiliate" of the issuer and who has beneficially owned shares for at least
three years is entitled to sell such shares under Rule 144 without regard to
the above volume limitations.
Rule 144A provides a safe harbor from the registration requirements of the
1933 Act for the resale of restricted securities to specified institutions. In
general, under Rule 144A a person is entitled to resell securities that, when
issued, were not of the same class as securities listed on a United States
national securities exchange or quoted on an automated inter-dealer quotation
system in the United States. Such "eligible securities" may be sold under Rule
144A only to a "qualified institutional buyer" which, in general, is an
institution that in the aggregate owns and invests on a discretionary basis at
least $100 million in securities of issuers that are not affiliated with the
institution.
The foregoing is not intended to be a complete description of Rule 144 or Rule
144A or of the rights of parties to sell Fund Shares.
The Fund is unable to predict the effect that sales made under Rule 144 or
Rule 144A, pursuant to future registration statements, or otherwise may have on
the prevailing market price for the Fund's Shares, although it is likely that
sales of a large number of Shares would depress such market price.
VALUATION
The net asset value per Share is calculated in U.S. Dollars on the last
business day of each week and each month, and may be calculated at such other
times as the Board of Directors may determine, in the following manner:
1) portfolio securities, including ADR's and other depositary receipts, which
are traded on stock exchanges, are valued at the last sale price on the
exchange on which such securities are traded, as of the close of business on
the day the securities are being valued, or, in the absence of any sales, at
the last reported bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange designated by or under
the authority of the Board as the primary market. Securities traded in the OTC
market are valued at the last reported sale price in the OTC market prior to
the time of valuation. Securities and assets for which market quotations are
not readily available (including restricted securities which are subject to
limitations as to their sale) or are not deemed to represent market value are
valued at fair value as determined in good faith by or under the authority of
the Board. Long-term bonds and U.S. Treasury notes are valued at prices
obtained from a bond pricing service of a major dealer when such prices are
available; however, when a pricing service is not available or in other
circumstances where the Manager deems it appropriate to do so, such securities
will be valued at the mean between their representative quoted bid and asked
prices (or, if not available at such prices for comparable securities). United
States Treasury bills, certificates of deposit issued by banks, corporate
short-term notes and other short-term investments with original or remaining
maturities in excess of sixty (60) days are valued at the mean of
representative quoted bid and asked prices for such securities or, if such
prices are not available, at the mean of representative quoted bid and asked
prices for securities of comparable maturity, quality and type. Short-term
securities with sixty (60) days or less to maturity are amortized to maturity
based on their cost if acquired within sixty (60) days of maturity or, if
already held on the 60th day, based on the value determined on the 61st day.
Shares of other investment companies may be valued using market quotations if
the market volume and the depth of the market are sufficient to establish that
the market quotation is appropriate to reflect the market value. Where market
quotations do not appropriately reflect market value, shares of other
investment companies will be valued at current net asset value. Assets or
liabilities initially expressed in terms of foreign currencies are translated
into U.S. dollars at the prevailing market rates. The fair value of all other
assets is added to the value of securities to arrive at the total assets;
2) the Fund's liabilities, including prior accruals of taxes and other expense
items, are deducted from the total assets; and
3) the net assets so obtained are then divided by the total number of Shares
outstanding (excluding treasury Shares), and the result, rounded to the nearer
cent, is the net asset value per Share.
DIVIDENDS AND DISTRIBUTIONS
The Fund will, from time to time, distribute dividends and realized net
capital gains to Shareholders. See "Tax Considerations". Shareholders will
receive all distributions in cash paid by check in U.S. Dollars mailed directly
to the Shareholder by the Fund's dividend paying agent or, as permitted by the
Board of Directors, may elect to invest distributions in additional Shares
issued by the Fund for this purpose. Shareholders, as permitted by the Board
of Directors, will be given the option to reinvest such distribution in
additional Shares of the Fund or receive cash. In any case, where Shareholders
are permitted to choose between a cash dividend or a stock dividend,
Shareholders will be required, before the declaration of any such dividend, to
provide their election to the Fund in writing. No fees are charged in
connection with a Shareholder's election to receive a stock dividend or in
connection with any other stock dividend.
Shares that are purchased in this offering will be entitled to any dividends
that are declared on Shares of record beginning on the day following the date
on which the net asset value is determined. If requested, Share certificates
will be sent to Shareholders immediately following the date on which payment
for the Shares has been received (the "settlement date").
REPURCHASE OF SHARES
The Fund's Board of Directors currently intends, approximately each quarter,
to consider authorizing the Fund to make tender offers for up to 5% of the
Fund's then outstanding Shares at the then current net asset value of the
Shares. Although such tender offers, if undertaken and completed, will provide
some liquidity for Shareholders, there can be no assurance that such tender
offers will in fact be undertaken or completed or, if completed, that they will
provide sufficient liquidity for all Shareholders who may desire to sell such
Shares. As such, investment in the Shares should be considered illiquid
notwithstanding the possibility that one or more tender offers may be
consummated. The Fund has completed one tender offer for 1,979,192 Shares
(8.5% of the then outstanding Shares) in accordance with a Board authorization
of January 10, 1991, permitting the Fund to tender for up to 10% of its then
outstanding Shares.
Commencement by the Fund of such a tender offer during a period in which it is
simultaneously engaged in a continuous offering of its Shares may be a
violation of rules designed to prevent price manipulation promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
Accordingly, the Fund applied for and was granted an exemption by the
Securities and Exchange Commission exempting the Fund from such rules to permit
the Fund to make tender offers for its Shares while simultaneously engaged in
the continuous offering of Shares. Pursuant to that exemptive order the Fund
has agreed to discontinue the offer and sale of Shares during the last five
business days prior to termination of any tender offer. No assurance can be
given that the Fund will be able to maintain such exemption indefinitely. If
the Board of Directors authorizes the Fund to make a tender offer at such time,
if any, that the Fund is unable to rely on such exemption, the Fund intends to
suspend the continuous offering of its Shares during the term of such tender
offer in the manner prescribed by the Securities Exchange Act of 1934 (or in
such other manner as may be permitted by the staff of the Securities and
Exchange Commission).
In connection with any tender offer, Shareholders will be furnished with a
notice describing the tender offer. Such notice will contain information
Shareholders should consider in deciding whether or not to tender their Shares
and detailed instructions on how to tender their Shares. A tender offer would
be funded by the disposition of portfolio investments. The Fund does not
intend to borrow money to finance a tender offer. The price the Fund will pay
to repurchase its Shares will be equal to the Fund's net asset value on the day
the tender offer expires. During the period that the tender offer is open
Shareholders may ascertain the net asset value (which is calculated on the last
business day of each week and month) by calling Abbe Shapiro at (310) 996-6000.
Although the Board of Directors believes that tender offers for the Shares
generally would increase the liquidity of the Shares, the acquisition of Shares
by the Fund will decrease the total assets of the Fund and, therefore, could
have the effect of increasing the Fund's expense ratio. Because of the nature
of the Fund's investment objective and policies and the Fund's portfolio, the
Manager may encounter some difficulty in disposing of portfolio securities in
order to consummate tender offers. In considering whether to make a tender
offer the Board of Directors would consider, among other things, how many (if
any) Shareholders have indicated an interest in selling their shares, the
current cash position of the Fund, any potential effect of the repurchase on
the Fund's investment management operations, and whether a tender offer would
be in the best interests of all Shareholders of the Fund. Shareholders
interested in selling Shares pursuant to a prospective tender offer should
notify Abbe Shapiro, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles,
California 90025. Such notification should be in writing and should specify
the number of Shares to be tendered. This information will be considered by
the Board of Directors in considering whether to make a tender offer.
Even if a tender offer has been made, the Directors' current policy (which may
be changed in the future), is that the Fund will not make a tender offer if (1)
in the judgment of the Directors, there is not sufficient liquidity of Fund
assets; (2) such transactions, if consummated, would impair the Fund's status
as a regulated investment company under the Internal Revenue Code (which would
make the Fund a taxable entity, causing the Fund's income to be taxed at the
corporate level in addition to the taxation of Shareholders who receive
dividends from the Fund); or (3) there is, in the judgment of the Directors,
any (a) material legal action or proceeding instituted or threatened
challenging such transactions or otherwise materially adversely affecting the
Fund, (b) declaration of a banking moratorium by federal or state authorities
or any suspension of payment by banks in the United States, (c) limitations
affecting the Fund or the issuers of its portfolio instruments imposed by
federal, state or foreign authorities on the extension of credit by lending
institutions or on the exchange of foreign currency, or (d) other events or
conditions that would have a material adverse effect on the Fund or its
shareholders if tendered Shares were purchased.
SHAREHOLDERS AGREEMENT AND RESTRICTIONS ON TRANSFER
Each current holder of the Fund's Shares has entered into a Shareholders
Agreement. Among other things, the Shareholders Agreement provides that with
respect to transfers of Shares that no Shareholder may transfer any Shares to a
third party that is a "company" (as the term is defined in the Act) unless (i)
the prospective purchaser represents that it has total assets in excess of U.S.
$5 million; (ii) it transfers a sufficient number of Shares that their current
net asset value, in the aggregate, equals or exceeds $100,000; and (iii) the
prospective purchaser will not own upon the transfer of Shares, either alone or
together with any affiliate of the prospective purchaser, more than 15% of the
Fund's outstanding Shares (provided that this restriction does not apply to the
acquisition of shares by reinvestment of dividends or capital gain
distributions; and provided further, that any Shareholder of the Fund may
purchase its pro rata portion of all shares authorized for issuance and sale by
the Fund without regard to this limitation). If the prospective purchaser is a
natural person no Shares may be transferred unless (i) the prospective
purchaser satisfies (ii) and (iii) above, and (ii) the prospective purchaser
has an individual net worth in excess of U.S. $1 million or an individual
income in excess of U.S. $200,000 during each of the two most recent years.
The Shareholders Agreement provides further that successors in interest of the
holders of Shares will be bound by its terms, and will be required to execute
the Agreement.
The Shareholders Agreement terminates upon the written agreement of the
holders of at least 66 2/3% of the outstanding Shares of the Fund or upon the
public offering of Shares by the Fund to persons who would not qualify as
"accredited investors" under Regulation D under the 1933 Act.
PORTFOLIO TRANSACTIONS AND BROKERAGE
In placing orders for the purchase and sale of securities for the Fund, the
Manager will use its best efforts to obtain the most favorable net results and
execution of the Fund's orders, taking into account all appropriate factors,
including price, dealer spread or commission, if any, size of the transaction,
and difficulty of the transaction. The Manager is authorized to pay spreads or
commissions to brokers or dealers furnishing brokerage and research services in
excess of spreads or commissions which another broker or dealer may charge for
the same transaction. The type of services the Manager may consider when
selecting brokers to effect transactions includes advice as to the value of
securities, the advisability of investing in, purchasing or selling securities,
the availability of securities or purchasers or sellers of securities, and the
furnishing of analyses and reports concerning issues, industries, securities,
economic factors and trends, portfolio strategy and the performance of
accounts. There is no intention to place portfolio transactions with
particular brokers or dealers or groups thereof.
Although certain research, market and statistical information from brokers and
dealers can be useful to the Fund and to the Manager, it is the opinion of the
Manager that such information is only supplementary to its own research
efforts, since the information must still be analyzed, weighed and reviewed by
the Manager in connection with the Fund. Such information may be useful to the
Manager in providing services to clients other than the Fund, and not all such
information may be used by the Manager in connection with the Fund.
Conversely, such information provided to the Manager by brokers and dealers
through whom other clients of the Manager effect securities transactions may be
useful to the Manager in providing services to the Fund.
