File No. 33-____
As filed with the Securities and Exchange Commission on April 24, 1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. [ ] Post-Effective Amendment No.
EMERGING MARKETS GROWTH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (310) 996-6000
11100 Santa Monica Blvd., 15th Floor
Los Angeles, California 90025
(Address of Principal Executive Offices) (Zip Code)
Roberta A. Conroy
Vice President & Secretary
11100 Santa Monica Blvd., 15th Floor
Los Angeles, California 90025
(Name and Address of Agent for Service)
Copies To: Robert W. Helm, Esq.
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
------------------------------------------------------------------
Calculation of Registration Fee under the Securities Act of 1933:
------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Proposed Maximum Proposed Maximum
Title of Securities Amount Being Offering Price Aggregate Offering Amount of
Being Registered Registered (1) per Unit (1) Price(1) Registration Fee
- ------------------- -------------- ---------------- ------------------- ------------
Common stock 4,999,805.927 $56.36 $281,789,062.07 $97,168.64
$.01 par value
</TABLE>
(1) Estimated soley for the purpose of calculating the registration fee.
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 thereafter 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.
EMERGING MARKETS GROWTH FUND, INC.
CROSS REFERENCE SHEET
Parts A and B - Prospectus*
<TABLE>
<CAPTION>
Item in Parts A and B of Form N-14 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, Synopsis and Risk Factors Synopsis; Risk Factors; Fee Table
4. Information about the Transaction Comparative Information on Shareholder Rights;
Information about the Reorganization
5. Information about the Registrant Incorporated by Reference
6. Information about the Company being Acquired Incorporated by Reference
7. Voting Information Consent Solicitation Information
8. Interest of Certain Persons and Experts Consent Solicitation Information
9. Additional Information Required for Reoffering Not Applicable
10. Cover Page Not Applicable
11. Table of Contents Table of Contents
12. Additional Information about the Registrant Additional Information about the Funds; Incorporated by Reference
13. Additional Information about the Company Additional Information about the Funds; Incorporated by Reference
being Acquired
14. Financial Statements Financial Statements
</TABLE>
All Items Required to be set forth in Part C are set forth in Part C
- ---------------------
*All information required to be set forth in Part B: Statement of Additional
Information has been included in Part A: The Prospectus
NEW WORLD INVESTMENT FUND
11100 SANTA MONICA BOULEVARD
LOS ANGELES, CALIFORNIA 90025
May __, 1996
Dear Shareholder:
The Board of Trustees of New World Investment Fund ("NWIF") has recently
reviewed and unanimously endorsed a proposal for reorganization of NWIF which
they judge to be in the best interests of its shareholders (the
"Reorganization"). This proposal calls for combining the assets of NWIF with
Emerging Markets Growth Fund, Inc. ("EMGF"), a closed-end investment company.
Capital International, Inc. is the investment adviser for both EMGF and NWIF.
We have therefore submitted the proposal for your consideration, and
request your written consent to approve the Reorganization. WE STRONGLY INVITE
YOUR PARTICIPATION BY ASKING YOU TO REVIEW, COMPLETE AND RETURN YOUR WRITTEN
CONSENT AS SOON AS POSSIBLE.
As a result of this Reorganization, NWIF would be combined with EMGF and
you would become a shareholder of EMGF, receiving shares having an aggregate
net asset value equal to the aggregate net asset value of your investment in
NWIF. No sales charge or other fees will be imposed in the Reorganization, and
the Closing of the transaction will be conditioned upon receiving an opinion of
counsel to the effect that the proposed Reorganization will qualify as a
tax-free reorganization for Federal income tax purposes.
Detailed information about the proposed Reorganization and the reasons for
it are contained in the enclosed materials. Please exercise your right to
authorize the transaction by completing, dating and signing the enclosed
written consent. A self-addressed, postage-paid envelope has been enclosed for
your convenience. IT IS VERY IMPORTANT THAT WE RECEIVE YOUR WRITTEN CONSENT NO
LATER THAN JUNE , 1996.
Should you decide to consent to the Reorganization, please complete and
return the EMGF Shareholders Agreement which is attached.
Sincerely,
Roberta A. Conroy
Vice President and Secretary
NEW WORLD INVESTMENT FUND
CONSENT SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE TRUST
WRITTEN CONSENT
AS OF MAY ____, 1996
Approval of an Agreement and Plan of Reorganization providing for the transfer
of the assets and certain liabilities of New World Investment Fund ("NWIF") in
exchange for shares of Emerging Markets Growth Fund, Inc. ("EMGF"), the
distribution of such shares to shareholders of NWIF in liquidation of NWIF and
the subsequent dissolution of NWIF.
_ _ _
// For // Against // Abstain
- - - -
Please sign exactly as your name or names appear hereon. Joint owners should
each sign individually. Corporate consents should be signed in full corporate
name by an authorized officer. Fiduciaries should give full titles as such.
By:
------------------------------
Authorized Person
[Name of Shareholder]
[Number of Shares as of _______]
------------------------------
Authorized Person
PROSPECTUS / INFORMATION STATEMENT
ACQUISITION OF THE ASSETS
OF NEW WORLD INVESTMENT FUND
BY AND IN EXCHANGE FOR SHARES
OF EMERGING MARKETS GROWTH FUND, INC.
May ___, 1996
INTRODUCTION
This Prospectus/Information Statement relates to the solicitation of
shareholder approval for the proposed transfer of the assets and certain
liabilities of New World Investment Fund ("NWIF"), a non-diversified,
closed-end management investment company, to Emerging Markets Growth Fund, Inc.
("EMGF"), a diversified closed-end management investment company, in exchange
for shares of common stock of EMGF. The address of EMGF and NWIF is 11100
Santa Monica Boulevard, Los Angeles, California 90025, and the telephone number
of each Fund is (310) 996-6000. Following the exchange, shares of EMGF will be
distributed to the shareholders of NWIF in liquidation of NWIF. As a result of
the proposed transaction, each shareholder of NWIF will receive that number of
full and fractional shares of EMGF equal in net asset value at the close of
business on the date of the exchange to the net asset value of the
shareholder's shares of NWIF. Shareholders of NWIF will not be assessed any
sales charge or other fee in connection with the proposed transaction.
PROPOSAL
To approve an Agreement and Plan of Reorganization providing for the
transfer of the assets and certain liabilities of NWIF in exchange for shares
of EMGF, the distribution of such shares to shareholders of NWIF in liquidation
of NWIF and the subsequent dissolution of NWIF.
THE BOARD OF TRUSTEES RECOMMENDS APPROVAL OF THE PLAN.
This Prospectus/Information Statement, which should be retained for future
reference, sets forth concisely the information about EMGF that a prospective
investor should know before returning the enclosed written consent. For a more
detailed discussion of the investment objective, policies and restrictions of
EMGF, including the risks of investing in EMGF, see the Prospectus of EMGF
dated February 14, 1996 (the "EMGF Prospectus") which is included herewith.
The information in the EMGF Prospectus is incorporated herein by reference.
Information about NWIF is included in its Prospectus dated December 5, 1995
(the "NWIF Prospectus") and is incorporated herein by reference. The NWIF
Prospectus is available upon request and without charge by contacting NWIF at
the above address or telephone number. Additional information about EMGF and
NWIF has been filed with the Securities and Exchange Commission (the
"Commission") and may be obtained without charge. (See "Additional Information
About the Funds - Public Information").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/INFORMATION STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------------------------------
T A B L E O F C O N T E N T S
- ----------------------------------------------------
Item Page No.
- ---- ----------
<TABLE>
<CAPTION>
<S> <C>
Introduction 1
Proposal 1
Synopsis 3
Risk Factors 5
Fee Table 6
Financial Highlights 7
Information about the Reorganization 8
Comparison of Investment Objectives and Policies 13
Comparison of Fundamental Investment Restrictions 14
Comparative Information on Shareholder Rights 14
Additional Information about the Funds 17
Consent Solicitation Information 19
Financial Statements 22
</TABLE>
SYNOPSIS
This synopsis is qualified by reference to the more complete information
contained elsewhere in this Prospectus/Information Statement, the EMGF
Prospectus, the NWIF Prospectus and the Agreement and Plan of Reorganization
attached hereto as Exhibit A. EMGF and NWIF are sometimes individually
referred to herein as a "Fund" and collectively as the "Funds."
PROPOSED TRANSACTION. At a meeting held on December 7, 1995, the Trustees
of NWIF, including the Trustees who are not "interested persons" of NWIF (the
"Independent Trustees") within the meaning of the Investment Company Act of
1940, as amended (the "1940 Act"), unanimously approved an Agreement and Plan
of Reorganization (the "Plan") between NWIF and EMGF, providing for the
transfer of the assets of NWIF to EMGF in exchange for shares of EMGF, the
assumption by EMGF of certain liabilities of NWIF, and the distribution of the
shares of EMGF to shareholders of NWIF in liquidation of NWIF (the
"Reorganization"). The aggregate net asset value of the shares of EMGF issued
in the Reorganization will equal the aggregate net asset value of the shares of
NWIF then outstanding.
As a result of the Reorganization, each shareholder of NWIF will receive
that number of full and fractional shares of EMGF equal in net asset value,
determined as of the close of trading on the New York Stock Exchange next
preceding the closing of the Reorganization, to the net asset value, determined
as of the same time, of such shareholder's shares of NWIF. Shareholders of
NWIF will not be assessed any sales charge or other fee in connection with the
Reorganization. The Board of NWIF has determined that the interests of
existing shareholders of NWIF will not be diluted as a result of the
Reorganization, concluded that the Reorganization would be in the best
interests of NWIF and the shareholders of NWIF, and recommends approval of the
Reorganization. Approval of the Plan and Reorganization will require the
affirmative consent of a majority of the outstanding shares of NWIF. Pursuant
to the terms of the Plan, NWIF and EMGF will each pay one-half of the costs of
the Reorganization.
The Reorganization is expected to occur shortly following shareholder
approval thereof. However, the Plan may be terminated at any time prior to the
closing of the Reorganization by either Fund, whether or not shareholder
approval has been obtained, if the conditions precedent to that Fund's
obligations under the Plan have not been satisfied or if the Board of that Fund
determines that proceeding with the Plan would not be in the best interests of
the Fund's shareholders. See "Information About the Reorganization" below.
FORM OF ORGANIZATION. EMGF is a diversified closed-end management
investment company, organized under the laws of the State of Maryland, while
NWIF is a non-diversified, closed-end management investment company, organized
under the laws of the Commonwealth of Massachusetts. See "Comparative
Information on Shareholder Rights" below.
TAX CONSEQUENCES. As a condition to closing, NWIF and EMGF will obtain an
opinion of counsel, based on certain facts, assumptions and representations
made by the Funds, to the effect that the Reorganization will qualify as a
tax-free reorganization for Federal income tax purposes. See "Information
About the Reorganization."
INVESTMENT OBJECTIVES AND POLICIES. The investment objective of EMGF is
to seek long-term growth of capital through investment in developing country
equity securities. The investment objective of NWIF is to seek, over the
long-term, a high level of total return by investing primarily in securities of
Latin American issuers. See "Comparison of Investment Objectives and Policies"
below.
ADVISORY AND OTHER FEES; EXPENSE RATIOS. Under an Investment Advisory and
Service Agreement (the "EMGF Advisory Agreement"), EMGF pays Capital
International, Inc. (the "Adviser") a monthly fee at the annual rate of 0.90%
of the first $400 million of the aggregate net assets of the Fund, reduced to
0.80% of the 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. During the most recent
fiscal year, EMGF paid fees to the Adviser amounting to 0.69% of its average
daily net assets. Under an Investment Advisory and Service Agreement (the
"NWIF Advisory Agreement") with the Adviser, NWIF pays the Adviser a fee at an
annual rate of 0.90% of the first $400 million of the Fund's aggregate net
assets and 0.80% of such aggregate net assets in excess of $400 million. Prior
to September 10, 1995, the Adviser's fee was assessed at the annual rates of
1.00% on the first $400 million of aggregate net assets and 0.80% of aggregate
net assets in excess of $400 million. During the most recent fiscal year, NWIF
paid fees to the Adviser amounting to 1.00% of its average daily net assets.
Other expenses for the Funds for their current fiscal year are estimated to be
0.25%, and 0.40%, of average daily net assets, for EMGF and NWIF, respectively.
For the year ended June 30, 1995, the ratio of expenses to average net assets
for the shares of EMGF was 0.91%. For the year ended June 30, 1995, the ratio
of expenses to average daily net assets for NWIF was 1.27%. Based on net
asset, fee and expense levels as of March 31, 1996, the pro forma ratio of
operating expenses to average net assets for the shares of EMGF upon completion
of the Reorganization would be .86%. See "Additional Information About the
Funds - Investment Adviser" below.
DIVIDENDS AND DISTRIBUTIONS. Each Fund's current policy is to make, from
time to time, distributions to shareholders consisting of dividends and net
realized capital gains. There is no fee or other charge imposed by either Fund
in connection with the reinvestment of dividends and capital gains
distributions. As permitted by its Board of Trustees/Directors, each Fund
permits its shareholders to make an election to receive dividends and
distributions in cash or in full or fractional shares of the Fund.
SUITABILITY AND TRANSFER RESTRICTIONS. Shares of each Fund are offered to
the public on a continuous basis to those investors meeting that Fund's
investor suitability and minimum purchase requirements, and who agree to enter
into the Fund's Shareholders Agreement. Each Fund's investor suitability
requirement provides that each prospective investor that is a "company" (as
defined in the 1940 Act), must have total assets in excess of US $5 million.
Each prospective investor that is a natural person must be an "accredited
investor" within the meaning of Regulation D under the Securities Act of 1933,
as amended (the "1933 Act"). NWIF's Shareholders Agreement restricts transfer
of the Fund's shares unless: 1) if the transfer is to a company, i) it has
total assets in excess of US $5 million; ii) the transfer is at least the
lesser of the total amount of shares held or the minimum purchase amount; iii)
written notice is provided to the Fund; and iv) the Board of Trustees has not
prohibited the transfer; or 2) if the transfer is to a natural person, i) the
prospective purchaser satisfies conditions (ii), (iii) and (iv) above, and ii)
has an individual net worth in excess of US $1 million or an individual income
in excess of US $200,000 during each of the two most recent years. EMGF's
Shareholders Agreement imposes similar restrictions on transfer, except that:
1) restrictions iii) and iv) are not applicable; and 2) no transferee may
acquire more than 15% of the Fund's shares. See "Additional Information About
the Funds - Shareholders Agreement" below.
RISK FACTORS
EMGF's investments 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, (11)
settlement risks and 12) the risks associated with ownership of Russian
securities. Although some of the foregoing considerations also may be present
in the case of investments in securities of issuers located in the U.S. or
other developed countries, they are present to a greater degree in connection
with EMGF's investments in equity securities of issuers in developing
countries. See "Risk Factors and Other Considerations" in the EMGF Prospectus
for a description of these risk factors. Most of these risk factors are
generally also present in an investment in NWIF, though such risks are specific
to the Latin American countries in which NWIF invests, in contrast to the
broader range of countries in which EMGF invests.
FEE TABLE
The table below sets forth information with respect to shares of EMGF and
shares of NWIF as well as pro forma information for EMGF shares after giving
effect to the Reorganization. The table is based on the net asset, fee and
expense levels of the Funds for the 12-month period ended March 31, 1996.
<TABLE>
<CAPTION>
<S>
<C>
<C> <C> Pro forma Combined Fund
Shares Shares (i.e. Shares of EMGF
of EMGF of NWIF Following the Reorganization)
------- ------- -----------------------------
Shareholder Transaction Expenses
Sales Load (as a percentage of
offering price)............... None None None
Dividend Reinvestment and Cash
Purchase Plan Fees............ None None None
Annual Fund Operating Expenses
(as a percentage of net assets)
Management Fees ................ .68% .90% .68%
Other Expenses***............... .19% .39% .19%
Total Fund Operating ---- ----- ----
Expenses.................. .87% 1.29% .87%
==== ===== ====
</TABLE>
__________
* 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.
** Assessed at the annual rate of 0.90% of the first $400 million of
aggregate net assets and 0.80% of aggregate net assets in excess of $400
million.
*** "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.
EXAMPLE
The Example below shows the cumulative expenses attributable to a $1,000
investment in shares of EMGF, shares of NWIF and shares of the pro forma
combined Fund for the periods specified.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
------ ------- ------- --------
EMGF...................... $ 9 $27 $48 $106
NWIF...................... $13 $39 $68 $149
Pro Forma Combined Fund
(i.e., shares of EMGF received
in the Reorganization)........... $ 9 $27 $48 $106
</TABLE>
The purpose of the foregoing table is to assist the investor in
understanding the various costs and expenses that an investor in a Fund will
bear directly or indirectly. The Example above assumes reinvestment of all
dividends and distributions and utilizes a 5% annual rate of return. The
Example is not to be considered representative of past or future expenses;
actual expenses may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The table below provides per share data and ratios for one share of EMGF
for each of the periods shown. This information is supplemented by the
financial statements and accompanying notes which appear elsewhere in this
Prospectus. The annual financial statements and notes and the financial
information in the table below have been audited by Price Waterhouse LLP,
independent accountants, whose report is included in the EMGF Prospectus. The
semi-annual financials for the period ended December 31, 1995 are unaudited.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Per-Share Data and Ratios
Six-Months Years Ended June 30
Ended
12/31/95 /1/ 1995 1994 1993 1992 1991
--------- -------- -------- -------- -------- -------
Net Asset Value,
Beginning of Period.............. $52.36 $58.75 $44.95 $38.64 $32.73 $32.81
------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net investment income... .43 .87 .53 .62 .55 .83
Net realized and
unrealized gain (loss)
on investments before
non-U.S. taxes........ (.87) (.79) 15.29 7.33 8.87 3.89
Non-U.S. taxes --- (.03) (.39) (.06) (.28) (.38)
------ ------ ----- ----- ----- -----
Total income from (.44) .05 15.43 8.01 9.14 4.34
investment operations... ------ ------ ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net (.37) (.63) (.49) (.56) (.56) (.92)
investment income.......
Distributions from net (1.27) (5.81) (1.14) (1.14) (2.67) (3.50)
realized gain........... ------ ------ ------ ------ ------ ------
Total distributions... (1.64) (6.44) (1.63) (1.70) (3.23) 4.42
------ ------ ------ ------ ------ -----
Net Asset Value, End of $50.28 $52.36 $58.75 $44.95 $38.64 $32.73
Period................ ====== ====== ====== ====== ====== ======
Total Return............... (.75)%/2/ (1.22)% 34.33% 21.55% 29.73% 18.08%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year $5,771 $5,572 $4,170 $2,574 $1,561 $703
(in millions)............
Ratio of expenses to
average net assets.......... .44%/2/ .91% 1.00% 1.01% 1.11% 1.18%
Ratio of expenses and non-U.S.
taxes to average net assets.. .44%/2/ .94% 1.04% 1.07% 1.18% 1.31%
Ratio of net income to
average net assets........... .84%/2/ 1.70% .91% 1.82% 1.84% 2.78%
Portfolio turnover rate... 9.31%/2/ 23.75% 18.13% 11.97% 16.03% 26.38%
</TABLE>
/1/ Unaudited.
/2/ Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
INFORMATION ABOUT THE REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION. The following summary of the
proposed Plan is qualified in its entirety by reference to the Plan attached to
this Prospectus/ Information Statement as Exhibit A. The Plan provides that
EMGF will acquire all or substantially all of the assets of NWIF in exchange
for shares of EMGF and the assumption by EMGF of certain identified liabilities
of NWIF on June 28, 1996 (the "Closing Date"), or such other date as provided
for pursuant to the Plan. EMGF will not assume any liabilities or obligations
of NWIF other than those reflected in an unaudited statement of assets and
liabilities of NWIF as of the normal close of business of the New York Stock
Exchange (currently 4:30 p.m., New York City time) on the Closing Date. The
number of full and fractional shares of EMGF to be issued to shareholders of
NWIF will be determined on the basis of the relative net asset values per share
and aggregate net assets of EMGF and NWIF computed as of the close of business
on the New York Stock Exchange on the Closing Date. The net asset value per
share for both EMGF and NWIF will be determined by dividing their respective
assets, less liabilities, by the total number of their respective outstanding
shares. Portfolio securities of both EMGF and NWIF will be valued in
accordance with the valuation practices of EMGF as described under "Valuation"
in its current prospectus.
The Board of Directors of EMGF and the Board of Trustees of NWIF have each
determined that the interests of existing shareholders will not be diluted as a
result of the transactions contemplated by the Reorganization, and that
participation in the Reorganization is in the best interests of shareholders of
EMGF and NWIF, respectively.
Prior to the Closing Date, NWIF will endeavor to discharge all of its
known liabilities and obligations. The liabilities assumed are expected to
relate generally to expenses incurred in the ordinary course of NWIF's
operations, such as accounts payable relating to custodian and transfer agency
fees, legal and accounting fees. EMGF will assume all liabilities, expenses,
costs, charges and reserves reflected on an unaudited statement of assets and
liabilities of NWIF as of the close of the New York Stock Exchange on the
Closing Date prepared by the Adviser in accordance with generally accepted
accounting principles consistently applied from the prior audited period. EMGF
will assume only those liabilities of NWIF reflected in that unaudited
statement of assets and liabilities and will not assume any other liabilities.
As of or prior to the Closing Date, NWIF contemplates declaring and paying
a dividend or dividends which are intended to have the effect of distributing
to NWIF's shareholders all of NWIF's net income and net realized gains which
has not been distributed previously.
Immediately after the Closing, NWIF will distribute pro rata to its
shareholders of record as of the close of business on the Closing Date the full
and fractional shares of EMGF received by NWIF, and NWIF will then terminate.
Such distribution will be accomplished by the establishment of accounts on the
share records of EMGF in the name of NWIF shareholders, each representing the
respective pro rata number of full and fractional shares of EMGF due such
shareholders. After the Closing Date, any outstanding certificates
representing shares of NWIF will represent shares of EMGF distributed to the
record holders of NWIF. Share certificates of NWIF will, upon presentation to
Capital International, Inc., be exchanged for shares of EMGF. Certificates for
EMGF shares will be issued only upon written request.
The consummation of the Plan is subject to the conditions set forth
therein. The Plan may be terminated at any time prior to the Closing Date,
before or after approval by shareholders of NWIF, by resolution of the Board of
Directors of EMGF or the Board of Trustees of NWIF, if circumstances should
develop that, in the opinion of either Board, make proceeding with the
Reorganization inadvisable. Approval of the Plan will require the affirmative
consent of the holders of a majority of the outstanding voting securities of
NWIF. Consummation of the Reorganization is also conditioned upon receipt of
an Order of the Securities and Exchange Commission pursuant to Section 17(b)
under the 1940 Act exempting the transaction from Section 17(a) of the 1940 Act
and permitting the transaction pursuant to Section 17(d) of the Act and Rule
17d-1 thereunder (the "Order"). EMGF, NWIF and certain of their affiliates
filed an application for the Order on March 28, 1996, and anticipate its
receipt prior to the Closing Date, however, there can be no assurance that such
Order will be granted.
DESCRIPTION OF SHARES OF EMGF. Full and fractional shares of EMGF will be
issued without the imposition of a sales charge or other fee to the
shareholders of NWIF in accordance with the procedures described above. Each
share of EMGF to be issued in the Reorganization will be fully paid and
non-assessable when issued and will have no preference, preemptive, conversion,
exchange, or similar rights.
FEDERAL INCOME TAX CONSEQUENCES. The Reorganization is intended to
qualify for Federal income tax purposes as a tax-free reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the
"Code"), with no gain or loss recognized by EMGF, NWIF, or the shareholders of
either Fund. As a condition to the closing of the Reorganization, NWIF and
EMGF will have received an opinion from the law firm of Dechert Price & Rhoads
to that effect. That opinion will be based in part upon representations made
by NWIF and EMGF and certain facts and assumptions.
Shareholders of NWIF should consult their tax advisers regarding the
effect, if any, of the proposed Reorganization in light of their individual
circumstances. SINCE THE FOREGOING DISCUSSION ONLY RELATES TO THE FEDERAL
INCOME TAX CONSEQUENCES OF THE REORGANIZATION, SHAREHOLDERS OF NWIF SHOULD ALSO
CONSULT THEIR TAX ADVISERS AS TO STATE, LOCAL, AND OTHER TAX CONSEQUENCES, IF
ANY, OF THE REORGANIZATION.