The Fund's portfolio turnover rates for the fiscal years ended June 30, 1995,
1994 and 1993 were 23.75%, 18.13% and 11.97%, respectively. The portfolio
turnover rate is expected to be less than 100% each fiscal year.
Brokerage commissions paid on the Fund's portfolio transactions for the fiscal
years ended June 30, 1995, 1994 and 1993 amounted to $10,079,926, $8,003,000
and $3,159,000, respectively.
REPORTS, LISTING AND PUBLICATION OF VALUE
The Fund does not currently believe there will be an active secondary market
for the Shares. To the extent a secondary market does develop, investors
should be aware that the shares of closed-end investment companies typically
trade at a discount from or premium to their net asset value and frequently
trade at a discount from net asset value. Should there ever be a secondary
market for Fund Shares, it cannot be predicted whether the Shares would sell at
a discount from or premium to net asset value.
Shares of the Fund are listed on the Luxembourg Stock Exchange. A legal
notice and the Articles of Incorporation and By-Laws of the Fund are lodged
with the Chief Registrar of the District Court of Luxembourg where such
documents are available for inspection and where copies thereof are available
upon request. While the restrictions on transfer described above under
"Shareholders Agreement and Restrictions on Transfer" remain in effect there
may be little (if any) trading in the Fund's Shares on the Luxembourg Stock
Exchange or elsewhere. Since the Fund's inception, there has been no public
trading of the Fund's Shares.
Financial statements of the Fund are sent to the Shareholders at least
semiannually. At least one of these reports will be audited annually. Reports
will be made available at the office of the Fund's Luxembourg transfer agent,
Banque Internationale a' Luxembourg, S.A. In addition, notices to Shareholders
are published in a Luxembourg newspaper, which is the Luxemburger Wort.
Attached as Appendix A to this Prospectus are: Emerging Markets Growth Fund,
Inc. - Statement of Assets and Liabilities as of June 30, 1995 (including
investment portfolio as of June 30, 1995) (audited); Statement of Operations
for the fiscal year ended June 30, 1995 (audited); Statement of Changes in Net
Assets for the fiscal years ended June 30, 1995 and June 30, 1994 (audited);
Notes to the Financial Statements for the fiscal year ended June 30, 1995;
Report of Independent Accountants for the fiscal year ended June 30, 1995;
Per-Share Data and Ratios for the fiscal years ended June 30, 1991 through June
30, 1995 (audited).
The Fund's net asset value per Share on August 31, 1995 was $53.44. The total
investment return, assuming dividend and capital gain distributions were
reinvested, from May 30, 1986 (the commencement of operations) through August
31, 1995 was +937%.
Total return for the period is computed as follows:
An initial investment is divided by the net asset value per Share as of the
first day of the period in order to determine the initial number of Shares
purchased. Subsequent dividends and capital gain distributions are reinvested
at net asset value on the reinvestment date determined by the Board of
Directors. The sum of the initial Shares purchased and Shares acquired through
reinvestment is multiplied by the net asset value per Share as of the end of
the period in order to determine ending value. The ending value is divided by
the initial investment converted to a percentage which equals total return.
TAX CONSIDERATIONS
The Fund is registered as an investment company under the 1940 Act and intends
to qualify and to elect to be taxed as a "regulated investment company" (or
"RIC") under the Internal Revenue Code of 1986, as amended (the "Code"). If
the Fund is to qualify for the special tax treatment afforded RICs under the
Code, it must meet various requirements, including (i) that at least 90% of the
Fund's gross income for the taxable year must be derived from dividends,
interest, and gains from the sale or other disposition of stocks, securities or
foreign currencies or from other income derived with respect to its business of
investing in stock, securities or currencies; (ii) that less than 30% of its
gross income must be derived from the sale or disposition of stock, securities,
options, futures, and certain foreign currencies (including certain options,
futures or forward contracts on foreign currencies) held for less than three
months; (iii) that at the end of each quarter of its taxable year, it meets
certain asset diversification requirements, including that not more than 25% of
the value of its assets be invested in the securities of any one issuer and at
least 50% of its assets be represented by cash, U.S. Government securities or
other securities limited in the case of any one issuer to not more than 5% of
the Fund's total assets and to not more than 10% of the outstanding voting
securities of each such issuer; and (iv) that it distribute each year at least
90% of its investment company taxable income (including interest, dividends and
net short-term capital gains in excess of net long-term capital losses).
As a RIC, the Fund will not be subject to U.S. federal income tax on its
investment company taxable income and net capital gains (net long-term capital
gains in excess of the sum of net short-term capital losses and capital loss
carryovers from prior years), if any, that it distributes to shareholders. The
Fund intends to distribute to its shareholders, at least annually,
substantially all of its investment company taxable income and net capital
gains. Amounts not distributed on a timely basis in accordance with a
calendar-year distribution requirement are subject to a non-deductible 4%
excise tax. To prevent imposition of the excise tax, the Fund must distribute
during each calendar year an amount equal to the sum of (i) at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year, (ii) at least 98% of its capital gains in excess of its capital
losses (adjusted for certain ordinary losses) for the twelve-month period
ending on October 31 of the calendar year, and (iii) any ordinary income and
capital gains for previous years that were not distributed during those years.
A distribution will be treated as paid on December 31 of the current calendar
year if it is declared by the Fund in October, November or December with a
record date in such a month even if paid by the Fund during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the year
in which the distributions are received. To prevent application of the excise
tax, the Fund intends to make its distributions in accordance with the calendar
year distribution requirement.
If it qualifies for regulated investment company status, the Fund will send
written notices to shareholders annually regarding the tax status of all
distributions made during such year, the amount of undistributed net capital
gains and any applicable tax credits.
Distributions
Dividends of investment company taxable income are taxable to a shareholder as
ordinary income whether paid in cash or reinvested in additional shares. It is
anticipated that the dividends will not qualify for the dividends-received
deduction for a U.S. corporation.
Distributions of net capital gains, if any, which are designated by the Fund
as capital gain dividends are taxable to shareholders as long-term capital
gains, regardless of how long the shareholder has held the Fund's shares, and
are not eligible for the dividends-received deduction. The Board of Directors
of the Fund generally intends to distribute any net capital gains. If the Fund
should retain net capital gains, it will be subject to a tax of 35% of the
amount retained. The Fund expects to designate amounts retained, if any, as
undistributed capital gains in a notice to its shareholders who, if subject to
U.S. federal income taxation on long-term capital gains, (i) would be required
to include in income for U.S. federal income tax purposes, as long-term capital
gains, their proportionate shares of the undistributed amount, and (ii) would
be entitled to credit against their U.S. federal income tax liabilities for
their proportionate shares of the tax paid by the Fund on the undistributed
amount and to claim refunds to the extent that their credits exceed their
liabilities. For U.S. federal income tax purposes, the adjusted basis of the
Fund shares owned by a shareholder of the Fund would be increased by an amount
equal to 65% of the amount of undistributed capital gains included in the
shareholder's income.
Currency Fluctuations -- "Section 988" Gains or Losses
Under the Code, the Fund will account for its income and deduction in U.S.
dollars and thus may realize gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues interest or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities. Any such gains or losses generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in
a foreign currency and on disposition of forward contracts and certain futures
contracts and options, gains or losses attributable to fluctuations in the
value of foreign currency between the date of acquisition of the security or
contract and the date of disposition also are treated as ordinary gain or loss.
These gains or losses are referred to under the Code as "Section 988" gains or
losses. Section 988 gains may increase the amount of income that the Fund must
distribute in order to qualify for treatment as a RIC and to prevent
application of an excise tax on undistributed income. Alternatively, Section
988 losses may decrease or eliminate income available for distribution. For
example, if foreign exchange losses of the Fund were to exceed the Fund's other
investment company taxable income during a taxable year, the Fund would not be
able to make ordinary dividend distributions, and distributions made before the
losses were realized would be recharacterized as a return of capital to
shareholders for federal income tax purposes, rather than as an ordinary
dividend, thus reducing each shareholder's basis in his Fund shares, or as gain
from the sale of Fund shares.
Hedging Transactions
Generally, certain hedging transactions which the Fund may undertake may
result in "straddles" for U.S. federal income tax purposes. The straddle
rules under the Code may affect the character of gains (or losses) realized by
the Fund. In addition, losses realized by the Fund on positions that are part
of a straddle may be deferred under the straddle rules, rather than being taken
into account in calculating the taxable income for the taxable year in which
the losses are realized. Because only a few regulations implementing the
straddle rules have been promulgated, the tax consequences to the Fund of
hedging transactions are not entirely clear. The hedging transactions may
increase the amount of ordinary income and short-term capital gain realized by
the Fund which is taxed as ordinary income when distributed to shareholders.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed by the
Fund to its shareholders and which will be taxed to shareholders of the Fund as
ordinary income or long-term capital gain, may be increased or decreased by
such hedging transactions.
Certain requirements under the regulated investment company provisions of the
Code may limit the extent to which the Fund will be able to engage in
transactions in options, futures contracts and forward contracts.
Sale of Shares
In general, upon the sale or other disposition of shares of the Fund, a
shareholder may realize a capital gain or loss which will be long-term or
short-term, depending upon the shareholder's holding period for the shares.
However, if the shareholder sells Fund shares to the Fund (in a tender offer by
the Fund, for example), proceeds received by the shareholder may, in some
cases, be characterized for tax purposes as dividends. Any loss realized on a
sale or exchange will be disallowed to the extent the shares disposed of are
replaced within a period of 61 days beginning 30 days before and ending 30 days
after disposition of the shares. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss. Any loss realized by
a shareholder on a disposition of Fund shares held by the shareholder for six
months or less will be treated as a long-term capital loss to the extent of any
distributions of capital gain dividends received by the shareholder with
respect to such shares.
Foreign Withholding Taxes
Income received by the Fund from sources within countries other than the
United States ("foreign countries") may be subject to withholding and other
taxes imposed by such countries. If more than 50% of the value of the Fund's
total assets at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible and intends to elect to "pass-through"
to shareholders the amount of foreign income and similar taxes it has paid.
Pursuant to this election, each of the Fund's shareholders will be required to
include in gross income (in addition to the full amount of the taxable
dividends actually received) its pro rata share of the foreign taxes paid by
the Fund. Each such shareholder will also be entitled either to deduct (as an
itemized deduction) its pro rata share of foreign taxes in computing its
taxable income or to claim a foreign tax credit against its U.S. Federal income
tax liability, subject to limitations. No deduction for foreign taxes may be
claimed by a shareholder who does not itemize deductions, but such a
shareholder may be eligible to claim the foreign tax credit (see below). The
deduction for foreign taxes is not allowable in computing alternative minimum
taxable income. Each shareholder will be notified with 60 days after the close
of the Fund's taxable year whether the foreign taxes paid by the Fund will
"pass-through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the shareholder's U.S. tax attributable to his or her foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of the Fund's income flows through to its shareholders. Any gains from
the sale of securities by the Fund will be treated as derived from U.S. sources
and certain currency fluctuation gains, including fluctuation gains from
foreign currency-denominated debt securities, receivables and payables, will be
treated as ordinary income derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source passive income (as
defined for purposes of the foreign tax credit), including the foreign source
passive income passed through by the Fund. Because of the limitation,
shareholders taxable in the United States may be unable to claim a credit for
the full amount of their proportionate share of the foreign taxes paid by the
Fund. The foreign tax credit also cannot be used to offset more than 90% of
the alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If the Fund is not
eligible to elect to "pass through" to its shareholders its foreign taxes, the
foreign taxes it pays generally will reduce investment company taxable income.
Backup Withholding
The Fund may be required to withhold U.S. Federal income tax at the rate of
31% of all taxable distributions payable to shareholders who fail to provide
the Fund with their correct taxpayer identification number or to make required
certifications, or where the Fund or the shareholder has been notified by the
Internal Revenue Service that the shareholder is subject to backup withholding.