CAPITALIZATION. The following table shows the capitalization and net
asset values per share of the common stock of EMGF and shares of beneficial
interest of NWIF as of March 31, 1996 and on a pro forma basis as of that date
after giving effect to the proposed Reorganization.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
EMGF NWIF Pro Forma
Combined
Net assets.......... $7,310,689,000 $255,608,000 $7,566,297,000
Net asset value per share... $54.24 $20.94 $54.24
Shares outstanding......... 134,773,805 12,205,648 139,486,342
</TABLE>
REASONS FOR THE REORGANIZATION. At a December 7, 1995 meeting of the
Board of Trustees of NWIF the Trustees unanimously approved the Reorganization
and recommended submission of the Plan to the shareholders of NWIF for their
approval. The Trustees concluded that the Reorganization and the Plan would be
in the best interests of NWIF and its shareholders, and recommended that the
shareholders approve the proposed Reorganization.
If effected according to the Plan, the proposed Reorganization should
result in an increase in the asset size of EMGF. The larger aggregate net
assets of EMGF should enable the shareholders of NWIF to realize significant
benefits associated with economies of scale. Shareholders of NWIF should enjoy
increased investment opportunities, enhanced portfolio diversification
opportunities, and enhanced liquidity. Shareholders of EMGF may also realize
these benefits, though to a lesser extent.
EMGF, with its much larger asset base and resulting economies of scale,
has a significantly lower expense ratio than does the smaller NWIF, and it is
expected that the shareholders of NWIF will benefit from this lower expense
ratio following the consummation of the Reorganization. The proposed
combination of Funds would eliminate the need for separate outside audits of
the respective Funds and the relatively fixed cost of auditing the surviving
EMGF would be spread across the larger asset base of the combined Funds,
resulting in lower auditing expenses per dollar of assets. Legal and other
costs would be subject to similar consolidation and cost-spreading, to the
benefit of shareholders of NWIF, and to a lesser extent, the shareholders EMGF.
As of June 30, 1994, June 30, 1995, and December 31, 1995, EMGF had net
assets of approximately $4,170,316,000, $5,571,810,000, and $5,770,962,336,
respectively. As of June 30, 1994, June 30, 1995, and December 31, 1995, NWIF
had net assets of approximately $305,426,000, $242,444,000, and $232,831,000,
respectively. NWIF faces the potential of a lack of growth and continued
diminution of asset size, which may increase the expense ratio of NWIF and may
render it more difficult to achieve its investment objective.
The shareholders of NWIF are primarily large pension plans and other
institutional investors. At the time when NWIF was established, these
investors generally desired to allocate the portion of their assets devoted to
emerging market investments to specific geographic regions, including Latin
America. Recently however, these types of investors have desired to allocate
the portion of their investments in emerging markets not by region, but on a
global scale. The Adviser believes that this is a factor which has led to the
lack of growth and diminution of asset size of NWIF. In contrast, over roughly
the same period of time, the asset size of EMGF has grown substantially. The
Adviser and Board of Trustees believe that shareholders of NWIF may benefit
from the Reorganization in being able to participate in an emerging markets
fund with a global focus, that more closely follows shareholders' investment
objectives.
In reaching its decision to recommend shareholder approval of the
Reorganization, the Board of Trustees considered the foregoing and a number of
other factors. The Board of Trustees reviewed summaries of operating expenses
of NWIF and of EMGF. It was noted that NWIF had an expense ratio of 1.27% for
its fiscal year ended June 30, 1995, compared to EMGF's expense ratio of .91%
for its fiscal year ended June 30, 1995. The Board also considered the fact
that the Reorganization would permit the shareholders of NWIF to pursue their
emerging market investment goals in a larger fund. The higher aggregate net
assets of EMGF may enable shareholders of NWIF to obtain the benefits of
economies of scale, permitting the reduction of certain duplicative costs and
expenses which may result in lower overall expense ratios through the spreading
of both fixed and variable costs of fund operations over a larger asset base.
The Board of Trustees also considered, among other things: (i) the terms
and conditions of the Reorganization; (ii) whether the Reorganization would
result in the dilution of shareholders' interests; (iii) the fact that the
investment policies and restrictions of the Funds are similar; and (iv) the
expected Federal income tax consequences of the Reorganization. Based on the
factors described above, the Board of Trustees unanimously determined that the
Reorganization would be in the best interests of NWIF and its shareholders and
would not result in dilution of shareholders' interests, and unanimously
recommended that the shareholders of NWIF approve the proposed Reorganization.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
GENERAL. The investment policies and restrictions of the Funds are
substantially similar. No significant differences exist regarding the
borrowing and lending limitations or quality of investments permitted for
either Fund. The primary difference between the Funds is that NWIF
concentrates its investments in Latin American countries, and is permitted to
invest a greater percentage of its assets in debt securities, while EMGF
invests in a broader range of emerging market countries, with a greater
percentage of its assets invested in equity securities. The investment
objective of EMGF is to seek long-term growth of capital through investment in
developing country equity securities. EMGF considers a developing country
security to be the security of an issuer domiciled and having its principal
place of business in a country which in the opinion of the Board of Directors
is considered to be a developing country by the international financial
community, including the International Bank for Reconstruction and Development
and the International Monetary Fund, and determined by the Board to be
qualified markets for the Fund. The countries currently considered qualified
markets are: Argentina, Brazil, Chile, China, Colombia, Greece, Hungary, India,
Indonesia, Jordan, Malaysia, Mexico, Pakistan, Peru, the Philippines, Poland,
Portugal, Russia, South Africa, South Korea, Sri Lanka, Taiwan, Thailand,
Turkey and Venezuela. EMGF may invest up to 35% of its assets in a single
country. In addition, EMGF may, for liquidity, or for temporary defensive
purposes, invest 100% of its assets in highly liquid debt instruments or freely
convertible currencies. EMGF may also invest up to 10% of its 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.
The investment objective of NWIF is to seek, over the long-term, a high
level of total return by investing primarily in securities of Latin American
issuers. NWIF currently concentrates its investments in Latin American
securities to securities issued or traded in the markets of Argentina, Brazil,
Chile, Colombia, Mexico, Peru or Venezuela, although it may invest in
additional Latin American markets. Under normal market conditions, NWIF
invests between 60% and 90% of its total assets in equity securities of Latin
American issuers. EMGF may invest up to 10% of its assets 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 total revenues from either goods and
services produced in, or sales made in, developing countries. NWIF may also
invest up to 10% of its assets outside of Latin American.
TYPES OF INVESTMENTS. Both EMGF and NWIF may invest in options on
securities and securities indexes; foreign currency exchange contracts,
including forward and futures contracts; other financial futures and options
thereon, such as those based on an index or other basket of securities;
interest rate, equity and currency exchange rate swap agreements; equity linked
notes; short sales "against the box;" and repurchase agreements. Both EMGF and
NWIF may purchase securities offered by private placement; loan participation
interests; and in other investment companies. For a description of the
characteristics, risks, and limitations on these investments see the EMGF
Prospectus.
COMPARISON OF FUNDAMENTAL INVESTMENT RESTRICTIONS
Except as set forth below, the fundamental investment restrictions of both
Funds are substantially identical. Fundamental restrictions are those that may
not be changed unless authorized by a vote of a majority of a Fund's
outstanding shares.
SENIOR SECURITIES. Each Fund's restriction on the issuance of "senior
securities" under the 1940 Act is identical, except that EMGF is permitted to
issue warrants to its shareholders.
COUNTRY, INDUSTRY AND ISSUER CONCENTRATION. EMGF does not invest more
than 35% of its assets in the securities of companies domiciled in any one
country. NWIF does not invest more than 50% of its assets in the securities
of companies domiciled in any one country. Neither Fund invests more than 25%
of its assets in issuers whose primary business is in a single industry. EMGF
does not invest more than 5% of its total assets in the securities of a single
issuer. NWIF also does not invest more than 5% of its total assets in the
securities of a single issuer, but this restriction is non-fundamental. These
restrictions are not applicable to marketable obligations of a national
government or its agencies or instrumentalities.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
GENERAL. As a Massachusetts business trust, NWIF is governed by its
Declaration of Trust dated September 8, 1989, as amended (the "NWIF
Declaration"), its By-laws (the "NWIF By-laws"), and applicable Massachusetts
law. In some respects, its operations differ from those of EMGF, which is
organized as a Maryland corporation, and is governed by its Articles of
Incorporation, dated March 9, 1986 as amended (the "EMGF Articles"), its
By-laws (the "EMGF By-laws"), and applicable Maryland law. Shareholders of
NWIF entitled to authorize the Reorganization may obtain a copy of the EMGF
Articles and EMGF By-laws, without charge, upon written request to NWIF or
EMGF.
SHARES OF THE FUNDS. NWIF has authorized an unlimited number of shares of
beneficial interest, with a par value of $.001 per share. EMGF has authorized
capital of 200,000,000 million shares of common stock, each having a par value
of $.01 per share. The shares of each of the Funds have no preemptive or
conversion rights.
VOTING REQUIREMENTS. The NWIF By-laws provide that special meetings of
shareholders shall be called upon the written request of holders of not less
than 10% of the then outstanding shares of the Fund. The EMGF By-laws and the
Maryland General Corporation Law (the "Maryland Code") provide that a special
meeting of shareholders shall be called upon the written request of
shareholders representing not less than 25% of the outstanding shares of EMGF.
Under the EMGF Articles, EMGF reserves the right to make any amendment to
the Articles, as authorized by the Maryland Code. Any amendment to the NWIF
Declaration may be adopted by a majority of the Trustees when authorized to do
so by the vote of shareholders holding a majority of the shares of the Fund
entitled to vote. Certain amendments to the NWIF Declaration that do not
adversely affect the rights of shareholders may be approved by a majority of
the Trustees.
SHAREHOLDER MEETINGS. EMGF is required under its By-laws and the Maryland
Code to hold an annual meeting of shareholders in any year in which EMGF must
hold a meeting for purposes of electing Directors as required by the 1940 Act.
NWIF is not required to hold annual meetings of shareholders, but is required
to hold meetings of its shareholders for purposes of voting on certain matters
as required under the 1940 Act.
DIRECTORS AND TRUSTEES. Directors of EMGF serve for the duration of the
existence of EMGF, unless they resign or are removed. The EMGF By-laws permit
removal of a Director by the holders of 75% of the outstanding shares of EMGF.
With respect to NWIF, each Trustee's term of office is unlimited as to duration
unless the Trustee resigns, dies or is removed by a written instrument signed
by at least 3/4 of the Trustees, by vote of the shareholders of the Fund
holding not less than 3/4 of the shares then outstanding cast in person or by
proxy at any meeting called for that purpose, or by a written declaration
signed by shareholders holding not less than 3/4 of the shares then
outstanding. Trustee vacancies may be filled by the Trustees remaining in
office. A meeting of shareholders of NWIF or EMGF could be required for the
purpose of electing additional Trustees or Directors whenever fewer than a
majority of the Trustees or Directors then in office were elected by
shareholders.
SHAREHOLDER LIABILITY. Under Massachusetts law, shareholders of a
Massachusetts business trust could, under certain circumstances, be held
personally liable for the obligations of the trust. However, the NWIF
Declaration disclaims shareholder liability for acts or obligations of NWIF and
requires that notice of such disclaimer be given in each agreement, obligation,
or instrument entered into or executed by NWIF or the Trustees. The NWIF
Declaration provides for indemnification out of Fund property for all losses
and expenses of any shareholder held personally liable for the obligations of
NWIF. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is considered remote since it is limited to circumstances
in which a disclaimer is inoperative and NWIF itself would be unable to meet
its obligations.
LIABILITY OF DIRECTORS AND TRUSTEES. Under the NWIF Declaration, a
Trustee or Officer will be personally liable only for his own willful
misfeasance, criminal acts, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. Under the NWIF
Declaration, Trustees and officers will be indemnified for the expenses of
litigation against them unless it is determined that the person did not act in
good faith in the reasonable belief that the person's action was in the best
interests of NWIF or if his conduct is determined to constitute willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
NWIF may also advance money for these expenses provided that the Trustee or
officer undertakes to repay NWIF if his conduct is later determined to preclude
indemnification.
The EMGF Articles provide that the Directors and officers shall be
indemnified to the fullest extent provide by Maryland law. Maryland law
provides that, in addition to any other liability imposed by law, the Directors
of EMGF may be liable to EMGF: (1) for voting or assenting to the declaration
of any dividend or other distribution of assets to shareholders which is
contrary to Maryland law, (2) for voting or assenting to certain distributions
of assets to shareholders of EMGF, and (3) for voting or assenting to a
repurchase of the shares of EMGF in violation of Maryland law.
In the event of any litigation against the directors or officers of EMGF,
Maryland law permits EMGF to indemnify a Director or officer unless it is
proved that (i) the act or omission of the Director or officer was material to
the cause of action adjudicated in the proceeding and was committed in bad
faith or with active and deliberate dishonesty, (ii) the Director or officer
actually received an improper personal benefit in money, property or services,
or (iii) in the case of a criminal proceeding, the Director or officer had
reasonable cause to believe that the act or omission was unlawful.
RIGHT OF INSPECTION. NWIF shareholders have the same rights to inspect
the records, accounts and books of NWIF as are permitted shareholders of a
Massachusetts corporation under the Massachusetts corporation law. Currently,
each shareholder of a Massachusetts corporation is permitted to inspect the
records, accounts and books of a corporation for any legitimate business
purpose. The EMGF By-laws provide that any shareholder may inspect the Fund's
By-laws, minutes of shareholder meetings, annual statement of its affairs,
shareholders agreement and any voting trust agreement on file at its principal
office.
The foregoing is only a summary of certain characteristics of the
operations of EMGF, its Articles of Incorporation and By-laws, and Maryland
law, and the operations of NWIF, its Declaration of Trust and By-laws, and
Massachusetts law. The foregoing is not a complete description of the
documents cited. Shareholders should refer to the provisions of the EMGF
Articles, EMGF By-laws, and Maryland law, and the NWIF Declaration, NWIF
By-laws and Massachusetts law directly for a more thorough description.
BOARD OF DIRECTORS. The business of EMGF, and the business of NWIF, is
managed under the direction of its Board of Directors and Board of Trustees,
respectively, which formulate the general policies of the Fund and meets
periodically to review the investment performance of the Fund, monitor
investment activities and practices and discuss other matters affecting the
Fund. In addition, each Board, in its discretion, declares what, if any,
dividends are to be paid by the Fund and when they are to be paid.
ADDITIONAL INFORMATION ABOUT THE FUNDS
SHAREHOLDERS AGREEMENT. Shareholders of EMGF and NWIF are each subject to
a Shareholders Agreement. In effecting the Reorganization, shareholders of
NWIF who are not currently shareholders of EMGF will be required to enter into
and sign the EMGF Shareholders Agreement, a form of which is attached as
Exhibit B. The Agreements are substantially similar, with a few exceptions, as
follows.
Transfer Restrictions. The EMGF Agreement imposes a minimum transfer
requirement of $100,000. The EMGF Agreement prohibits any transferee from
acquiring more than 15% of EMGF's shares (excluding shares acquired through
reinvestment of dividends and distributions, or through purchases of its pro
rata share of shares issued by EMGF). The NWIF Agreement provides that the
minimum amount of shares that may be transferred by a shareholder is: i) the
minimum investment amount set forth in the NWIF Prospectus (currently
$100,000); or ii) the shareholder's entire holdings, if less. In addition,
shareholders of NWIF desiring to transfer shares must notify and provide
information to the Fund regarding the transfer. The Board of Trustees of NWIF
has 30 days from receipt of the information to prohibit the transfer if they
find it likely to have a materially adverse effect on the Fund or any
shareholders.
Agreement Term. Among other provisions for termination, the EMGF
Agreement provides that it may be terminated by the affirmative consent of
66-2/3% of the outstanding shares of the Fund. The NWIF agreement may
similarly be terminated, but upon the affirmative consent of 75% of the
outstanding shares of the Fund.
Governing Law. The EMGF Agreement is governed under the laws of the
United States and the State of Maryland. The NWIF Agreement is construed under
the laws of the United States and the Commonwealth of Massachusetts.
INVESTMENT ADVISER AND MANAGER. Capital International, Inc., a California
corporation with offices at Los Angeles, California, serves as investment
adviser of both Funds (the "Adviser"). The EMGF Advisory Agreement dated June
21, 1994 was last approved by the Board of Directors, including the Directors
who are not parties to the Agreement or interested persons of any such party,
on January 25, 1996 to continue through January, 1997, unless sooner
terminated. The EMGF Advisory Agreement and NWIF Advisory Agreement are
substantially identical, except for the compensation to be paid, and the
differences set forth below.
Investment Advisory Services. The EMGF Advisory Agreement provides that
the Adviser shall consult with and provide information to the Board of
Directors in order to help select "qualified markets" in which the Fund may
invest. NWIF does not formally select qualified markets and thus has no
comparable provision.
Administrative Services. The EMGF Advisory Agreement provides that the
Adviser shall perform such administrative and clerical functions as are
necessary in order to provide effective operation of the Fund, including the
preparation and maintenance of required reports, books and record of the Fund.
The NWIF Advisory Agreement does not list these services specifically, although
such services are arguably required under the Agreement.
Compensation. The EMGF Advisory Agreement specifically states that no
compensation other than as provided in the Agreement shall be paid to the
Adviser by EMGF without Board approval. The NWIF Advisory Agreement has no
comparable provision.
Expenses. The EMGF Advisory Agreement provides that the Adviser shall be
responsible for the costs of allocable personnel and telephone expenses in
connection with investor services. The NWIF Advisory Agreement has no
comparable provision.
Portfolio Transactions and Brokerage. The EMGF Advisory Agreement
provides that, in placing orders for the purchase and sale of securities for
the Fund, the Adviser will use its best efforts to obtain the most favorable
net results and execution of the Fund's order, taking into account all
appropriate factors, including price, dealer spread or commission, if any, size
of the transaction, and difficulty of the transaction. The Adviser 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 expenses of
the Adviser may not necessarily be reduced as a result of receipt of such
research services. The Adviser may select brokers or dealers with which it or
the Fund are affiliated, subject to the Agreement or applicable law.
CUSTODIAN AND TRANSFER AGENT. The Chase Manhattan Bank, N.A., 1211 Avenue
of the Americas, New York, New York 10036, acts as custodian for each Fund
pursuant to a custodian agreement. The custodian employs sub-custodians
located in countries where each Fund's portfolio securities are traded.
American Funds Service Company, 135 South State College Boulevard, Brea,
California 92621, acts as each Fund's dividend paying agent, transfer agent and
registrar for its shares. EMGF's Luxembourg transfer agent is Banque
Internationale a Luxembourg, S.A.
PUBLIC INFORMATION. Information about EMGF is included in the EMGF
Prospectus dated February 14, 1996, a copy of which is included herewith, and
is incorporated herein by reference. A copy of the NWIF Prospectus can be
obtained without charge by writing to Capital International, Inc., at 11100
Santa Monica Boulevard, Los Angeles, California 90025. Shares of EMGF are
listed on the Luxembourg Stock Exchange and reports, and other information
concerning EMGF can be inspected at the offices of its transfer agent in
Luxembourg. EMGF and NWIF both file reports, and other information with the
Commission. These documents and other information can be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549; 7 World Trade Center, Suite 1300, New
York, NY 10048; and 500 West Madison Street, Suite 1400, Chicago, IL 60661.
Copies of such material can also be obtained from the Public Reference Branch,
Office of Filings and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549 at prescribed rates.
THE BOARD OF TRUSTEES
UNANIMOUSLY RECOMMENDS APPROVAL OF THE PLAN.
CONSENT SOLICITATION INFORMATION
Written consents of the shareholders of NWIF are being solicited by the
Board of Trustees of NWIF. Approval of the Plan and the Reorganization, will
require the affirmative consent of the holders of a majority of NWIF's
outstanding voting securities. Abstentions will have the effect of "no" votes
for purposes of the Proposal. Written consents are to be solicited by mail.
Additional solicitation may be made by telephone, telegraph or personal contact
by officers, employees or agents of Capital International, Inc. and its
affiliates.
Shareholders of NWIF of record at the close of business on ________, 1996
("Record Date") will be entitled to authorize approval of the Plan and
Reorganization. Shareholders are entitled to one vote for each share held and
fractional votes for fractional shares held. As of March 31, 1996, as shown on
the books of NWIF, there were issued and outstanding 12,205,648 shares of
beneficial interest. As of March 31, 1996, as shown on the books of EMGF,
there were issued and outstanding 134,773,805 shares of common stock. The
approval of the shareholders of EMGF are not being solicited, since their
approval or consent is not necessary for the Reorganization to take place.
As of March 31, 1996, the officers and Directors of EMGF or Trustees of
NWIF as a group beneficially owned less than 1% of the outstanding shares of
EMGF or NWIF, respectively. The following tables below show those persons who
owned of record or beneficially 5% or more of EMGF and NWIF outstanding shares,
as of March 31, 1996, and show the number of shares of EMGF each person would
own upon consummation of the Reorganization, based upon net asset values of
each Fund as of March 31, 1996.
EMGF Beneficial Ownership
-------------------------
<TABLE>
<CAPTION>
Percentage of Percentage of
Common Stock Number of Outstanding
or Shares of Shares of EMGF Shares of EMGF
Number of Beneficial following following
Name & Address Shares Interest Reorganization Reorganization
<S> <C> <C> <C> <C>
The Chase Manhattan Bank, N.A.
as Trustee for the
General Motors Employes Global
Group Pension Trust
General Motors Corporation
767 Fifth Avenue
New York, NY 10153 13,848,091 10.3% 15,909,313 11.4%
The Chase Manhattan Bank, N.A.
as Trustee for the
IBM Retirement Plan Trust
262 Harbor Drive
Stamford, CT 06904 9,664,915 7.2% 10,559,765 7.6%
Pensioenfonds PGGM
Kroostweg-Noord 149
P.O. Box 117, 3700
AC Zeist
The Netherlands 8,050,665 6.0% 8,050,665 5.8%
</TABLE>
<TABLE>
<CAPTION>
NWIF Beneficial Ownership
-------------------------
<S> <C> <C> <C> <C>
Name & Address Percentage Number of Percentage of
of Outstanding Shares of EMGF Outstanding Shares
Number Common Stock or following of EMGF following
of Shares Beneficial Interest Reorganization Reorganization
----------- ------------------- -------------- ------------------
The Chase Manhattan Bank,
N.A. as Trustee for the
AT&T Master Pension Trust
One Oak Way - Room 4EC 117
Berkeley Heights, NJ 07922 3,203,458 26.2% 1,236,733 .89%
The Chase Manhattan Bank, N.A.
as Trustee for the
General Motors Employes
Global Group Pension Trust
General Motors Corporation
767 Fifth Avenue
New York, NY 10153 5,339,097 43.7% 15.909,313 11.4%
The Chase Manhattan Bank, N.A.
as Trustee for the
IBM Retirement Plan Trust
262 Harbor Drive
Stamford, CT 06904 2,317,891 18.9% 10,559,765 7.6%
</TABLE>
YOU ARE URGED TO COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED WRITTEN CONSENT PROMPTLY
By Order of the Board of Trustees,
Roberta A. Conroy
Vice President and Secretary
[DATE]
FINANCIAL STATEMENTS
--------------------
EMERGING MARKETS GROWTH FUND, INC.
- ----------------------------------
Unaudited Financial Statements for the six-months ended December 31, 1995:
Statement of Assets and Liabilities at December 31, 1995 (including investment
portfolio at December 31, 1995) (Unaudited).
Statement of Operations for the six-months ended December 31, 1995 (Unaudited).
Statement of Changes in Net assets for the six-months ended December 31, 1995
(Unaudited) and for the fiscal year ended June 30, 1995.
Per Share Data and Ratios for the six-months ended December 31, 1995
(Unaudited), and for the fiscal years ended June 30, 1991 through June 30,
1995.
Notes to Financial Statements for the six-months ended December 31, 1995.
NEW WORLD INVESTMENT FUND
- -------------------------
Unaudited Financial Statements for the six-months ended December 31, 1995:
Statement of Assets and Liabilities at December 31, 1995 (including investment
portfolio at December 31, 1995) (Unaudited).
Statement of Operations for the six-months ended December 31, 1995 (Unaudited).
Statement of Changes in Net assets for the six-months ended December 31, 1995
(Unaudited) and for the fiscal year ended June 30, 1995.
Per Share Data and Ratios for the six-months ended December 31, 1995
(Unaudited), and for the fiscal years ended June 30, 1992 through June 30,
1995.
Notes to Financial Statements for the six-months ended December 31, 1995.