Corporate shareholders and certain other shareholders specified in the Code
generally are exempt from such backup withholding. Backup withholding is not
an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. federal income tax liability.
Foreign Shareholders
The tax consequences to a foreign shareholder of an investment in the Fund may
be different from those described herein. Foreign shareholders are advised to
consult their own tax advisers with respect to the particular tax consequences
to them of an investment in the Fund.
Other Taxation
Pursuant to Treasury regulations, certain expenses of non-publicly offered
RICs, including advisory fees, are no longer deductible by those investment
companies. Rather, an individual shareholder's pro rata portion of such
expenses will be treated as income to it and deductible by it subject to the 2%
"floor" on miscellaneous itemized deductions and the other limitations set
forth in the Code on itemized deductions. The Fund will be a non-publicly
offered RIC generally until it either has 500 shareholders at all times during
a taxable year or continuously offers its shares pursuant to a public offering
with the meaning of Section 4 of the 1933 Act. Accordingly, if the Fund is a
non-publicly offered RIC, to the extent such expenses are not fully deductible
by a shareholder, it is possible that the shareholder's taxable income from the
Fund will exceed the amounts actually distributed to the shareholder. These
rules have no application to corporate Shareholders or to any foreign
individual investor unless the dividend income such an investor receives from
the Fund is "effectively connected" with a U.S. trade or business.
Distributions may be subject to additional state, local and foreign taxes
depending on each shareholder's particular situation. Shareholders are advised
to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
Investment in Foreign Investment Companies
The Fund currently invests in Chile and may in the future invest in one or
more other countries through vehicles organized under local laws. For U.S.
Federal income tax purposes, the vehicle used may be treated as a controlled
foreign corporation ("CFC"). The income and net capital gains of a CFC will be
includable in the investment company taxable income of the Fund, which the Fund
must distribute to its shareholders. The Fund's investment in any CFC (or in
two or more CFC's in which the Fund owns 20% or more of the voting stock) may
be treated as the security of one issuer for purposes of the 5% and 25% limits
of the diversification requirement.
The Fund may also invest in securities of investment companies which it does
not control which are organized under the laws of a country in which it may
invest. For U.S. federal income tax purposes, these investment companies will
be treated as passive foreign investment companies ("PFIC"). Gain on sale of
PFIC shares, and certain excess distributions received from a PFIC, will be
treated as ordinary income allocable ratably over the Fund's holding period for
its PFIC shares. To the extent attributable to prior taxable years of the
Fund, the gains or income will be taxable to the Fund, rather than its
shareholders, and tax payable by the Fund will be increased by an interest
charge. The Fund may be able to elect with respect to a PFIC to be taxed
currently on the PFIC's income and gains. If its election were made it would
avoid taxation of the income to the Fund and imposition of any interest charge,
and enable the character of the PFIC's income (as net capital gain or ordinary
income) to pass through to the Fund.
Other elections also may become available to the Fund, including one under
which the Fund would treat appreciation in value of PFIC shares as gain
realized at the end of a taxable year, such gain, if distributed by the Fund,
would not be taxable to the Fund and no interest charge would be imposed. The
specific consequences of one election normally will differ from the
consequences arising under another election. As a result, the Fund will
consider the ramifications of the election(s) available to it and will make
these elections only as deemed appropriate.
CUSTODIAN, DIVIDEND PAYING AGENT, TRANSFER AGENT AND REGISTRAR
The Chase Manhattan Bank, N.A., One Chase Manhattan Plaza, New York, NY 10081,
acts as Custodian for the Fund pursuant to a custodian agreement. The
Custodian employs sub-custodians located in countries where the Fund's
portfolio securities are traded.
American Funds Service Company, 135 South State College Blvd., Brea, CA 92621,
acts as the Fund's dividend paying agent, transfer agent and registrar for the
Shares. The Fund's Luxembourg transfer agent is Banque Internationale a'
Luxembourg, S.A.
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL
The accounting firm of Price Waterhouse LLP, 400 South Hope Street, Los
Angeles, CA 90071, acts as independent accountants for the Fund. The financial
statements for the year ended June 30, 1995 included in this Prospectus have
been so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The law firm of Jorden Burt & Berenson, 1025 Thomas Jefferson Street, N.W.,
Washington, D.C. 20007, acts as legal counsel to the Fund.
At the date of this Prospectus, the Fund was not subject to any pending
litigation and was not aware of any threatened litigation.
SUPPLEMENTAL INFORMATION
International Finance Corporation ("IFC"), a Shareholder of the Fund, is an
international organization affiliated through largely common ownership with the
International Bank for Reconstruction and Development ("The World Bank") but is
a separate entity with its own operational and legal staff. IFC does not have
access to all information in the possession of The World Bank including
information furnished in confidence by representatives of countries which are
members of The World Bank. IFC's obligations are not guaranteed by The World
Bank or by any of IFC's member countries. IFC's capital is owned exclusively
by its member governments. Shareholders should be aware that, in the course of
their regular business activities, both IFC and The World Bank may possess or
come into possession of information directly relevant to investment decisions
made on behalf of the Fund. Shareholders should be aware that both IFC and The
World Bank are obligated not to disclose or otherwise reveal any such
information to third parties, including to the Manager, Board of Directors or
officers of the Fund.
AVAILABLE INFORMATION
A Registration Statement on Form N-2, including amendments thereto, relating
to the Shares offered hereby, has been filed by the Fund with the U.S.
Securities and Exchange Commission ( "SEC"), Washington, D.C. This Prospectus
does not contain all of the information set forth in the Registration
Statement, including any exhibits and schedules thereto. For further
information with respect to the Fund and the Shares offered hereby, reference
is made to the Registration Statement. Statements contained in this Prospectus
as to the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. A copy
of the Registration Statement may be inspected without charge at the SEC's
principal office in Washington, D.C., and copies of all or any part thereof may
be obtained from the SEC upon the payment of certain fees prescribed by the
SEC.
APPENDIX A TO PROSPECTUS
Audited Financial Statements as of June 30, 1995:
Statement of Assets and Liabilities as of June 30, 1995 (including investment
portfolio as of June 30, 1995).
Statement of Operations for the fiscal year ended June 30, 1995.
Statement of Changes in Net Assets for the fiscal years ended June 30, 1995 and
June 30, 1994.
Per-Share Data and Ratios for the fiscal years ended June 30, 1991 through June
30, 1995.
Notes to Financial Statements for the fiscal year ended June 30, 1995.
Report of Independent Accountants dated August 10, 1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of
EQUITY-TYPE SECURITIES Shares Market Percent
(common and preferred stocks or Value of Net
and convertible debentures) Principal (000) Assets
Amount
Argentina - 7.45%
Alpargatas SAIC (1) 13,413,632 $5,166 .09
Astra Compania Argentina de Petroleo SA 9,792,450 14,693 .26
Banco de Galicia y Buenos Aires SA, Class B
(American Depositary Receipts) 1,343,000 21,152
Banco de Galicia y Buenos Aires SA,
7.00% convertible bond August 1, 2002 $12,365,000 8,655 .54
Banco Frances del Rio de la Plata SA 1,427,200 8,566
Banco Frances del Rio de la Plata SA
(American Depositary Receipts) 1,297,600 23,357 .57
BISA-Bemberg Industrial SA (1) (2)
(acquired 10/31/94, cost: $3,130,000) 3,130,000 3,130 .06
Buenos Aires Embotelladora SA, Class B
(American Depositary Receipts) 1,286,000 32,311 .58
Central Costanera SA, Class B 1,088,933 3,431 .06
Central Puerto SA, Class B 506,795 1,876
Central Puerto SA, Class B (American Depositary Receipts)
(acquired 2/27/95, cost:$755,000) (2) 51,820 959 .05
Compania Naviera Perez Companc SACFIMFA, Class B 3,660,114 15,377 .28
Hidroneuquen SA (acquired 11/11/93, cost: $26,649,000) 26,649,468 26,649 .48
(1)(2)
IRSA Inversiones y Representaciones SA 100,000 237
IRSA Inversiones y Representaciones SA
(Global Depositary Receipts) (1) 384,575 8,941 .17
Nortel Inversora SA, Class A, preferred
(American Depositary Receipts)
(acquired 11/24/92, cost:$10,760,000) (2) 1,321,820 13,099
Nortel Inversora SA, Class B, preferred
(American Depositary Receipts)
(acquired 2/27/92, cost: $27,980,000) (2) 2,034,860 30,523 .78
Sociedad Comercial del Plata SA 4,777,000 11,851 .21
Telecom Argentina STET-France Telecom SA,
Class B 9,954,072 45,305
Telecom Argentina STET-France Telecom SA,
Class B (American Depositary Shares) (1) 1,333,600 60,679 1.90
Telefonica de Argentina SA, Class B 4,000,000 10,043
Telefonica de Argentina SA, Class B
(American Depositary Shares) 2,041,300 50,522 1.09
YPF SA, Class D
(American Depositary Receipts) 972,800 18,362 .33
--------- ---------
- -
414,884 7.45
--------- ---------
- -
Australia - 0.07%
Star Mining Corp. NL 19,740,000 4,064 .07
---------
-
Brazil - 13.11%
Aracruz Celulose SA,
(American Depositary Receipts) 449,200 5,278 .09
Banco Bradesco SA, preferred nominative 2,547,387,541 21,597
Banco Bradesco SA, preferred nominative, rights
expire July 13, 1995 (1) 46,000,759 50 .40
Brasmotor SA, preferred nominative 100,675,187 18,603 .33
CBV Industria Mecanica SA, preferred nominative 87,120,000 57 -
Centrais Eletricas Brasileiras SA, preferred nominative 378,723,200 100,856
Centrais Eletricas Brasileiras SA, ordinary nominative 304,527,864 79,442 3.24
CESP-Companhia Energetica de Sao Paulo,
preferred nominative 571,589,400 22,615
CESP-Companhia Energetica de Sao Paulo, preferred
nominative (American Depositary Receipts)
acquired 8/30/94, cost: $2,141,000) (1) (2) 124,992 1,391 .56
CESP-Companhia Energetica de Sao Paulo, ordinary
nominative 215,440,754 7,025
COFAP-Companhia Fabricadora de Pecas,
preferred nominative 575,117 4,926 .08
Companhia Cervejaria Brahma, preferred nominative 164,539,015 54,010
Companhia Cervejaria Brahma, ordinary nominative 224,483 81 .97
Companhia Cimento Portland Itau, preferred nominative 21,005,800 6,165 .11
Companhia Energetica de Minas Gerais-CEMIG,
preferred nominative 3,047,043,436 59,616
Companhia Energetica de Minas Gerais-CEMIG, preferred
nominative (American Depositary Receipts)
(acquired 9/22/94, cost: $7,886,000) (1) (2) 310,323 5,974 1.18
Companhia Siderurgica Belgo-Mineira,
preferred nominative 73,460,892 6,508
Companhia Siderurgica Belgo-Mineira,
ordinary nominative 2,086,180 207 .13
Companhia Siderurgica Belgo-Mineira Luxembourg,
ordinary nominative 2,813,639 356
Companhia Siderurgica Nacional ordinary nominative 353,842,000 8,073 .14
Companhia Suzano de Papel e Celulose
Class, B, preferred nominative 949,900 4,853 .08
Companhia Vale Do Rio Doce, preferred nominative 129,450,460 19,558 .35
GP Capital Partners, LP
(acquired 1/28/94, cost: $24,000,000) (1) (2) (3) 24,000 24,000 .43
Industrias Klabin de Papel e Celulose SA,
preferred nominative 8,453,761 11,946 .21
Iochpe-Maxion SA, preferred nominative 4,075,100 1,541 .03
Lojas Americanas SA, preferred nominative 97,709,809 2,177
Lojas Americanas SA, ordinary nominative 169,464,200 3,859 .12
Lojas Americanas SA, preferred nominative,
warrants, expire May 3, 1996 (1) 1,153,009 617
Mesbla SA, preferred nominative 79,324,845 4,742
Mesbla SA, Series 2, 13.25% convertible
bond November 1, 1996 R$25,190,000 1,491 .11
Metal Leve SA Industria e Comercio,
preferred nominative 115,884,489 3,275 .06
Petrobras Distribuidora SA-BR, preferred nominative 745,735,000 25,777 .46
Petroleo Brasileiro SA-PETROBRAS, preferred nominative 428,960,000 36,368 .65
Refrigeracao Parana SA, preferred nominative 170,197,509 331 .01
Telecomunicacoes Brasileiras SA, preferred nominative 4,042,120,168 133,126 2.39
Telecomunicacoes de Sao Paulo SA-Telesp,
preferred nominative 196,894,977 24,396
Telecomunicacoes de Sao Paulo SA-Telesp,
ordinary nominative 40,745,500 5,182 .53
Usinas Siderurgicas de Minas Gerais SA,
preferred nominative 15,503,058,000 17,525 .31
Vidrarcaria Santa Marina, ordinary nominative 1,824,372 7,535 .14
--------- ---------
- -
731,129 13.12
--------- ---------
- -
Canada - 0.16%
Abacan Resource Corp. 3,000,000 9,066 .16
--------- ---------
- -
Chile - 2.23%
Banmedica SA 4,500,000 2,049 .04
CAP SA 1,100,000 6,925 .13
Chilgener SA
(American Depositary Receipts) 1,810,457 57,256 1.03
Compania de Telecomunicaciones de Chile SA
(American Depositary Receipts) 63,700 5,184 .09
Compania Tecno Industrial SA 80,245,285 5,804 .10
Empresa Nacional de Electricidad SA
(American Depositary Receipts) 1,350,750 35,795 .64
Enersis SA 540,697 317 .01
Forestal Terranova 1,100,000 2,107 .04
Invercap SA 1,100,000 2,416 .04
Sociedad Quimica y Minera de Chile SA, Class A 1,321,300 6,265 .11
--------- ---------
- -
124,118 2.23
--------- ---------
- -
China - 1.81%
China North Industries Investment Ltd.