EMERGING MARKETS GROWTH FUND
Semi-Annual Financial Statements as of December 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
WHERE THE FUND'S ASSETS ARE INVESTED
------------------------------------
12/31/94 06/30/95 12/31/95 MSCI Market Value
-------- -------- -------- EMF Index(1) of Holdings
12/31/1995 12/31/95
---------- (in thousands)
--------------
ASIA/PACIFIC
China................................ 1.5% 1.8% 1.4% * $77,459
Hong Kong............................ 1.3 1.0 1.0 * 59,321
India................................ 4.3 5.7 7.0 5.8 403,429
Indonesia............................ 3.8 4.2 6.4 5.4 371,036
Malaysia............................. 3.7 4.3 4.2 16.7 240,011
New Zealand.......................... .2 - - * -
Pakistan............................. 1.0 1.1 1.1 .6 62,483
Philippines.......................... 7.9 7.6 7.3 3.0 423,504
South Korea.......................... 7.0 7.0 7.8 3.3 452,447
Sri Lanka............................ .2 .2 .2 .1 9,105
Taiwan............................... 1.2 .8 2.3 * 133,513
Thailand............................. 5.8 5.5 4.9 9.8 285,285
Vietnam.............................. .1 .1 .1 * 6,206
---- ---- ---- ---- ---------
38.0 39.3 43.7 44.7 2,523,799
---- ---- ---- ---- ---------
LATIN AMERICA
Argentina............................ 8.0 8.3 8.2 3.8 476,670
Brazil............................... 20.5 13.7 15.5 11.2 895,143
Chile................................ 3.1 2.2 2.2 5.4 125,053
Colombia............................. .7 .5 .4 .8 21,175
Ecuador.............................. .2 .1 .6 * 32,321
Mexico............................... 12.0 7.6 9.6 8.3 553,204
Panama............................... - .4 .8 * 44,229
Peru................................. 1.7 1.8 1.9 1.2 112,198
Venezuela............................ .2 .1 .1 .4 5,532
---- ---- ---- ---- ---------
46.4 34.7 39.3 31.1 2,265,525
---- ---- ---- ---- ---------
EASTERN EUROPE
Czech Republic....................... - .1 .1 * 5,671
Hungary.............................. - - .4 * 19,839
Poland............................... - .1 .1 .2 8,435
Russia and former republics of the .2 .7 1.4 * 81,946
Soviet Union (2) .................. --- --- --- --- ------
.2 .9 2.0 .2 115,891
--- --- --- --- -------
OTHER MARKETS
Gabon................................ .1 - - * -
Ghana................................ .4 .4 .3 * 17,415
Greece............................... 1.0 1.0 1.4 1.3 79,506
Mauritius............................ - - .1 * 4,573
Morocco.............................. - .1 .2 * 12,791
Portugal............................. .1 .3 .3 2.0 17,854
South Africa ........................ .4 .8 2.8 16.4 162,739
Turkey............................... 1.2 2.2 1.1 1.3 63,021
United States........................ .1 .1 .1 * 5,447
Virgin Islands....................... .6 - - * -
--- --- --- ---- -------
3.9 4.9 6.3 21.0 363,346
--- --- --- ---- -------
Multi-National....................... 1.3 1.2 1.1 65,281
--- --- --- -------
Other (3)............................ 1.8 1.7 1.0 55,299
--- --- --- -------
Cash & Equivalents................... 8.4 17.3 6.6 381,821
--- ---- --- -------
TOTAL................................ 100.0% 100.0% 100.0% $5,770,962
====== ====== ====== ==========
</TABLE>
(1) Morgan Stanley Capital International Emerging Markets Free Index includes
Israel(2.8%) and
Jordan(0.2%). An asterisk indicates that this market is not included in
the index. Source:
Morgan Capital International Perspective.
(2) Includes investments in companies incorporated outside the region which
have significant operations
in the region.
(3) Includes investments in markets where the holdings represent a percentage
of net assets of less than
.05%. Also includes stocks in initial period of acquisition and
investments in companies that have
substantial assets in developing countries and/or derive a substantial
proportion of their total
revenues from either goods and services produced in, or sales made in,
developing countries.
EMERGING MARKETS GROWTH FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
INDUSTRY DIVERSIFICATION Equity-Type Securities Bonds Percent of
------------------------------- Net Assets
Common Preferred Convertible
Stocks Stocks Bonds
- ---------------------------------------------------------------------------------
Telecommunications 11.88% 5.92% - 0.13% 17.93%
Utilities: Electric & Gas 8.52 3.52 - 0.04 12.08
Banking 10.05 0.41 0.48% 0.04 10.98
Beverages & Tobacco 5.01 0.56 - - 5.57
Energy Sources 3.40 0.67 - - 4.07
Equity Common Trusts 3.09 0.05 - - 3.14
Metals: Steel 2.19 0.54 0.09 0.14 2.96
Other Industries 28.75 3.17 0.78 3.96 36.66
72.89% 14.84% 1.35% 4.31% 93.39
====== ====== ===== =====
Short-Term Securities 7.37
Excess of liabilities (.76)
over cash and receivables -------
Net Assets 100.00%
</TABLE>
*******************
EMERGING MARKETS GROWTH FUND
<TABLE>
<CAPTION>
<S> <C> <C>
TEN LARGEST EQUITY HOLDINGS Percent of Percent of Gain/Loss
Net Assets for Six Months
Ended 12/31/95*
(in U.S. Dollars)
- -----------------------------------------------------------------------------------
Telecomunicacoes Brasileiras (Telebras) 4.02% +46.24%
Centrais Electricas Brasileiras (Eletrobras) 3.37 +2.53
Telefonos de Mexico 2.25 +7.99
Telecom Argentina STET-France Telecom 2.05 +4.25
Korea Electric Power 1.98 +13.49
Philippine Long Distance Telephone 1.85 -24.18
Mahanagar Telephone Nigam 1.52 -18.80
Telefonica de Argentina 1.44 +9.67
Bangkok Bank 1.41 +9.96
Samsung Electronics 1.36 +13.53
</TABLE>
* The percent change reflects the increase or decrease in the market price
per share of equity securities held in the portfolio for the entire period.
The actual gain or loss on the total position in the fund may differ from
the percentage shown.
EMERGING MARKETS GROWTH FUND, INC.
<TABLE>
<CAPTION>
Investment Portfolio - December 31, 1995
<S> <C> <C> <C>
EQUITY - TYPE SECURITIES Number of Market Percent
(common and preferred stocks and convertible debentures) Shares or Value of Net
Principal Amount (000) Assets
Argentina - 7.87%
Alpargatas SA Industrial y Comercial (1)
Astra Compania Argentina de Petroleo SA 5,333,432 $2,800 .05%
Banco de Galicia y Buenos Aires SA, Class B 9,792,450 18,114 .31
(American Depositary Receipts)
Banco de Galicia y Buenos Aires SA, 1,578,840 32,564
7.00% convertible bond August 1, 2002
Banco Frances del Rio de la Plata SA $10,570,000 9,777 .73
Banco Frances del Rio de la Plata SA 644,000 5,699
(American Depositary Receipts)
BI SA (acquired 10/31/94, cost: $3,130,000) 1,472,345 39,569 .79
(Previously listed as BISA-Bemberg Industrial SA) (2)
Buenos Aires Embotelladora SA, Class B 3,130,000 3,130 .05
(American Depositary Receipts)
Central Costanera SA, Class B 1,013,600 20,906 .36
Central Puerto SA, Class B 831,599 2,561 .04
Central Puerto SA, Class B (American Depositary Receipts) 315,545 1,199
(acquired 2/27/95, cost:$755,000) (2)
Compania Naviera Perez Companc SACFIMFA, Class B 51,820 984 .04
Hidroneuquen SA (acquired 11/11/93, cost: $26,649,000) 3,660,114 19,397 .34
(1)(2)
IRSA Inversiones y Representaciones SA 26,649,468 26,649 .46
(Global Depositary Receipts)
Nortel Inversora SA, Class A, preferred 57,670 1,471 .03
(American Depositary Receipts)
(acquired 11/24/92, cost:$10,760,000) (2)
Nortel Inversora SA, Class B, preferred 1,321,820 14,196
(American Depositary Receipts)
(acquired 2/27/92, cost: $23,049,000) (2)
Sociedad Comercial del Plata SA 1,676,260 25,982 .70
Telecom Argentina STET-France Telecom SA, 4,777,000 12,658 .22
Class B
Telecom Argentina STET-France Telecom SA, 9,954,072 46,979
Class B (American Depositary Shares)
Telefonica de Argentina SA, Class B 1,495,600 71,228 2.05
Telefonica de Argentina SA, Class B 4,000,000 10,799
(American Depositary Shares)
YPF SA, Class D 2,647,900 72,155 1.44
(American Depositary Receipts)
696,800 15,068 .26
---------- ----------
453,885 7.87
---------- ----------
Brazil - 14.80%
Aracruz Celulose SA,
(American Depositary Receipts)
Banco Bradesco SA, preferred nominative 449,200 3,481 .06
Banco Bradesco SA, preferred nominative, rights, 2,593,388,300 22,686
expire January 31, 1996
Banco Nacional SA, preferred nominative 60,638,635 100 .39
Banco Nacional SA, ordinary nominative 215,995,294 1,240
Brasmotor SA, preferred nominative 2,500,000 18 .02
CBV Industria Mecanica SA, preferred nominative 100,675,187 19,996 .35
Centrais Eletricas Brasileiras SA, preferred nominative 78,120,000 31 -
(American Depositary Receipts)
Centrais Eletricas Brasileiras SA, ordinary nominative 7,574,464 102,255
Centrais Eletricas Brasileiras SA, ordinary nominative 6,983,000 1,890
(American Depositary Receipts)
CESP-Companhia Energetica de Sao Paulo, 6,708,752 90,568 3.37
preferred nominative (1)
CESP-Companhia Energetica de Sao Paulo, preferred 92,650,000 2,697
nominative (American Depositary Receipts)
(acquired 8/30/94, cost: $43,527,000)(1)(2)
CESP-Companhia Energetica de Sao Paulo, ordinary 2,972,290 24,521
nominative (1)
COFAP-Companhia Fabricadora de Pecas, 287,617,854 6,512 .58
preferred nominative
Companhia Cervejaria Brahma, preferred nominative 548,716 2,711 .05
Companhia Cervejaria Brahma, ordinary nominative 78,332,015 32,245
Companhia Cimento Portland Itau, preferred nominative 224,483 95 .56
Companhia de Tecidos Norte de Minas-COTEMINAS, 36,472,500 8,708 .15
preferred nominative
Companhia Energetica de Minas Gerais-CEMIG, 37,463,500 12,530 .22
preferred nominative (American Depositary Receipts)(1)
Companhia Energetica de Minas Gerais-CEMIG, 3,047,043 66,654
preferred nominative (American Depositary Receipts)
(acquired 9/22/94, cost: $7,886,000) (1) (2)
Companhia Siderurgica Belgo-Mineira, preferred nominative 310,323 6,788 1.27
Companhia Siderurgica Belgo-Mineira, ordinary nominative 62,020,892 3,479
Companhia Siderurgica Belgo-Mineira Luxembourg 2,086,180 155
Companhia Siderurgica Nacional, ordinary nominative 2,813,639 229 .07
(American Depositary Receipts)
Companhia Suzano de Papel e Celulose 353,842 7,165 .12
Class B, preferred nominative(American Depositary Receipts)
Companhia Vale Do Rio Doce, preferred nominative 316,633 4,591 .08
(American Depositary Receipts)
Companhia Vidrararia Santa Marina, ordinary nominative 382,801 15,599 .27
GP Capital Partners, LP 1,824,372 6,196 .11
(acquired 1/28/94, cost: $23,408,000) (1) (2) (3)
Industrias Klabin de Papel e Celulose SA, 24,000 24,000 .42
preferred nominative (American Depositary Receipts)
Iochpe-Maxion SA, preferred nominative 1,056,720 9,114 .16
(American Depositary Receipts)
Lojas Americanas SA, preferred nominative 163,004 408 .01
Lojas Americanas SA, ordinary nominative 97,709,809 2,293
Lojas Americanas SA, preferred nominative, 34,361,200 750
warrants, expire May 3, 1996 (1)
Mesbla SA, preferred nominative (1) 1,153,009 794 .07
Metal Leve SA Industria e Comercio, 79,324,845 980 .02
preferred nominative
Petrobras Distribuidora SA-BR, preferred nominative 157,884,489 1,787 .03
Petroleo Brasileiro SA-PETROBRAS, preferred nominative 723,445,000 19,357 .34
Refrigeracao Parana SA, preferred nominative 428,960,000 36,636 .63
(American Depositary Receipts)
Telecomunicacoes Brasileiras SA, preferred nominative 410,000 3,895 .07
Telecomunicacoes Brasileiras, preferred nominative 59,500,000 2,866
(American Depositary Receipts)
Telecomunicacoes de Sao Paulo SA-Telesp, 4,836,609 229,134 4.02
preferred nominative
Telecomunicacoes de Sao Paulo SA-Telesp, 341,341,977 50,234
ordinary nominative
Usinas Siderurgicas de Minas Gerais SA, 112,931,000 16,329 1.15
preferred nominative (American Depositary Receipts)
1,550,305 12,403 .21
---------- ----------
854,120 14.80
Chile - 2.17% ---------- ----------
Banco Osorno y La Union, Class A
(American Depositary Receipts)
Banmedica SA 190,556 2,644 .05
CAP SA 4,500,000 1,674 .03
Chilgener SA (American Depositary Receipts) 1,100,000 4,755 .08
Compania de Telecomunicaciones de Chile SA 1,412,257 35,306 .61
(American Depositary Receipts)
CTI Compania Tecno Industrial SA 63,700 5,279 .09
Empresa Nacional de Electricidad SA 80,245,285 4,647 .08
(American Depositary Receipts)
Enersis SA (American Depositary Receipts) 1,322,600 30,089 .53
Forestal Terranova 1,175,982 33,515 .58
Invercap SA 550,000 779 .01
Sociedad Quimica y Minera de Chile SA, Class A 1,100,000 1,653 .03
991,300 4,712 .08
---------- ----------
125,053 2.17
China - 1.34% ---------- ----------
China North Industries Investment Ltd.