(acquired 9/30/94, cost: $5,727,000) (1) (2) 5,500,000 5,720 .10
China Yuchai International Ltd. (1) 1,015,500 10,282 .19
Guangdong Electric Power, Class B
(acquired 5/31/95, cost: $5,999,000) (1) (2) 10,855,000 5,471 .10
Harbin Power Equipment Co. Ltd.
(American Depositary Receipts)
(acquired 11/30/94, cost: $3,336,000) (1) (2) 99,000 3,167
Harbin Power Equipment Co. Ltd., Class H (1) 44,509,000 14,237 .31
Huaneng Power International, Class N
(American Depositary Receipts) (1) 1,099,100 20,196 .36
Maanshan Iron & Steel Co. Ltd.
(acquired 10/14/93, cost: $9,730,000) (1) (2) 32,935,500 6,896 .12
NW China Investment Ltd.
(acquired 9/22/93, cost: $6,240,000) (1) (2) 600,000 6,360 .12
Shanghai Diesel Engine Co. Ltd., Class B 5,071,000 3,144 .06
Shanghai Petrochemical Co. Ltd., Class H 71,606,600 22,443
Shanghai Petrochemical Co. Ltd., Class H
(American Depositary Receipts) 7,000 220 .40
Yizheng Chemical Fibre Co. Ltd., Class H (1) 1,408,500 492 .01
Zhenhai Refining and Chemical Co. Ltd., Class H 9,040,000 2,161 .04
--------- ---------
- -
100,789 1.81
--------- ---------
- -
Colombia - 0.45%
Banco de Bogota 1,317,898 7,790 .14
Banco de Colombia SA (Global Depositary Receipts)
(acquired 4/4/94, cost: $11,176,000) (1) (2) 880,000 6,600
Banco de Colombia SA, 5.20% convertible bond .31
February 1, 1999 (acquired 1/27/94, $14,250,000 10,688
cost: $15,571,000) (1) (2)
--------- ---------
- -
25,078 .45
--------- ---------
- -
Czech Republic - 0.09%
SPT Telecom 51,000 5,181 .09
--------- ---------
- -
Ecuador - 0.11%
La Cemento Nacional CA (Global Depositary Receipts)
(acquired 6/21/94, cost: $4,110,000) (1)(2) 25,856 5,947 .11
--------- ---------
- -
Ghana - 0.35%
Ashanti Goldfields Co. Ltd. (Global Depositary Receipts) 860,000 19,565 .35
--------- ---------
- -
Greece - 1.02%
Hellenic Bottling Co. SA 844,045 25,082 .45
Intracom SA-Hellenic Telecommunications and
Electronics Industry, preferred 20,000 469
Intracom SA-Hellenic Telecommunications and
Electronics Industry, ordinary 476,620 13,146 .24
Katselis Sons SA, ordinary 115,000 888 .02
Michaniki SA, preferred 252,540 3,219
Michaniki SA, ordinary 533,520 8,354 .21
Titan Cement Co. SA, ordinary 146,522 5,566 .10
--------- ---------
- -
56,724 1.02
--------- ---------
- -
Hong Kong - 1.03%
Consolidated Electric Power Asia Ltd. 18,460,000 42,826
Consolidated Electric Power Asia Ltd.
(American Depositary Shares)
(acquired 11/29/93, cost: $2,268,000) (1) (2) 140,000 3,248 .83
Hopewell Holdings Ltd. 2,000,000 1,693 .03
Hutchison Delta Finance Ltd.,
7.00% convertible bond October 24, 2001 (1) $2,000,000 2,159 .04
Siu-Fung Ceramics Holdings Ltd. 22,834,000 3,276 .06
Tian An China Investments Co. Ltd. 26,387,000 4,093
Tian An China Investments Co. Ltd., warrants
expire January 25, 1996 (1) 6,680,000 17 .07
--------- ---------
- -
57,312 1.03
--------- ---------
- -
Hungary - 0.00%
Graboplast Textiles Muborgyarto RT 10,000 114 -
--------- ---------
- -
India - 5.68%
East India Hotels Ltd. 639,777 8,661
East India Hotels (Global Depositary Receipts) (1) 100,000 1,563 .18
EID Parry Ltd. (Global Depositary Receipts) (1) 624,000 2,184 .04
Essar Gujarat Ltd. 3,667,000 6,891
Essar Gujarat Ltd., 5.50% convertible
Eurobonds August 5, 1998 $7,195,000 7,573 .26
Flex Industries Ltd. 393,800 2,233
Flex Industries Ltd., (1 unit = 2 shares + 1 warrant) 157,520 893 .06
Grasim Industries Ltd. 260,300 5,008
Grasim Industries Ltd.
(Global Depositary Receipts) 730,000 17,432 .40
Hindalco Industries Ltd. (Global Depositary Receipts) 230,000 6,555 .12
India Fund, Class B 3,306,718 6,110 .11
India Magnum Fund NV, Class B, non-voting shares (1) 20,000 920 .02
Indian Aluminum Co. Ltd.
(Global Depositary Receipts) 527,000 5,270 .09
Indian Rayon and Industries Ltd. 305,300 4,454
Indian Rayon and Industries Ltd.
(Global Depositary Receipts) (1) 96,000 1,368 .10
Indo Gulf Fertilisers and Chemicals Corp. Ltd. 2,155,200 4,085
Indo Gulf Fertilisers and Chemicals Corp. Ltd.
(Global Depositary Receipts) (1) 1,770,900 3,630 .14
I.T.C. Ltd. 1,214,600 9,362 .17
Madras Cement Ltd. 4,000 1,159 .02
Mahanagar Telephone Nigam Ltd. 10,295,500 54,109 .97
Mahindra & Mahindra Ltd. 860,650 8,909
Mahindra & Mahindra
(Global Depositary Receipts) 545,000 6,268 .27
Mastergain Scheme 33,345,500 10,621 .19
Max India Ltd. 371,150 4,315 .08
Motor Industries Co. Ltd. 97,660 18,384 .33
Nicholas Piramal India Ltd. 325,000 2,847 .05
Nippon Denro Ispat Ltd., 3.00% convertible bond April 1,
2001
(acquired 3/1/94, cost: $7,758,000) (1) (2) $8,750,000 5,250 .09
Ranbaxy Laboratories Ltd. 554,350 11,477
Ranbaxy Laboratories Ltd.
(Global Depositary Receipts) (1) 777,800 19,445 .55
Raymond Woollen Mills Ltd.
(Global Depositary Receipts) (1) 673,200 10,186 .18
SCICI Ltd. 5,294,600 11,552
SCICI Ltd., 3.50% convertible Eurobonds
April 4, 2004 $3,620,000 3,403 .27
Sundaram Finance Ltd. 76,500 924 .02
Tata Engineering and Locomotive Co. Ltd. 510,000 9,162
Tata Engineering and Locomotive Co. Ltd.
(Global Depositary Receipts)
(acquired 12/12/94, cost: $18,509,000) (1) (2) 1,246,500 24,307 .68
Tata Engineering and Locomotive Co. Ltd.,
(Global Depositary Receipts), warrants, expire March 883,000 4,194
8, 1996 (1)
United Phospherous Ltd. 366,500 7,775
United Phospherous Ltd.
(Global Depositary Receipts) (1) 55,000 1,182 .16
Videocon International Ltd. 56,100 179
Videocon International Ltd.
(Global Depositary Receipts) (1) 62,200 221 .01
Zee Telefilms Ltd. 934,200 6,636 .12
--------- ---------
- -
316,697 5.68
--------- ---------
- -
Indonesia - 4.16%
PT Astra International 11,582,400 20,553 .37
PT Bakrie & Brothers 3,727,600 11,387 .20
PT Bank Internasional Indonesia 10,141,500 31,322 .56
PT Gudang Garam 1,370,000 10,524 .19
PT Indah Kiat Pulp & Paper Corp. 33,918,550 50,284 .90
PT Indofood Sukses Makmur 10,904,450 47,027 .85
PT International Nickel Indonesia 5,069,500 10,248 .18
PT Inti Indorayan Utama, 7.00% convertible bond
May 2, 2006 (acquired 4/22/91, cost: $900,000) (2) $900,000 851
PT Inti Indorayan Utama, 7.00%
convertible Eurobonds May 2, 2006 (5) $400,000 378 .02
PT Japfa Comfeed Indonesia 700,000 487 .01
Jaya Real Property 1,300,000 3,913 .07
PT Kabelmetal Indonesia 1,200,000 2,022 .04
PT Kalbe Farma 362,000 1,659 .03
PT Mayora Indah 1,550,000 7,102 .13
PT Modern Photo Film Co. 557,000 3,028 .05
PT Pabrik Kertas Tjiwi Kimia 672,000 1,351 .03
Perusahaan Perseroan (Persero) PT Indonesian
Satellite Corp. (American Depositary Receipts) 600,500 22,969 .41
PT Praxair Indonesia (1) 142,700 27 -
PT Supreme Cable Manufacturing Corp. 811,000 2,559 .05
PT Tigaraksa Satria 1,014,400 3,463
PT Tigaraksa Satria, 12.00%
convertible bond August 14, 1997 IR 192,900 357 .07
--------- ---------
- -
231,511 4.16
--------- ---------
- -
Luxembourg - 1.02%
New Europe East Investment Fund, Class B
(acquired 6/4/93, cost: $54,500,000) (1) (2) (3) (4) 436 56,657 1.02
--------- ---------
- -
Malaysia - 4.27%
Genting Bhd. 2,347,500 23,215 .42
Genting International PLC 8,301,000 14,194 .25
IJM Corp. Bhd. 3,714,000 14,783
IJM Corp. Bhd., 7.00% convertible loan stock 1997 RM 323,857 897 .28
Leader Universal Holding Bhd. 8,920,000 31,844 .57
Malaysian International Shipping Corp. Bhd. 2,210,000 6,484 .12
Nestle (Malaysia) Sdn. Bhd. 4,765,000 36,564 .66
OYL Industries Bhd. 1,165,437 8,321 .15
Renong Bhd. 4,914,000 9,154
Renong Bhd., 2.50% convertible bond January 15, 2005
(acquired 10/20/94, cost:$2,553,000) (2) $2,550,000 2,856 .27
Renong Bhd., 2.50% convertible Eurobonds
January 15, 2005/1999 $2,855,000 3,198
Resorts World Bhd. 1,267,000 7,435 .13
Sime Darby Bhd. 16,217,000 45,251 .81
Sime UEP Properties Bhd. 3,344,000 6,930 .12
Tan Chong Motor Holdings Bhd. 680,000 776 .01
Technology Resources Industries Bhd. (1) 2,614,000 7,508 .14
UMW Holdings Bhd. 6,257,359 18,102
UMW Holdings Bhd., warrants, expire January 26, 2000 (1) 736,159 643 .34
--------- ---------
- -
238,155 4.27
--------- ---------
- -
Mexico - 7.43%
Apasco, SA de CV, Class A 4,717,226 18,748 .34
CEMEX, SA, Class A 3,090,762 10,699
CEMEX, SA, Class B 6,569,625 23,741 .85
CEMEX, SA, ordinary participation certificates 2,993,975 10,172
CEMEX, SA, Class B, 4.25% convertible bond
November 1, 1997 (acquired 9/28/94, cost $3,876,000) (2) $4,000,000 3,020
Cifra, SA de CV, Class A 8,694,000 11,982
Cifra, SA de CV, Class B 10,761,580 14,832 .75
Cifra, SA de CV, Class C 11,580,192 15,292
Embotelladores del Valle de Anahuac, SA de CV, Class B 546,000 516 .01
Gruma, SA de CV, Class B 864,960 2,467 .04
Grupo Carso, SA de CV, Class A1 4,448,300 24,380 .44
Grupo Financiero Banamex Accival, SA de CV, Class B 23,313,600 35,867
Grupo Financiero Banamex Accival, SA de CV. Class L 3,144,794 4,788
Grupo Financiero Banamex Accival, SA de CV,
7.00% convertible Eurobonds December 15, 1999 $8,300,000 5,976 .84
Grupo Financiero Banorte, SA de CV, Class C 4,070,400 5,284 .09
Grupo Industrial Maseca, SA de CV, Class B
(American Depositary Receipts) (1) 5,700 57 -
Grupo Televisa, SA, ordinary participation certificates 375,000 3,846
Grupo Televisa, SA, ordinary participation certificates
(American Depositary Receipts) 1,670,200 34,030 .68
Kimberly-Clark de Mexico, SA de CV, Class A 1,651,100 18,998 .34
Panamerican Beverages, Inc., Class A 1,389,200 41,676 .75
Sigma Alimentos, SA de CV. Class B 400,000 2,724 .05
Telefonos de Mexico, SA de CV, Class A 7,487,500 11,063
Telefonos de Mexico, SA de CV, Class L 11,231,250 16,595
Telefonos de Mexico, SA de CV, Class L
(American Depositary Receipts) 2,504,475 74,195 1.83
Tolmex, SA de CV, Class B2 2,285,200 8,936
Tolmex, SA de CV, Variable Capital, Class B
(American Depositary Receipts) 174 7 .16
Tubos de Acero de Mexico, SA (1) 1,012,200 4,948
Tubos de Acero de Mexico, SA
(American Depositary Receipts) (1) 1,883,200 9,298 .26
--------- ---------
- -
414,137 7.43
--------- ---------
- -
Morocco - 0.07%
Cimentirie de L'Oriental, Class A (1) 92,503 3,673 .07
--------- ---------
- -
Pakistan - 1.07%
Chakwal Cement Co. Ltd.
(Global Depositary Receipts) (1) 891,111 6,353 .12
Hub Power Co. Ltd. (Global Depositary Receipts) (1) 2,066,328 29,714 .53
Pakistan Telecommunication Corp. (Global Depositary 236,100 23,492 .42
Receipts)
(1)
--------- ---------
- -
59,559 1.07
--------- ---------
- -
Peru - 0.83%
Banco de Credito del Peru 19,522,194 34,265 .62
Ontario-Quinta A.V.V. (acquired 8/15/94, cost: $12,000,000) 11,694,441 11,694 .21
(1) (2)
--------- ---------
- -
45,959 .83
--------- ---------
- -
Philippines - 7.50%
Ayala Corp., Class B 24,135,727 26,986
Ayala Corp., Class B (Global Depositary Shares) 459,800 4,598 .57
Ayala Land, Inc., Class B 19,635,962 22,725 .41
Bacnotan Consolidated Industries, Inc., 5.50% convertible
bond
June 21, 2004 (acquired 6/8/94, cost: $4,478,000) (2) $4,500,000 4,050 .07
Benpres Holdings Corp.
(Global Depositary Receipts) (1) 793,210 6,346 .11
International Container Terminal Services Inc. 5,787,730 4,030
International Container Terminal Services Inc., 6.00%
convertible bond, February 19, 2000
(acquired 2/18/93, cost: $4,000,000) (2) $4,000,000 4,400 .15
JG Summit Holdings, Inc., Class B 11,056,600 3,210
JG Summit Holdings, Inc., Class B
(Global Depositary Shares) 20,000 535
JG Summit Holdings, Inc.,
3.50% convertible bond December 23, 2003 (2) $9,870,000 6,934 .25
JG Summit Holdings, Inc., 3.50% convertible Eurobonds
December 23, 2003 $4,750,000 3,337
Keppel Philippines Holding Inc., Class B 1,995,300 978 .02
Kepphil Shipyard, Inc. (1) 462,000 48 -
Manila Electric Co., Class B 979,590 7,878 .14
Metropolitan Bank and Trust Co. 1,757,735 38,272 .69
Petron Corp. 6,071,250 3,990
Petron Corp. (Global Depositary Receipts) 377,075 11,124 .27
Philippine Commercial National Bank 892,080 6,614 .12
Philippine Long Distance Telephone Co., ordinary 86,250 6,175
Philippine Long Distance Telephone Co.
(American Depositary Receipts) 1,306,305 93,727
Philippine Long Distance Telephone Co., convertible
preferred,
Series III (Global Depositary Receipts) (1) 474,000 19,315 2.24
Philippine Long Distance Telephone Co., convertible
preferred Series III (Global Depositary Shares) 87,000 5,546
Philippine National Bank 1,233,072 14,392 .26
Pilipino Telephone Corp.(acquired 6/26/92, cost: 32,504,000 25,503 .46
$10,320,000)
(1)(2)
PR Holdings, Inc., subscription rights
(acquired 7/8/92, cost: $9,835,000) (1) (2) 2,236,600 9,704 .17
San Miguel Corp., Class B 17,386,772 72,303 1.30
Universal Robina 9,092,400 4,637
Universal Robina (acquired 3/2/94, cost: $13,032,000) (1) 20,400,000 10,404 .27
(2)
--------- ---------
- -
417,761 7.50
--------- ---------
- -
Poland - 0.05%
Zywiec (Zaklady Piwowarskie w Zywcu S.A.) 40,000 3,025 .05
--------- ---------
- -
Portugal - 0.35%
Banco Comercial Portugues, SA 206,719 2,737 .05
ITI Sociedade de Investimentos Turisticos na
Ilha da Madeira SA 64,000 617 .01
Portugal Telecom, SA (American Depositary Receipts) (1) 815,000 15,485 .28
TVI-Televisao Independente SA (1) 105,500 650 .01
--------- ---------
- -
19,489 .35
--------- ---------
- -
Russian Federation - 0.18%
Russian Telecommunications Development Corp.
(acquired 12/22/93, cost: $3,800,000) (1) (2) 380,000 3,800
Russian Telecommunications Development Corp.,
non-voting ordinary (acquired 12/22/93, cost: $6,200,000) 620,000 6,200 .18
(1)(2)
--------- ---------
- -
10,000 .18
--------- ---------
- -
South Africa - 0.79%
Nedcor Ltd., units (acquired 5/23/95, cost: $8,102,000) (1) 177,000 8,717 .16
(2)
Sasol Ltd. 3,688,680 35,365 .63
--------- ---------
- -
44,082 .79
--------- ---------
- -
South Korea - 7.05%
Cheil Foods & Chemicals Inc., non-voting preferred 70,500 2,050
Cheil Foods & Chemicals Inc., ordinary 3,000 188
Cheil Foods & Chemicals Inc., 3.00%
convertible Eurobonds December 31, 2006 $2,365,000 2,743 .09
Daehan Asia Trust
(International Depositary Receipts) (1) 2,820 3,313 .06
Daehan Korea Trust
(International Depositary Receipts) 500 450 .01
Daewoo Corp. 257,738 3,229 .06
Daewoo Securities Co., Ltd. non-voting, preferred 326,350 6,456
Daewoo Securities Co., Ltd. 240,674 6,793 .24
Haitai Stores Co., Ltd. 13,401 152 -
Hanil Bank 3,227,780 37,621 .68
Hansol Paper Co. Ltd., preferred 17,263 319
Hansol Paper Co. Ltd., ordinary 80,627 3,243 .06
Hyundai Motor Co., nonvoting preferred
(Global Depositary Receipts) (1) 544,800 11,033 .20
Korea Asia Fund Ltd.
(International Depositary Receipts) (1) 300 2,888 .05
Korea Electric Power Corp. 2,250,500 86,826
Korea Electric Power Corp.
(American Depositary Receipts) 225,000 5,091 1.65
Korea First Bank 2,349,570 22,157 .40
Korea Long Term Credit Bank 349,841 10,313 .19
Korea Pacific Trust
(International Depositary Receipts) 3,000 3,825 .07
Kyongnam Bank 733,607 6,870 .12
LG Chemicals, preferred 252,000 3,789 .07
LG Electronics, non-voting preferred 167,300 3,883
LG Electronics, non-voting preferred
(Global Depositary Receipts) 256,100 2,945 .12
LG Securities, preferred 291,842 3,345
LG Securities, ordinary 2,337 41 .06
Pacific Chemical Ind. 165,440 4,189 .08
Pohang Iron & Steel Co., Ltd. 585,540 58,083
Pohang Iron & Steel Co., Ltd.
(American Depositary Receipts) 18,000 531 1.05
Samsung Co., Ltd. 29,021 731 .01
Samsung Electronics Co., Ltd. 192,704 32,248
Samsung Electronics Co., Ltd., new 40,313 6,663
Samsung Electronics Co., Ltd., non- voting preferred, new 12,515 1,182
Samsung Electronics Co., Ltd, non-voting preferred 63,241 5,973
Samsung Electronics Co. Ltd., non- voting preferred
(Global Depositary Shares) (1) 166,922 8,680 1.11
Samsung Electronics Co. Ltd., ordinary
(Global Depositary Shares) (1) 89,420 6,439
Seoul Asia Index Trust
(International Depositary Receipts) 80 960 .02
Seoul Horizon Trust 531,000 9,160 .16
Shinhan Bank 155,650 3,427 .06
Ssangyong Investment & Securities Co., Ltd. 4,000 69 -
Ssangyong Investment & Securities Co., Ltd., nonvoting 61,090 677 .01
preferred
Ssangyong Oil Refining Co., Ltd. 180,000 5,175 .09
Taihan Electric Wire Co. 134,418 4,698 .08
Yukong Ltd. 262,661 10,982
Yukong Ltd., non- voting preferred,
(Global Depositary Receipts) 257,558 2,768 .25
--------- ---------
- -
392,198 7.05
--------- ---------
- -
Sri Lanka - 0.21%
Asian Hotel Corp. 6,107,500 1,912 .03
Development Finance Corp. of Ceylon 1,258,310 9,377 .17
National Development Bank 96,200 459 .01
--------- ---------
- -
11,748 .21
--------- ---------
- -
Taiwan - 0.84%
Chia Hsin Cement Corp.