(acquired 9/30/94, cost: $5,727,000) (1)(2)
China Yuchai International Ltd. 5,500,000 4,950 .09
Guang Dong Electric Development Co. Ltd., Class B 1,015,500 8,251 .14
(acquired 5/31/95, cost: $8,452,000) (2)
Harbin Power Equipment Co. Ltd Class H 15,275,000 7,310 .13
Harbin Power Equipment Co. Ltd Class H 44,999,000 6,635
(American Depositary Receipts)
(acquired 11/30/94, cost: $3,336,000)(2)
Huaneng Power International Inc., Class N 99,000 1,460 .14
(American Depositary Receipts) (1)
Maanshan Iron & Steel Co. Ltd., Class H 1,174,100 16,878 .29
(acquired 10/14/93, cost: $6,812,000)(2)
NW China Investment Ltd.(2) 23,069,500 3,222 .06
(acquired 9/22/93, cost: less than $1,000) (1)(2)
Shanghai Diesel Engine Co. Ltd., Class B 600,000 0 -
Shanghai Petrochemical Co. Ltd., Class H 5,071,000 1,876 .03
Shanghai Petrochemical Co. Ltd., Class H 76,678,600 22,065
(American Depositary Receipts)
Yizheng Chemical Fibre Co. Ltd., Class H 7,000 199 .38
Zhenhai Refining & Chemical Co. Ltd., Class H 1,408,500 317 .01
22,906,000 4,296 .07
---------- ----------
77,459 1.34
---------- ----------
Colombia - 0.35%
Banco de Bogota
Banco de Colombia SA (Global Depositary Receipts)(1) 1,031,067 4,945 .09
Banco de Colombia SA, 5.20% convertible bond 880,000 4,400
February 1, 1999 (acquired 1/27/94, cost: $15,571,000) (2)
$14,250,000 10,687 .26
---------- ----------
20,032 .35
---------- ----------
Czech Republic - 0.10%
SPT Telecom ---------- ----------
60,000 5,671 .10
---------- ----------
Ecuador - 0.11%
La Cemento Nacional CA (Global Depositary Receipts)
(acquired 6/21/94, cost: $6,615,000) (2) ---------- ----------
37,648 6,400 .11
---------- ----------
Ghana - 0.30%
Ashanti Goldfields Co. Ltd. (Global Depositary Receipts) ---------- ----------
860,000 17,415 .30
---------- ----------
Greece - 1.38%
Aluminum of Grece Industrial and Commercial SA
Hellenic Bottling Co. SA 149,670 6,425 .11
Intracom SA, preferred 1,382,945 45,109 .78
Intracom SA, ordinary 20,000 354
Katselis SA, ordinary 476,620 10,250 .18
Michaniki SA, preferred 45,000 346 .01
Michaniki SA, ordinary 252,540 2,514
Titan Cement Co. SA, ordinary 652,220 8,372 .19
146,522 6,136 .11
---------- ----------
79,506 1.38
---------- ----------
Hong Kong - 1.03%
Consolidated Electric Power Asia Ltd.
Consolidated Electric Power Asia Ltd. 18,460,000 33,544
(American Depositary Shares)
(acquired 11/29/93, cost: $868,000) (2)
New World Infrastructure 53,600 974 .60
Siu-Fung Ceramics Holdings Ltd. 11,468,497 21,952 .38
Tian An China Investments Co. Ltd. 8,295,409 1,159 .02
Tian An China Investments Co. Ltd., warrants 13,610,700 1,690
expire January 25, 1996 (1)
1,327,500 2 .03
---------- ----------
59,321 1.03
---------- ----------
Hungary - 0.34%
Graboplast Textiles Muborgyarto RT (1)
Mol Magyar Olaj Es Gazipari RT 12,000 158 -
(Global Depositary Receipts)
2,460,100 19,681 .34
---------- ----------
19,839 .34
---------- ----------
India - 6.98%
Asian Paints (India) Ltd.
Bharat Forge Co. Ltd. 564,600 5,076 .09
Bombay Dyeing and Manufacturing Co. Ltd. 3,250 12 -
(Global Depositary Receipts)
East India Hotels Ltd. 90,000 855 .01
East India Hotels (Global Depositary Receipts) 664,777 9,400
EID Parry Ltd. (Global Depositary Receipts) (1) 100,000 1,775 .19
Essar Oil Ltd. 150,000 375 .01
Essar Oil Ltd., 12.50% optionally fully convertible debenture 100 0 -
Part C, February 28, 2003
Essar Oil Ltd., 12.50% optionally fully convertible debenture INR10500 0 -
Part B, February 28, 2003
Essar Steel INR4500 0 -
Flex Industries Ltd. 3,545,000 3,906 .07
Flex Industries Ltd., units (1 unit = 2 shares + 1/2 warrant) 393,800 1,639
Grasim Industries Ltd. 157,520 655 .04
Grasim Industries Ltd. 405,300 6,203
(Global Depositary Receipts)
Hindalco Industries Ltd. 820,500 16,820 .40
Hindalco Industries Ltd. (Global Depositary Receipts) 912,450 23,363
Hindustan Lever Ltd. 579,520 19,779 .75
India Fund, Class B 514,500 9,134 .16
India Magnum Fund , Class B, nonvoting shares (1) 3,306,718 5,443 .09
Indian Aluminum Co., Ltd. 20,000 880 .02
Indian Aluminum Co., Ltd. (Global Depositary Receipts) 181,000 875
Indian Rayon & Industries, Ltd. 1,008,771 6,305 .12
Indian Rayon & Industries, Ltd. 305,300 3,700
(Global Depositary Receipts)
Indo Gulf Fertilisers and Chemicals Corp. Ltd. 298,000 3,651 .13
Indo Gulf Fertilisers and Chemicals Corp. Ltd. 2,155,200 3,127
(Global Depositary Receipts)
I.T.C. Ltd. 1,770,900 2,656 .10
Madras Cement Ltd. 1,214,600 8,673 .15
Mahanagar Telephone Nigam Ltd. 11,000 2,754 .05
Mahindra & Mahindra Ltd. 20,541,000 87,657 1.52
Mahindra & Mahindra Ltd. 1,842,416 10,903
(Global Depositary Receipts)
Mastergain Scheme 545,000 7,014 .31
Max India 6,857,200 1,990 .03
Motor Industries Co. Ltd. 411,860 2,601 .05
Nicholas Piramal India Ltd. 170,890 29,025 .50
Nippon Denro Ispat Ltd., 3.00% convertible bond April 1, 2001 325,000 2,127 .04
(acquired 3/1/94, cost: $7,817,000) (2)
Ranbaxy Laboratories Ltd. 8,750,000 4,856 .08
Ranbaxy Laboratories Ltd. 1,037,150 19,032
(Global Depositary Receipts)
Raymond Woollen Mills Ltd. 777,800 19,538 .68
(Global Depositary Receipts)
SCICI Ltd. 690,100 11,387 .20
SCICI Ltd., 3.50% convertible Eurobonds 7,941,900 8,416
April 4, 2004
Sundaram Finance $3,620,000 3,674 .21
Tata Engineering and Locomotive Co. Ltd. 153,000 788 .02
Tata Engineering and Locomotive Co. Ltd. 816,000 8,822
(Global Depositary Receipts)
Tata Engineering and Locomotive Co. Ltd., 2,002,461 26,292
(Global Depositary Receipts), warrants,
expire March 8, 1996 (1)
United Phospherous Ltd. 1,412,800 6,711 .71
United Phospherous Ltd. 976,800 8,267
(Global Depositary Receipts)
Videocon International Ltd. 174,132 2,786 .19
Videocon International Ltd. 20,100 43
(Global Depositary Receipts)
Zee Telefilms Ltd. 62,200 171 -
934,200 3,422 .06
---------- ----------
402,578 6.98
---------- ----------
Indonesia - 6.43%
Asia Pacific Resources International Ltd.(1)
PT Astra International 1,217,000 5,781 .10
PT Bakrie & Brothers 16,582,400 34,486 .60
PT Bank Internasional Indonesia 3,226,200 5,862 .10
PT Eka Gunatma Mandiri, 4.00% convertible Eurobonds 6,692,000 22,194 .38
October 4, 1997
PT Fajar Surya Wiesea $ 1,030,000 1,185 .02
PT Gudang Garam 696,500 328 .01
PT Hanjeya Mandala Sampoerna 735,000 7,691 .13
PT Indah Kiat Pulp & Paper Corp. 4,758,000 49,580 .86
PT Indofood Sukses Makmur 29,307,750 21,493 .37
PT Indo-Rama Synthetics 15,189,250 73,153 1.27
PT International Nickel Indonesia 5,562,000 20,151 .35
PT Japfa Comfeed Indonesia 5,069,500 9,544 .17
PT Jaya Real Property 700,000 345 .01
PT Kabelmetal Indonesia 2,114,000 5,739 .10
PT Kalbe Farma 1,200,000 985 .02
PT Lippo Bank 362,000 1,228 .02
PT Mayora Indah 11,765,000 18,157 .31
PT Modern Photo Film Co. 10,380,000 7,499 .13
PT Mulia Industrindo 549,900 3,190 .06
PT Pabrik Kertas Tjiwi Kimia 2,092,245 5,909 .10
Perusahaan Perseroan (Persero)PT Indonesian 1,355,962 1,247 .02
Satellite Corp. (American Depositary Receipts)
Perusahaan Perseroan (Persero)PT Telekomunikasi 887,500 32,394 .56
Indonesia, Class B (American Depositary Receipts) (1)
PT Praxair Indonesia (1) 662,300 16,723 .29
PT Semen Gresik 142,700 34 -
PT Sorini Corp 3,565,000 9,989 .17
PT Supreme Cable Manufacturing Corp. 112,500 547 .01
PT Supreme Cable Manufacturing Corp., rights, expire January. 3, 1996 (1) 811,000 1,207 .02
PT Tambang Timah Class B(Global Depositary Receipts) (1) 405,500 5
PT Tigaraksa Satria 836,270 10,161 .18
1,207,300 4,229 .07
---------- ----------
371,036 6.43
---------- ----------
Malaysia - 4.16%
Arab Malaysian Finance Bhd.