(Global Depositary Receipts) 590,300 6,641 .12
China Steel Corp.
(American Depositary Receipts) (1) 868,000 17,794
China Steel Corp .43
(Global Depositary Shares) 300,000 6,150
Hocheng Group Corp Ltd., (Global Depositary Receipts) 90,469 1,063 .02
Nan Ya Plastics Corp., 1.75% convertible bond
July 19, 2001 (acquired 7/11/94, cost: $12,873,000) (2) $13,250,000 12,687
Nan Ya Plastics Corp., 1.75% convertible Eurobond
July 19, 2001 (1) $1,000,000 957 .24
R.O.C. Taiwan Fund (1) 26,000 286 .01
Tung Ho Steel Enterprise Corp., 4.00% convertible
Eurobonds July 26, 2001 $1,070,000 1,252 .02
--------- ---------
- -
46,830 .84
--------- ---------
- -
Thailand - 5.48%
Alphatec Electronics PLC (acquired 6/26/95, cost: 520,000 9,483 .17
$8,516,000)
(2)
Ayudhya Life Assurance Co., Ltd. 159,300 1,098 .02
Bangkok Bank Ltd. 8,347,340 92,015
Bangkok Bank Ltd., 3.25% convertible bond
March 3, 2004 (acquired 8/4/94, cost: $961,000) (2) $1,000,000 1,015 1.74
Bangkok Bank Ltd., 3.25% convertible
Eurobond March 3, 2004 $3,630,000 3,684
Bangkok Metropolitan Bank Public Co. Ltd. 3,694,600 4,417 .08
Bank of Ayudhya Ltd. 6,346,240 31,120 .56
Charoen Pokphand Feedmill Co. Ltd. 1,575,600 9,578 .17
Dusit Thani Corp. Ltd. 1,485,000 1,459 .03
Electricity Generating Authority of Thailand (1) 2,014,270 6,082
Electricity Generating Authority of Thailand,
local registered (1) 22,530 66 .11
Industrial Finance Corp. of Thailand 3,225,400 8,497 .15
MBK Properties & Development Co. Ltd. 4,000,000 5,755 .10
Nakhornthai Integrated Steels Co., Ltd. 11,213,400 21,927 .39
Post Publishing Co. Ltd. 1,010,000 5,731 .10
Serm Suk Co. Ltd. 210,166 2,129
Serm Suk Co. Ltd., local registered 64,960 658 .05
Siam City Bank Ltd. 13,116,010 18,073 .32
Siam Commercial Bank, Ltd. 1,340,200 12,818 .23
Thai Farmers Bank Public Co. Ltd. 5,306,600 50,754 .91
Thai Military Bank, Ltd. 3,243,684 13,146 .24
Wattachak Public Co. Ltd.,
3.50% convertible bond December 6, 2003 $6,400,000 5,856 .11
--------- ---------
- -
305,361 5.48
--------- ---------
- -
Turkey - 2.22%
Adana Cimento Sanayii, Class A 10,060,512 5,921
Adana Cimento Sanayii, Class C 4,004,640 480 .11
Akbank Turk AS 11,107,980 2,829 .05
Arcelik AS 30,472,886 9,312 .17
Eczacibasi Ilac Sanayi ve Ticaret AS 5,706,296 1,369 .02
Ege Biracilik ve Malt Sanayii AS 12,156,496 14,308 .26
KOC Holding AS, ordinary 19,673,673 19,371 .35
Medya Holdings AS, Class C (1) 74,984,000 2,334 .04
Migros Turk 1,440,000 1,613
Migros Turk, rights, expire, December 24, 1995 (1) 720,000 790 .04
Netas Northern Electric Telekomunikasyon AS 30,690,000 10,594 .19
Turkiye Garanti Bankasi AS 98,326,514 13,354
Turkiye Garanti Bankasi AS
(American Depositary Receipts) (1) 449,000 5,388 .34
Turkiye Sise ve Cam Fabrikalari AS 89,043,312 19,348 .35
Yapi ve Kredi Bankasi AS 260,869,300 16,828 .30
--------- ---------
- -
123,839 2.22
--------- ---------
- -
Ukraine - 0.23%
JP Kenny Exploration & Production Ltd.
(acquired 2/10/95, cost: $9,750,000) (1) (2) 4,250,000 12,863 .23
--------- ---------
- -
United States - 0.07%
Atlantic Tele Network (1) 270,700 2,200 .04
Freeport-McMoRan Copper & Gold Inc., Class A 90,000 1,856 .03
--------- --------
4,056 .07
--------- ---------
- -
Venezuela - 0.12%
Compania de Inmuebles Y Valores Caracas (1) 72,655,270 - -
Fabrica Nacional de Cementos SACA 14,531,054 1,410 .02
Mavesa SA (American Depositary Receipts)
(acquired 10/28/93, cost: $6,690,000) (2) 861,341 2,369 .04
Venezolana de Cementos, SACA 1,484,902 2,096 .04
Venezolana de Prerreducidos Caroni CA
(Global Depositary Shares) 179,000 1,074 .02
--------- ---------
- -
6,949 .12
--------- ---------
- -
Vietnam - 0.11%
Vietnam Frontier Fund
(acquired 7/21/94, cost: $3,000,000) (1) (2) (3) 291,300 3,000 .05
Vietnam Investment Fund (Singapore) Ltd., preferred, units
(acquired 8/4/94, cost: $3,206,000) (1) (2) (3) 30 3,206
Vietnam Investment Fund (Singapore) Ltd., ordinary, units
(acquired 8/4/94, cost: less than $1,000) (1) (2) (3) 6 - .06
--------- ---------
- -
6,206 .11
--------- ---------
- -
Multi National - 0.17%
Emerging Markets Gold Fund
(acquired 1/28/94, cost: $9,563,000) (1) (2) (3) 9,563 9,563 .17
--------- -------
Miscellaneous - 1.72%
Equity-type securities in initial period of acquisition 95,850 1.72
--------- ---------
- -
TOTAL EQUITY-TYPE SECURITIES - -
(cost: $3,580,889,000) 4,430,139 79.51
--------- ---------
- -
BONDS AND NOTES
Argentina - 0.91%
Republic of Argentina Bocon PIK
7.268% April 1, 2001 (5) $60,770 33,285 .60
Republic of Argentina Bocon PIK
5.861% April 1, 2001 (5) ARP 20,430 6,678 .12
Republic of Argentina Bocon
5.861% April 1, 2007 ARP 51,000 5,958 .10
Republic of Argentina Eurobond Series L
7.3125% March 31, 2005 (5) $8,450 5,197 .09
--------- ---------
- -
51,118 .91
--------- ---------
- -
Brazil - 0.55%
Federal Republic of Brazil Capitalization Bond PIK
8.00% April 15, 2014 10,404 5,111 .09
Federal Republic of Brazil Debt Conversion Bond Series LI
7.3125% April 15, 2012 (5) 45,750 23,790 .43
Republic of Minas Gerais Series A
7.875% February 10, 1999 1,500 1,185 .02
Republic of Minas Gerais Series B
8.250% February 10, 2000 500 390 .01
--------- ---------
- -
30,476 .55
--------- ---------
- -
India - 0.02%
Flex Industries W/W 13.50% December 31, 2004 INR 7,876 953 .02
--------- ---------
- -
Indonesia - 0.04%
Tjiwi Kimia International Finance Co.
13.25% bond August 1, 2001 2,000 2,120 .04
--------- ---------
- -
Mexico - 0.15%
Tubos de Acero de Mexico,
13.75% December 8, 1999 7,500 6,628 .12
United Mexican States MYRA (multi-year restructuring
agreement)/Agent-Citibank, NA/Loan Participation
Agreements
(Participation-Salomon Brothers, Inc.) (1) (5) (6) (7) 750 521 .01
United Mexican States MYRA (multi-year restructuring
agreement)/
Agent-International Mexican Bank Ltd./
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1) (5) (6) (7) 1,495 1,039 .02
--------- ---------
- -
8,188 .15
--------- ---------
- -
Panama - 0.41%
Republic of Panama 7.25% May 10, 2002 1,750 1,339 .02
Republic of Panama/Agent-Citibank, NA/
Loan Participation Agreements
(Participation-Citibank, NA) (1) (5) (6) (7) 71,580 21,759 .39
--------- ---------
- -
23,098 .41
--------- ---------
- -
Peru - 0.94%
Republic of Peru/Agent-Bankers Trust Company/
Loan Participation Agreements
(Participation-Citibank, NA) (1)(5)(6)(7) 10,764 3,019 .05
Republic of Peru/Agent-Chemical Bank/
Loan Participation Agreements
(Participation-Citibank, NA)(1)(5)(6)(7) 3,544 1,006 .02
Republic of Peru/Agent-Chemical Bank/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(5)(6)(7) 4,085 1,150 .02
Republic of Peru/Agent-Citibank, NA/
Loan Participation Agreements
(Participation-Salomon Brothers) (1)(5)(6)(7) 20,278 5,505 .10
Republic of Peru/Agent-Citibank, NA/
Loan Participation Agreements
(Participation-Citibank, NA) (1)(5)(6)(7) 20,970 5,997 .11
Republic of Peru/Agent-Citibank, NA/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(5)(6)(7) 41,364 12,437 .22
Republic of Peru/Agent-Morgan Guaranty Trust/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(5)(6)(7) 8,720 2,444 .04
Republic of Peru/Agent-Wells Fargo Bank
Loan Participation Agreements
(Participation-Citibank, NA) (1)(5)(6)(7) 20,657 5,851 .11
Republic of Peru/Agent-Wells Fargo Bank
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(5)(6)(7) 35,534 10,005 .18
Republic of Peru/Agent-J.P. Morgan/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(5)(6)(7) 17,719 5,031 .09
--------- ---------
- -
52,445 .94
Philippines - 0.07%
Subic Power Corp. 9.50% December 28, 2008 (1) 2,793 2,577 .05
Subic Power Corp. 9.50% Eurobonds
December 28, 2008 (1) 1,397 1,288 .02
--------- ---------
- -
3,865 .07
Poland - 0.07%
Poland Eurobonds 7.125% October 27, 2024 (5) 5,250 4,043 .07
--------- ---------
- -
TOTAL BONDS AND NOTES (cost: $168,501,000) 176,306 3.16
SHORT-TERM SECURITIES
CORPORATE SHORT-TERM NOTES - 11.00%
ABN AMRO North America Finance Inc. 5.92%-5.94%
due 7/11-7/12/95 39,600 $39,529 .71
Bayer Corp 5.84%-5.98% due 7/25-8/7/95 100,000 99,485 1.79
Canadian Imperial Holdings, Inc. 5.92%-5.96% due 38,400 38,264 .69
7/20-7/24/95
Deutsche Bank Financial Inc. 5.88%-5.94% due 7/5-7/7/95 53,000 52,944 .95
Exxon Imperial U.S. Inc. 5.85%-5.97% due 7/6-8/7/95 63,111 62,913 1.13
National Australia Funding (Delaware) Inc. 5.92%-5.95% due 67,000 66,934 1.20
7/6/95
Panasonic Finance Inc. 5.93%-5.95% due 7/14-7/21/95 28,000 27,906 .50
RTZ America, Inc. 5.94%-6.07% due 7/6-7/26/95 27,800 27,733 .50
Siemens Corp. 5.94% due 7/18/95 25,000 24,926 .45
SmithKline Beecham 5.93%-5.95% due 7/6-7/17/95 65,000 64,863 1.16
Sony Capital Corp 5.95%-6.20% due 7/3-7/19/95 21,800 21,771 .39
Toyota Motor Credit Corp. 5.94%-5.95% due 7/12-7/17/95 49,000 48,886 .88
Unilever Capital Corp. 5.84%-5.96% due 7/10-8/29/95 36,600 36,487 .65
-------- ---------
-
612,641 11.00
--------- ---------
-
Certificates of Deposit - 3.81%
Abbey National Treasury Services PLC Eurocertificates
6.02% due 7/19/95 25,000 25,000 .45
Banque Nationale de Paris 5.89%-6.02% due 7/5-8/8/95 75,000 75,000 1.34
Societe Generale 5.99%-6.05% due 7/5-8/11/95 64,700 64,700 1.16
Swiss Bank Corp. 5.80%-6.01% due 7/21-8/7/95 48,000 48,000 .86
--------- ---------
-
212,700 3.81
--------- ---------
-
Non-U.S. Government Short -Term Obligations - 0.94%
Polish Government Treasury Bills due 4/18-5/22/96 PLZ 14,200 4,931 .09
Turkish Government Treasury Bills due 12/6/95-1/5/96 TRL 2,914,545 47,301 .85
--------- ---------
-
52,232 .94
--------- ---------
Non-U.S. Currency - 1.62%
Chilean Peso CHP 14,768,663 39,562 .71
New Taiwanese Dollar N$ 1,313,403 50,856 .91
--------- ---------
90,418 1.62
--------- ---------
TOTAL SHORT-TERM SECURITIES (cost: $965,662,000) 967,991 17.37
--------- ---------
TOTAL INVESTMENT SECURITIES (cost: $4,715,052,000) 5,574,436 100.04
Excess of liabilities over cash and receivables 2,626 .04
--------- ---------
NET ASSETS $5,571,810 100.00
========== ======
</TABLE>
(1) Non-income producing securities.
(2) Purchased in a private plament transaction; resale to the public may
require registration, and no right to demand registration under U.S. law
exists. As of June 30, 1995, the total
market value and cost of such securities was $391,421,000 and $382,180,000,
respectively,
and the market value represented 7.03% of net assets.
(3) Includes an unfunded capital commitment representing a binding commitment
made by the fund which may be paid in the future.
(4) A Luxembourg-based, closed-end investment fund seeking long-term capital
appreciation through investments in Eastern and Central Europe and the former
Soviet Union, and for which
Capital International, Inc. serves as the investment adviser.
(5) Coupon rate may change periodically.
(6) Security is currently in default.
(7) Participation interests were acquired through the financial institution
indicated parenthetically.
Non-U.S. Currency Symbols:
ARP - Argentine Peso
CHP - Chilean Peso
INR - Indian Rupee
IR - Indonesian Rupiah
NT$ - New Taiwanese Dollar
PLZ - Polish Zloty
R$ - Brazilian Real
TRL - Turkish Lira
See Notes to Financial Statements
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Statement of Assets and Liabilities
at June 30, 1995 (dollars in thousands)
- - -----------------------------------------------------------------------------------------------
Assets:
Investment securities at market
(cost: $4,715,052) ............... $5,574,436
Cash ............................... 2,148
Non-U.S. taxes receivable 478
Receivables for--
Sales of investments ............. $39,439
Dividends and accrued interest ... 50,750 90,189
---------------- ----------------
5,667,251
Liabilities:
Payables for--
Purchases of investments ......... 53,277
Unfunded capital commitments 37,508
Management services .............. 3,111
Accrued expenses ................. 1,545 95,441
---------------- ----------------
Net Assets at June 30, 1995 --
Equivalent to $52.36 per share on
106,420,215 shares of $0.01 par value
capital stock outstanding (authorized
capital stock -- 200,000,000 shares)......... $5,571,810
============
Statement of Operations (dollars in thousands)
for the Year Ended June 30, 1995
Investment Income:
Income:
Dividends ........................ $81,640
Interest ......................... 50,169 $131,809
----------------
Expenses:
Management services fee .......... 34,286
Custodian fee .................... 9,696
Registration statement and prospectus 512
Taxes other than federal
income tax ..................... 123
Auditing and legal fees .......... 120
Reports to shareholders .......... 10
Other expenses ................... 938 45,685
---------------- ----------------
Income before non-U.S. taxes........ 86,124
Non-U.S. taxes...................... (1,109)
----------------
Net investment income .............. 85,015
----------------
Realized Gain and Unrealized
Depreciation on Investments:
Realized gain before non-U.S. taxes..... 333,308
Non-U.S. taxes...................... (27,954)
----------------
Net realized gain .................. 305,354
Net change in unrealized appreciation:
Beginning of year ................ 1,369,217
End of year ...................... 859,160
----------------
Net unrealized depreciation ...... (510,057)
Non-U.S. taxes.. 23,100 (486,957)
---------------- ----------------
Net realized gain and unrealized
depreciation on investments ............. (181,603)
----------------
Net Decrease in Net Assets Resulting
from Operations .................... ($96,588)
==============
Statement of Changes in Net Assets
(dollars in thousands)
Year Ended June 30, 1995
1995 1994
---------------- ----------------
Operations:
Net investment income .............. $85,015 $33,606
Net realized gain on investments ... 305,354 272,998
Net unrealized appreciation (depreciation)
on investments ................... (486,957) 611,134
---------------- ----------------
Net increase (decrease)in net assets
resulting from operations ...... (96,588) 917,738
---------------- ----------------
Dividends and Distributions Paid
to Shareholders:
Dividends from net
investment income ................ (61,624) (32,744)
Distributions from net realized
gain on investments .............. (456,090) (71,721)
---------------- ----------------
Total dividends and
distributions .................. (517,714) (104,465)
---------------- ----------------
Capital Share Transactions:
Proceeds from shares sold:
26,840,022 and 11,985,661 shares, respectively 1,502,619 681,214
Proceeds from shares issued in
reinvestment of net investment
income dividends and
distributions of net realized
gain on investments:
8,593,036 and 1,727,157 shares,
respectively ...................... 513,177 101,629
---------------- ----------------
Net increase in net assets
resulting from capital share
transactions ................... 2,015,796 782,843
---------------- ----------------
Total Increase in Net Assets 1,401,494 1,596,116
Net Assets:
Beginning of year .................. 4,170,316 2,574,200
---------------- ----------------
End of year (including excess distributions
over net investment income: $2,410 and $2,495,
respectively) $5,571,810 $4,170,316
========== ==========
</TABLE>
**************************
Notes to Financial Statements
1. Emerging Markets Growth Fund, Inc. (the "fund") is registered under the
Investment Company Act of 1940 as a closed-end, diversified management
investment company. The following paragraphs summarize the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
Equity-type securities are stated at market value based upon closing sales
prices reported on recognized securities exchanges on the last business day of
the year or, in the absence of any sales, upon last reported bid prices on that
date. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange designated by or under the authority of
the Board of Directors as the primary market. Equity-type securities traded
primarily in the over-the-counter market are valued at the last available sale
prior to the time of valuation, or, lacking any sales, at the last reported bid
price. Bonds and notes are valued at prices obtained from a bond-pricing
service provided by a major dealer in bonds, when such prices are available;
however, in circumstances where the investment adviser deems it appropriate to
do so, such securities will be valued at the mean of their representative
quoted bid and asked prices or, if such prices are not available, at the mean
of such prices for securities of comparable maturity, quality, and type.
Short-term securities with original or remaining maturities in excess of 60
days are valued at the mean of their quoted bid and asked prices. Short-term
securities with 60 days or less to maturity are amortized to maturity based on
their cost to the fund if acquired within 60 days of maturity or, if already
held by the fund on the 60th day, based on the value determined on the 61st
day. Securities for which market quotations are not readily available
(including restricted securities which are subject to limitations as to their
sale), or which are not deemed to represent market value, are valued at fair
value as determined in good faith by the Valuation Committee of the Board of
Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Dividend and interest income is reported on the accrual basis.
Discounts on securities purchased are amortized over the life of the respective
securities. The fund does not amortize premiums on securities purchased.
Dividends and distributions paid to shareholders are recorded on the
ex-dividend date.
Investment securities, cash balances, and other assets and liabilities
denominated in non-U.S. currencies are recorded in the financial statements
after translation into U.S. dollars utilizing rates of exchange on the last
business day of the year. Purchases and sales of investment securities,
dividend and interest income, and certain expenses are calculated at the rates
of exchange prevailing on the respective dates of such transactions. Gains and
losses that arise from changes in exchange rates are not segregated from gains
and losses that arise from changes in market prices of investments. The
effects on net investment income arising from changes in exchange rates are
also not segregated.
Unfunded capital commitments represent agreements which obligate the fund to
meet capital calls in the future. Payment would be made when a capital call
is requested. Capital calls can only be made if and when certain
requirements have been fulfilled; thus, the timing of such capital calls
cannot be readily determined. Unfunded capital commitments are recorded at
the amount that would be paid when and if capital calls are made.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian
bank. The custodian fee of $9,696,000 includes $446,000 that was paid by
these credits rather than in cash.
2. Investing in securities of issuers in a variety of developing countries
involves certain special investment risks, which may include investment and
repatriation restrictions, currency volatility, government involvement in the
private sector, limited investor information, shallow securities markets,
certain local tax law considerations, and limited regulation of the securities
markets.
Dividend income, and interest income, net realized gain and net unrealized
gain, of the fund derived in Chile are subject to certain non-U.S. taxes at
rates of 20% and 35%, respectively. Net realized gain and net unrealized gain
of the fund derived in India are subject to certain non-U.S. taxes at a rate of
10%. The fund provides for such non-U.S. taxes on investment income, net
realized gain, and net unrealized gain.
3. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of June 30, 1995, net unrealized appreciation on investments for federal
income tax purposes aggregated $846,804,000, net of accumulated deferred taxes
totaling $4,167,000 on net unrealized appreciation of Chilean and Indian
securities, of which $1,266,959,000 related to appreciated securities and
$420,155,000 related to depreciated securities. During the year ended June 30,
1995, the fund realized, on a tax basis, a net capital gain of $301,338,000 on
securities transactions. The cost of portfolio securities for federal income
tax purposes was $4,723,465,000 at June 30, 1995.
4. The fee of $34,286,000 for management services was paid pursuant to an
agreement with Capital International, Inc. (CII), with which certain officers
and Directors of the fund are affiliated. The Investment Advisory and Service
Agreement provides for monthly fees, accrued weekly, based on an annual rate of
0.90% on the first $400 million of the fund's net assets; 0.80% of such assets
in excess of $400 million but not exceeding $1 billion; 0.70% of such assets in
excess of $1 billion but not exceeding $2 billion; 0.65% of such assets in
excess of $2 billion but not exceeding $4 billion; 0.625% of such assets in
excess of $4 billion but not exceeding $6 billion; 0.60% of such assets in
excess of $6 billion but not exceeding $8 billion; 0.58% of such assets in
excess of $8 billion but not exceeding $11 billion; and 0.56% of such assets in
excess of $11 billion. CII is owned by Capital Group International, Inc.,
which is a wholly owned subsidiary of The Capital Group Companies, Inc.