Genting Bhd. 1,642,000 6,984 .12
Genting International PLC 3,547,500 29,618 .51
Hong Leong Credit Bhd. 8,301,000 13,531 .24
IJM Corp. Bhd. (MR) 1,593,000 7,905 .14
Leader Universal Holdings Bhd. 8,075,714 12,849 .22
Malaysian International Shipping Corp. Bhd. 8,920,000 20,375 .35
Nestle (Malaysia) Sdn. Bhd. 2,210,000 5,788 .10
O.Y.L. Industries Bhd. 4,765,000 34,904 .60
Renong Bhd. 1,165,437 9,042 .16
Renong Bhd., 2.50% convertible bond January 15, 2005 7,905,000 11,706
(acquired 10/20/94, cost:$2,554,000) (2)
Renong Bhd., 2.50% convertible Eurobonds $2,550,000 2,843
January 15, 2005
Resorts World Bhd. $2,855,000 3,183 .32
Sime Darby Bhd. 1,267,000 6,786 .12
Sime UEP Properties Bhd. 16,217,000 43,110 .75
Technology Resources Industries Bhd. (1) 3,344,000 5,268 .09
UMW Holdings Bhd. 2,614,000 7,721 .13
UMW Holdings Bhd., warrants, expire January 26, 2000 (1) 6,676,359 17,879
736,159 519 .31
---------- ----------
240,011 4.16
---------- ----------
Mauritius - 0.08%
State Bank of Mauritius ---------- ----------
10,927,000 4,573 .08
---------- ----------
Mexico - 9.11%
Apasco, SA de CV, Class A
CEMEX, SA, Class A 6,326,426 26,031 .45
CEMEX, SA, Class B 2,956,762 9,817
CEMEX, SA, ordinary participation certificates 6,535,551 23,828
Cifra, SA de CV, Class A 7,609,287 25,265 1.02
Cifra, SA de CV, Class B 8,694,000 9,622
Cifra, SA de CV, Class C 10,761,580 11,238
Corporacion Geo,SA de CV, Class B(aquire 8/29/95,cost$4,981,000) (2) 11,580,192 11,761 .57
Embotelladores del Valle de Anahuac, SA de CV, Class B 1,401,268 4,142 .07
Gruma, SA de CV, Class B 546,000 498 .01
Grupo Carso, SA de CV, Class A1 864,960 2,444 .04
Grupo Financiero Banamex Accival, SA de CV, Class B 4,448,300 24,095 .42
Grupo Financiero Banamex Accival, SA de CV, Class L 29,625,550 49,839
Grupo Financiero Banamex Accival, SA de CV, 7,474,093 11,153
7.00% convertible Eurobonds December 15, 1999
Grupo Financiero Banorte, SA de CV, Class B $2,520,000 2,028 1.09
Grupo Industrial Maseca, SA de CV, Class B 10,414,957 9,737 .17
(American Depositary Receipts)
Grupo Televisa, SA, ordinary participation certificates 5,700 52 -
Grupo Televisa, SA, ordinary participation certificates 375,000 4,443
(American Depositary Receipts)
Kimberly-Clark de Mexico, SA de CV, Class A 3,042,499 68,456 1.26
Panamerican Beverages, Inc., Class A 2,087,100 31,633 .55
Sigma Alimentos, SA de CV. Class B 1,459,200 46,695 .81
Telefonos de Mexico, SA de CV, Class A 400,000 2,552 .04
Telefonos de Mexico, SA de CV, Class L 7,487,500 12,089
Telefonos de Mexico, SA de CV, Class L 11,231,250 18,075
(American Depositary Receipts)
Tubos de Acero de Mexico, SA (1) 3,133,475 99,879 2.25
Tubos de Acero de Mexico, SA 1,012,200 7,420
(American Depositary Receipts) (1)
1,883,200 13,182 .36
---------- ----------
525,974 9.11
---------- ----------
Morocco - 0.22%
Banque Commercial du Maroc
Cimenterie de l'Oriental, Class A (1) 31,505 1,998 .04
ONA SA 92,503 3,575 .06
Societe des Brasserie du Maroc 56,000 2,158 .04
Wafabank Class A 20,500 1,944 .03
72,000 3,116 .05
---------- ----------
12,791 .22
---------- ----------
Pakistan - 1.08%
Chakwal Cement (Global Depository Receipts)(1)
Hub Power Co. (Global Depositary Receipts) (1) 891,111 6,461 .11
Pakistan Telecommunication Corp. 2,066,328 35,954 .62
(Global Depositary Receipts) (1)
236,100 20,068 .35
---------- ----------
62,483 1.08
---------- ----------
Peru - 0.78%
Credicorp Ltd. (1)
Ontario-Quinta AVV (acquired 8/15/94, cost: $12,000,000) (2) 1,944,560 33,544 .58
11,694,441 11,694 .20
---------- ----------
45,238 .78
---------- ----------
Philippines - 7.30%
Ayala Corp., Class B
Ayala Corp., Class B (Global Depositary Shares) 22,545,827 27,526
Ayala Land, Inc., Class B 514,976 4,635 .56
Bacnotan Consolidated Industries, Inc. 18,285,962 22,326 .39
Bacnotan Consolidated Industries, Inc., 5.50% convertible 336,235 1,924
bond June 21, 2004 (acquired 6/8/94, cost: $4,479,000) (2)
Benpres Holdings Corp. $4,500,000 3,825 .10
(Global Depositary Receipts) (1)
C&P Homes Inc., (1) 793,210 3,768 .07
International Container Terminal Services Inc. 7,251,900 5,326 .09
International Container Terminal Services Inc., 6.00% convertible 5,787,730 3,036
bond, February 19, 2000 (acquired 2/18/93, cost: $4,000,000) (2)
JG Summit Holdings, Inc., Class B $4,000,000 3,600 .11
JG Summit Holdings, Inc., Class B 28,256,600 7,762
(Global Depositary Shares)
JG Summit Holdings, Inc., 20,000 480
3.50% convertible bond December 23, 2003
Keppel Philippines Holdings,Inc., Class B $15,270,000 11,110 .34
Kepphil Shipyard, Inc. (1) 226,740 95 -
Manila Electric Co., Class B 136,960 7 -
Metropolitan Bank and Trust Co. 1,979,590 16,163 .28
Petron Corp. 1,857,350 36,141 .63
Petron Corp. (Global Depositary Receipts) 6,071,250 3,127
Philippine Commercial International Bank, Inc. 377,075 7,919 .19
Philippine Long Distance Telephone Co., ordinary 1,066,200 9,844 .17
Philippine Long Distance Telephone Co. 86,250 4,689
(American Depositary Receipts)(1)
Philippine Long Distance Telephone Co., convertible preferred, 1,531,305 82,882
Series II (Global Depositary Receipts)
Philippine Long Distance Telephone Co., convertible 474,000 14,694
preferred Series III (Global Depositary Shares)
Philippine National Bank 87,000 4,502 1.85
Pilipino Telephone Corp.(acquired 6/26/92, cost: $10,320,000)(1)(2) 1,233,072 13,643 .24
PR Holdings Inc., subscription rights (aquired 7/8/92, 32,504,000 32,864 .57
cost: $9,835,000)(1)(2)
San Miguel Corp., Class B 2,236,600 9,437 .16
Southeast Asia Cement Holdings (1) 20,486,772 69,957 1.21
Universal Robina Corp. 39,000,000 5,059 .09
Universal Robina Corp. (acquired 3/2/94, cost: $13,032,000) (2) 9,092,400 4,510
20,400,000 10,118 .25
---------- ----------
420,969 7.30
---------- ----------
Poland - 0.11%
Zaklady Piwowarskie w Zywcu SA (Previously listed as Zywiec) ---------- ----------
94,811 6,541 .11
---------- ----------
Portugal - 0.31%
Portugal Telecom ,SA
Portugal Telecom SA (American Depositary Receipts)(1) 100,000 1,879
Televisao Independente SA (1) 815,000 15,485 .30
105,500 490 .01
---------- ----------
17,854 .31
---------- ----------
RUSSIA AND FORMER REPUBLICS OF THE SOVIET UNION - 1.42%
Abacan Resource Corp. (1)
Abacan Resource Corp. (1) 3,000,000 8,470
Chernogorneft (Russian Depositary Trust Certificate) 2,803,000 7,533 .28
Gez Investment Holding Ltd.,Class A 70 4,641 .08
(aquired 9/11/95,Cost: $230,000)(1)(2)
Gez Investment Holding Ltd.,Class B 2,870 230
(aquired 9/11/95,Cost: $12,623,000)(1)(2)
J P Kenny Exploration & Production Ltd. 157,793 12,623 .22
Lukoil Holding (Russian Depositary Trust Certificate) 6,138,140 15,443 .27
New Century Capital Partners,L.P. 12 1,386 .02
(acquired 12/7/95,cost: $19,129,000)(!)(2)(3)
Russian Telecommunications Development Corp. 19,128,900 19,129 .34
(acquired 12/22/93, cost: $3,800,000) (1) (2)
Russian Telecommunications Development Corp., 380,000 3,800
nonvoting ordinary (acquired 12/22/93, cost: $6,200,000) (1) (2)
Star Mining Corp. NL 620,000 6,200 .17
19,740,000 2,491 .04
---------- ----------
81,946 1.42
---------- ----------
South Africa - 2.57%
AECI Ltd.
International Pepsi-Cola Bottling Investments 719,100 4,341 .08
(aquired 12/18/95,cost:$10,000,000)(1)(2)(3)
Iscor Ltd. 100,000 10,000 .17
Malbak Ltd. 20,477,857 18,430 .32
Nedcor Ltd. 2,653,833 18,386 .32
Nedcor Ltd., 8,600 148
(Global Depositary Receipts)
Nedcor Ltd., warrants, expire September 30, 1997 (1) 1,227,736 20,417
Polifin Ltd. 306,934 1,688 .38
Rembrandt Group Ltd. 677,000 1,087 .02
Sasol Ltd. 808,000 7,760 .13
South Africa Capital Growth Fund, Class D 6,176,609 50,589 .88
(acquired 8/25/95,cost:$13,650,000)(1)(2)(3)
South Africa Capital Growth Fund, Class A 13,650 13,650
(acquired 8/25/95,cost:$1,900,000)(1)(2)(3)
1,900 1,900 .27
---------- ----------
148,396 2.57
---------- ----------
South Korea - 7.84%
Cheil Foods & Chemicals, Inc., nonvoting preferred
Cheil Foods & Chemicals, Inc., 3.00% convertible 70,500 2,463
Eurobonds December 31, 2006
Daehan Asia Trust (International Depositary Receipts) 2,365,000 3,051 .10
Daehan Korea Trust (International Depositary Receipts) 2,820 3,384 .06
Daewoo Corp. 500 450 .01
Daewood Securities Co., Ltd., nonvoting preferred 257,738 2,990 .05
Daewood Securities Co., Ltd.,ordinary 421,270 7,181
HAITAI STORES CO., LTD. 415,674 10,825 .31
Hanil Bank 16,747 149 -
Hansol Paper Co., Ltd., preferred 3,488,280 40,212 .70
Hansol Paper Co., Ltd., ordinary 8,663 181
Hyundai Motor Co., nonvoting preferred,new 76,089 2,913 .05
(Global Depositary Receipts) (1)
Hyundai Motor Co., nonvoting preferred 586,800 9,095
(Global Depositary Receipts)
Korea Asia Fund Ltd. 508,000 7,747 .28
(International Depositary Receipts) (1)
Korea Electric Power Corp. 300 3,337 .06
Korea Electric Power Corp. 2,478,790 108,265
(American Depositary Receipts)
Korea First Bank 225,000 6,019 1.98
Korea Long Term Credit Bank 2,174,850 19,346 .34
Korea Mobile Telecommunications Corp. 349,841 10,272 .18
Korea Mobile Telecommunications Corp. 9,590 10,631
(Global Depositary Receipts)(1)
Korea Pacific Trust (International Depositary Receipts) (1) 45,300 2,005 .22
Kyongnam Bank 3,000 3,900 .07
Kyongnam Bank, new 600,000 6,126
LG Chemical Ltd., preferred 133,607 1,352 .13
LG Electronics Inc. 330,000 3,867 .07
LG Electronics, Inc. nonvoting preferred 48,840 1,700
LG Electronics, non-voting preferred 546,500 12,981
(Global Depositary Receipts)
LG Electronics Inc. new 756,100 9,829
LG Electronics Inc. new 2,304 79
(Global Depositary Receipts) (1)
LG Securities Co. Ltd. 16,896 265 .43
LG Securities Ltd., preferred 138,648 2,467
Pacific Chemical Industrial Co. Ltd. 590,460 6,470 .15
Pohang Iron & Steel Co., Ltd. 165,440 3,860 .07
Pohang Iron & Steel Co., Ltd. 346,650 24,300
(American Depositary Receipts)
Samsung Electronics Co., Ltd. 201,000 4,397 .50
Samsung Electronics Co., Ltd., new, 3/95 192,704 35,116
Samsung Electronics Co., Ltd., new, 8/95 40,313 7,294
Samsung Electronics Co., Ltd., nonvoting preferred, new 3/95 3,830 695
Samsung Electronics Co., Ltd., nonvoting preferred 12,515 1,451
Samsung Electronics Co., Ltd., nonvoting preferred 70,695 8,346
(Global Depositary Shares)
Samsung Electronics Co., Ltd.,ordinary 280,922 16,434
(Global Depositary Shares)
Seoul Asia Index Trust (International Depositary Receipts) 103,594 9,945 1.36
Seoul Horizon Trust 80 940 .02
Shinhan Bank 531,000 9,160 .16
Ssangyong Investments & Securities, Co., Ltd. 186,650 4,060 .07
Ssangyong Investments & Securities, Co., Ltd., nonvoting preferred 4,000 72
Ssangyong Oil Refining Co. Ltd. 61,090 642 .01
Taihan Electric Wire Co. 298,000 8,452 .15
Yukong Ltd. 123,148 3,334 .06
Yukong Ltd., new 309,755 10,702
Yukong Ltd., nonvoting preferred, 28,106 967
(Global Depositary Receipts)
Yukong Ltd., ordinary 230,000 2,300
(Global Depositary Receipts)
27,558 428 .25
---------- ----------
452,447 7.84
Sri Lanka - 0.16% ---------- ----------
Asian Hotel Corp.