5. As of June 30, 1995, accumulated undistributed net realized gain on
investments was $105,603,000 and additional paid-in capital was
$4,612,560,000. The fund made purchases and sales of investment securities,
excluding short-term securities, of $1,966,143,000 and $1,067,577,000,
respectively, during the year ended June 30, 1995.
Dividend and interest income is recorded net of non-U.S. taxes paid. For the
year ended June 30, 1995, such non-U.S. taxes were $10,377,000. Net realized
currency losses on dividends, interest, withholding taxes reclaimable, and
sales of non-U.S. bonds were $168,000 for the year ended June 30, 1995.
In accordance with SOP 93-2, the fund reclassified $23,306,000 from
undistributed net investment income to additional paid-in capital and
$24,141,000 from additional paid-in capital to undistributed net realized gains
for the year ended June 30, 1995.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30
1995 1994 1993 1992 1991
------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $58.75 $44.95 $38.64 $32.73 $32.81
-------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME ...... .87 .53 .62 .55 .83
NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS
BEFORE NON-U.S. TAXES ..... (.79) 15.29 7.33 8.87 3.89
NON-U.S. TAXES ................ (.03) (.39) .06 (.28 ) (.38 )
-------- -------- ------- ------- -------
TOTAL INCOME FROM INVESTMENT
OPERATIONS.............. .05 15.43 8.01 9.14 4.34
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
DIVIDENDS FROM NET INVESTMENT
INCOME .................... (.63) (.49) (.56) (.56) (.92)
DISTRIBUTIONS FROM NET REALIZED
GAIN................. (5.81) (1.14) (1.14) (2.67) (3.50)
-------- -------- ------- ------- -------
TOTAL DISTRIBUTIONS ....... (6.44) (1.63) (1.70) (3.23) (4.42)
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF YEAR .. $52.36 $58.75 $44.95 $38.64 $32.73
======= ======= ======= ======== =======
TOTAL RETURN .................... (1.22)% 34.33% 21.55% 18.08%
29.73%
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF YEAR (IN MILLIONS) $5,572 $4,170 $2,574 $1,561 $703
RATIO OF EXPENSES TO AVERAGE NET .91% 1.00% 1.01% 1.11% 1.18%
ASSETS
RATIO OF EXPENSES AND NON-U.S. TAXES
TO AVERAGE NET ASSETS ........... .94% 1.04% 1.07% 1.18% 1.31%
RATIO OF NET INCOME TO AVERAGE
NET ASSETS .......... 1.70% .91% 1.82% 1.84% 2.78%
PORTFOLIO TURNOVER RATE ............ 23.75% 18.13% 11.97% 16.03% 26.38%
</TABLE>
PART C - OTHER INFORMATION
Item 24. Financial Statement and Exhibits
(1) Financial Statements
Parts A and B
Financial Statements (audited):
Emerging Markets Growth Fund, Inc. - Statement of Assets and
Liabilities as of June 30, 1995 (including investment portfolio as of June 30,
1995); Statement of Operations for the fiscal year ended June 30, 1995;
Statement of Changes in Net Assets for the fiscal years ended June 30, 1995 and
June 30, 1994; Notes to the Financial Statements for the fiscal year ended June
30, 1995; Report of Independent Accountants for the fiscal year ended June 30,
1995; and Per-Share Data and Ratios for the fiscal years ended June 30, 1991
through June 30, 1995.
(2) Exhibits
(a) Articles of Incorporation Emerging Markets Growth Fund, Inc.- on file
(see SEC File No. 811-4692).*
(b) By-Laws of Emerging Markets Growth Fund, Inc.*
(c) Not Applicable.
(d) Specimen Certificate of Common Stock.*
(e) Not Applicable.
(f) Not Applicable.
(g) Investment Advisory and Service Agreement.*
(h) Not Applicable.
(i) Not Applicable.
(j) (1) Form of Custodian Contract - on file (see SEC File No. 811-4692).*
(2) Form of Sub-Custody Agreement - on file (see SEC File No. 811-4692).*
Not Applicable.
(k) Not Applicable.
(l) Opinion and consent of Jorden Burt & Berenson as to the legality of the
securities registered.
(m) Not Applicable.
(n) Consent of Price Waterhouse LLP.
(o) Not Applicable.
(p) Not Applicable.
(q) Not Applicable.
*Previously filed
Item 25. Marketing Arrangements
Not Applicable.
Item 26. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
<TABLE>
<CAPTION>
<S> <C>
Registration Fees......................................... $544,560.21
Legal fees and expenses................................... $7,500.00
Accounting fees and expenses.............................. $2,800.00
-----------
TOTAL........................................... $554,860.21
===========
</TABLE>
Item 27. Persons Controlled by or Under Common Control with Registrant
Not Applicable.
Item 28. Number of Holders of Securities
As of August 31, 1995, the following is the number of record holders of each
class of securities of the Fund:
<TABLE>
<CAPTION>
(1) (2)
<S> <C>
Title of Class Number of Record Holders
Common Stock ($.01 par value) 470
</TABLE>
Item 29. Indemnification
Section 2-418 of the General Corporation Law of the State of Maryland, the
State in which the Fund was organized, empowers a corporation, subject to
certain limitations, to indemnify its directors and officers against expenses
(including attorneys' fees, judgments, fines, and certain settlements) actually
and reasonably incurred by them in connection with any suit or proceeding to
which they are a party so long as they acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to a criminal action or proceeding, so long as
they had no reasonable cause to believe their conduct to have been unlawful.
Article 6 of the Fund's By-Laws provides:
(a) "Each director and each officer of the Corporation shall be indemnified by
the Corporation to the fullest extent and in the manner provided by Maryland
law and the Investment Company Act of 1940 (if applicable), as they may be
amended. Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director or
officer in connection with any proceeding. However, if the proceeding was one
by or in the right of the Corporation, indemnification may not be made in
respect of any proceeding in which the director or officer shall have been
adjudged to be liable to the Corporation.
In the event of a settlement, the indemnification shall be made only upon
approval by the court having jurisdiction or upon determination by the Board of
Directors that such settlement was or, if still to be made, is in the best
interests of the Corporation. If the determination is to be made by the Board
of Directors, it may rely as to all questions of law on the advice of general
counsel of the Corporation, if such counsel is not involved therein or, if
involved, then on the advice of independent counsel. The right of
indemnification hereby provided shall be in addition to any other rights to
which any director or officer may be entitled.
(b) The Corporation may purchase and maintain insurance on behalf of any person
who is or was a director or officer of the Corporation or who, while a director
or officer of the corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, or another foreign or
domestic corporation, partnership, joint venture, trust, other enterprise, or
employee benefit plan, against any liability asserted against and incurred by
such person in any such capacity or arising out of such person's position;
provided, that no insurance may be purchased which would indemnify any director
or officer of the Corporation against any liability to the Corporation or to
its stockholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office."
Item 30. Business and Other Connections of Investment Adviser
None.
Item 31. Location of Accounts and Records
Accounts, books and other records required by Rule 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended, are maintained and kept in the
offices of the Fund and its investment adviser, Capital International, Inc.,
11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA 90025. Certain
accounting records are maintained and kept in the offices of the Fund's
accounting department, 135 South State College Boulevard, Brea, CA 92621.
Records covering shareholder accounts are maintained and kept by the transfer
agent, American Funds Service Company, 135 South State College Boulevard, Brea,
CA 92621.
Records covering portfolio transactions are maintained and kept by the
Custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081.
Item 32. Management Services
Not Applicable.
Item 33. Undertakings
Registrant undertakes to suspend offer of its shares until it amends its
prospectus if (1) subsequent to the effective date of this Registration
Statement, its net asset value declines more than 10 percent from its net asset
value per share as of the effective date of this Registration Statement, or (2)
the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.
Registrant undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(ii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) To approve all advisory agreements by votes cast in person by the Board of
Directors consistent with Section 15 of the Investment Company Act of 1940.
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Los Angeles, and State of California, on the 20th day of September,
1995.
EMERGING MARKETS GROWTH FUND, INC.
/s/ David I. Fisher
- - -------------------
David I. Fisher, Vice Chairman
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below on the 20th day of September, 1995, by the
following persons in the capacities indicated.
Signature Title
- - --------- -----
(1)Principal Executive Officer:
/s/ Nancy Englander President
- - -------------------- ---------
(Nancy Englander)
(2)Principal Financial Officer and
Principal Accounting Officer:
/s/ Steven N. Kearsley Treasurer
- - ---------------------- ---------
(Steven N. Kearsley)
(3)Directors:
Issa Al-Sowaidi* Director
R. Michael Barth* Director
Robert B. Egelston* Director
Nancy Englander* Director
David I. Fisher* Director
Beverly L. Hamilton* Director
Marinus W. Keijzer* Director
Hugh G. Lynch* Director
Helmut Mader* Director
Teresa E. Martini Director
John G. McDonald Director
James K. Peterson* Director
William Robinson* Director
Patricia A. Small* Director
Walter P. Stern* Director
*By/s/ Roberta A. Conroy
- - -------------------------
Roberta A. Conroy, Attorney-in-Fact
September 20, 1995
Emerging Markets Growth Fund, Inc.
11100 Santa Monica Blvd., 15th Floor
Los Angeles, CA 90025
Dear Sirs:
In connection with the Form N-2 Registration Statement to be filed with the
Securities and Exchange Commission relating to the sale of 28,755,00 shares
("Shares") of Common Stock, par value $.01 per share, of Emerging Markets
Growth Fund, Inc., a Maryland corporation, we have examined such governmental
and corporate certificates and records as we deemed necessary to give this
opinion.
On the basis of the foregoing, it is our opinion that the Shares have been duly
authorized and, when paid for as contemplated by the Registration Statement,
will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to our firm therein.
Very truly yours,
/s/ Jorden Burt & Berenson
JORDEN BURT & BERENSON
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Amendment No. 20 to the registration statement on Form N-2 of our report dated
August 10, 1995, relating to the financial statements and per share data and
ratios of Emerging Markets Growth Fund, Inc., which is included in such
Prospectus. We also consent to the references to us under the headings
"Financial Highlights" and "Independent Accountants and Legal Counsel" in such
Prospectus.
/S/Price Waterhouse LLP
PRICE WATERHOUSE LLP
Los Angeles, California
September 18, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 4,715,052
<INVESTMENTS-AT-VALUE> 5,574,436
<RECEIVABLES> 90,667
<ASSETS-OTHER> 2,148
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,667,251
<PAYABLE-FOR-SECURITIES> 90,785
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,656
<TOTAL-LIABILITIES> 95,441
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,612,560
<SHARES-COMMON-STOCK> 106,420,215
<SHARES-COMMON-PRIOR> 70,987,157
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2,410
<ACCUMULATED-NET-GAINS> 105,603
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 859,160
<NET-ASSETS> 5,571,810
<DIVIDEND-INCOME> 81,640
<INTEREST-INCOME> 50,169
<OTHER-INCOME> 0
<EXPENSES-NET> 46,794
<NET-INVESTMENT-INCOME> 85,015
<REALIZED-GAINS-CURRENT> 305,354
<APPREC-INCREASE-CURRENT> (486,957)
<NET-CHANGE-FROM-OPS> (96,588)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 61,624
<DISTRIBUTIONS-OF-GAINS> 456,090
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26,840,022
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 8,593,036
<NET-CHANGE-IN-ASSETS> 1,401,494
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 232,198
<OVERDISTRIB-NII-PRIOR> 2,495
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 34,286
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 46,794
<AVERAGE-NET-ASSETS> 4,996,747
<PER-SHARE-NAV-BEGIN> 58.75
<PER-SHARE-NII> .84
<PER-SHARE-GAIN-APPREC> (.79)
<PER-SHARE-DIVIDEND> .63
<PER-SHARE-DISTRIBUTIONS> 5.81
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 52.36
<EXPENSE-RATIO> .009
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