Development Finance Corp. of Ceylon 6,107,500 1,655 .03
National Development Bank 1,258,310 7,055 .12
96,200 395 .01
---------- ----------
9,105 .16
Taiwan - 2.31% ---------- ----------
Acer Inc. (1)
Acer Inc.(1) 2,130,000 4,918
(Global Depositary Receipts)
Acer Inc., 4.00% convertible Eurobonds June 10, 2001 735,000 9,555
Advance Semiconductor Engineering, Inc. $2,380,000 6,902 .37
Advance Semiconductor Engineering, Inc. 2,441,000 5,904
(Global Depositary Receipts)(1)
Chia Hsin Cement Corp. 360,000 4,761 .18
(Global Depositary Receipts)
China Steel Corp. 645,700 5,375 .09
China Steel Corp. 7,900,000 6,312
(American Depositary Receipts)
China Steel Corp . 813,000 14,126
(Global Depositary Shares)
Hocheng Corp Ltd., (Global Depositary Receipts) 300,000 5,213 .45
Nan Ya Plastics Corp. 112,361 1,101 .02
R.O.C. Taiwan Fund 700,000 1,062 .02
Siliconware Precision Industries Co.,Ltd.(1) 26,000 273 -
Siliconware Precision 1,485,000 3,973
(Global Depositary Receipts)(1)
Sin-Yih Ceramics Co. Ltd. 13,000 215 .07
Taiwan American Fund, nonvoting, preferred (1) 1,500,000 2,298 .04
Taiwan Opportunities Fund, series C (1) 600,000 6,300 .11
Taiwan Semiconductor Manufacturing Co. Ltd..(1) 200,000 2,130 .04
Ton Yi Industrial Corp.(1) 14,815,000 46,422 .80
U-Ming Marine Transport Corp.(1) 3,803,640 5,004 .09
1,570,000 1,669 .03
---------- ----------
133,513 2.31
---------- ----------
Thailand - 4.94%
Alphatec Electronics Public Co. Ltd.
(acquired 6/26/95,cost:$8,516,000)(2)
Ayudhya Jardine CMG Life Assurance 520,000 7,434 .13
(Formerly Ayudha Life Assurance Co.,Ltd.)
Bangkok Bank Public Co. Ltd. 84,547 349 .01
Bangkok Bank Public Co.Ltd., 3.25% convertible bond 6,360,240 77,293
March 3, 2004 (acquired 8/4/94, cost: $961,000) (2)
Bangkok Bank Public Co. Ltd., 3.25% convertible $1,000,000 1,060
Eurobond March 3, 2004
Bangkok Metropolitan Bank Public Co. Ltd. $3,630,000 3,848 1.41
Bank of Ayudhya Co. Ltd. 1,052,500 982 .02
Charoen Pokphand Feedmill Public Co. Ltd. 4,224,240 23,654 .40
Dusit Thani Public Corp. Ltd. 1,575,600 7,696 .13
Electricity Generating Authority of Thailand (1) 990,000 1,455 .03
Electricity Generating Authority of Thailand, 7,392,217 25,247
local registered (1)
Industrial Finance Corp. of Thailand 22,530 67 .44
MBK Properties & Development Co. Ltd. 3,593,800 12,203 .21
Nakhornthai Integrated Steel Co., Ltd. 4,000,000 5,639 .10
Post Publishing Public Co. Ltd. 11,213,400 12,915 .22
SCF Finance and Securities Public Co.Ltd. 1,010,000 5,616 .10
Serm Suk Public Co. Ltd. 92,451 292 .01
Serm Suk Public Co. Ltd., local registered 210,166 3,255
Siam City Bank Public Co. Ltd. 64,960 1,006 .07
Siam City Credit Finance and Securities Public Co. Ltd. 8,140,010 9,375 .16
Siam Commercial Bank, Public Co.Ltd. 73,417 347 .01
Thai Farmers Bank Public Co. Ltd. 1,340,200 17,671 .31
Thai Military Bank Public, Ltd. 4,836,600 48,789 .85
Wattachak Public Co. Ltd., 3,243,684 13,140 .23
3.50% convertible bond December 6, 2003
$6,400,000 5,952 .10
---------- ----------
285,285 4.94
Turkey - 1.09% ---------- ----------
Adana Cimento Sanayii TAS, Class A
Adana Cimento Sanayii, TAS Class C 24,145,229 3,127
Arcelik AS 9,611,136 232 .06
Eczacibasi Ilac Sanayi ve Ticaret AS (1) 49,620,352 3,986 .07
Ege Biracilik ve Malt Sanayii AS 1,776,600 100 -
KOC Holding AS, ordinary 27,959,940 9,626 .17
Migros Turk 59,021,018 8,418 .15
Netas Northern Electric Telekomunikasyon AS 3,720,000 2,836 .05
Turkiye Garanti Bankasi AS 24,700,000 6,985 .12
Turkiye Garanti Bankasi AS 66,826,513 5,587
(American Depositary Receipts) (1)
Turkiye Sise ve Cam Fabrikalari AS 449,000 3,816 .16
Yapi ve Kredi Bankasi AS 132,643,312 15,439 .27
70,000,000 2,869 .04
---------- ----------
63,021 1.09
---------- ----------
United States - 0.09%
Atlantic Tele-Network Inc.(1)
Freeport-McMoRan Copper & Gold Inc., Class A 270,700 2,927 .05
90,000 2,520 .04
--------- --------
5,447 .09
---------- ----------
Venezuela - 0.10%
Compania de Inmuebles Y Valores Caracas (1)
Fabrica Nacional de Cementos SACA 72,655,270 0 -
Mavesa SA (American Depositary Receipts) 14,531,054 1,068 .02
(acquired 10/28/93, cost:$4,385,000) (2)
Venezolana de Cementos, SACA I 578,441 2,025 .04
Venezolana de Cementos, SACA II 1,579,719 1,938
Venezolana de Prerreducidos Caroni CA 321,192 345 .04
(Global Depositary Shares)
46,300 156 -
---------- ----------
5,532 .10
---------- ----------
Vietnam - 0.11%
Vietnam Frontier Fund
(acquired 7/21/94, cost: $3,000,000) (1) (2)
Vietnam Investment Fund, preferred, units 291,300 3,000 .05
(acquired 8/4/94, cost: $3,206,000) (1) (2) (3)
Vietnam Investment Fund, ordinary, units 30 3,206
(acquired 8/4/94, cost: less than $1,000) (1) (2) (3)
6 0 .06
---------- ----------
6,206 .11
---------- ----------
Multi National - 1.14%
Emerging Markets Gold Fund
(acquired 1/28/94, cost: $9,563,000) (1) (2) (3) ---------- ----------
New Europe East Investment Fund, Class B 9,563 9,563 .17
(acquired 6/4/93, cost $54,500,000)(1)(2)(3)(4)
436 55,718 .97
--------- -------
65,281 1.14
Miscellaneous - 0.96%
Equity-type securities in initial period of acquisition(5) ---------- ----------
55,299 .96
---------- ----------
TOTAL EQUITY-TYPE SECURITIES (cost: $4,447,842,000)
---------- ----------
5,140,227 89.08
---------- ----------
Principal
Amount
BOND & NOTES (000)
Argentina - 0.39%
Republic of Argentina Bocon PIK
4.57% April 1, 2001(6)
Republic of Argentina Bearer Bond Series L 6.8125% ARP2000 1,088 .02
March 31, 2005(6)
Republic of Argentina Eurobond Series L 13,000 9,262 .16
5.00% March 31, 2023 (6)
Telecom Argentina $11,000 6,297 .11
10.00% November 15, 2002
5,750 6,138 .10
---------- ----------
22,785 .39
---------- ----------
Brazil - 0.71%
Federal Republic of Brazil Capitalization Bond PIK
8.00% April 15, 2014
Federal Republic of Brazil Debt Conversion Bond Series LI 23,612 13,488 .23
6.875% April 15, 2012 (6)
Federal Republic of Brazil Bond Series Z 43,000 24,671 .43
4.25% April 15, 2024 (6)
Republic of Minas Gerais Series A 2,250 1,190 .02
7.875% February 10, 1999
Republic of Minas Gerais Series B 1,500 1,260 .02
8.250% February 10, 2000
500 414 .01
---------- ----------
41,023 .71
Colombia - 0.02% ---------- ----------
Communicacio Cellular SA
0%/13.125% November 15, 2003 (1)(7)
2,000 1,143 .02
---------- ----------
Ecuador - 0.45%
Republic of Equador Discount Bond
6.8125% February 28, 2005(6)
Republic of Equador Past Due Interest Bonds 65,919 11,378 .20
6.8125% February 27, 2015(6)
43,669 14,543 .25
---------- ----------
25,921 .45
---------- ----------
India - 0.01%
Flex Industries 13.50% December 31, 2004
INR 29,929 851 .01
---------- ----------
Mexico - 0.47%
Banco Nacional de Com ercio Exterior International Finance
7.250% February 2, 2004
MC-Cuernavaca Toll Road Trust 3,250 2,515 .04
9.250% July 25, 2001
Tubos de Acero de Mexico, 1,571 1,074 .02
13.75% December 8, 1999
United Mexican States Discount Bond Series A 7,500 7,594 .13
6.76563% December 31, 2019(6)
United Mexican States Discount Bond Series B 16,250 11,720 .08
6.76563% December 31, 2019(6)
6,000 4,327 .20
---------- ----------
27,230 .47
---------- ----------
Panama - 0.78%
Republic of Panama/Agent-Bank of America NTSA
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA)(1)(6)(8)(9)
Republic of Panama/Agent-Bank of America NTSA/ 28,921 12,289 .21
Loan Participation Agreements
(Participation-Citibank, NA)(1)(6)(8)(9)
Republic of Panama/Agent-Bank of America NTSA/ 28,400 12,060 .21
Loan Participation Agreements
(Participation-Chase Manhattan Bank NA
(1)(6)(8)(9)
Republic of Panama/Agent-Generale Bank NV SA/ 6,993 2,880 .05
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA)(1)(6)(8)(9)
Republic of Panama/Agent-Generale Bank NV SA / 4,956 2,113 .04
Loan Participation Agreements
(Participation-Citibank, NA)(1)(6)(8)(9)
Republic of Panama/Agent-Chase Manhattan Bank NA/ 848 360 .01
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA)(1)(6)(8)(9)
Republic of Panama/Agent-MUL/ 6,660 2,828 .06
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA)(1)(6)(8)(9)
Republic of Panama/Agent-First Chicago Limited/ 314 144 -
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA)(1)(6)(8)(9)
Republic of Panama/Agent-Bank of America NTSA/ 1,482 626 .01
Loan Participation Agreements
(Participation-Citibank, NA)(!)(6)(8)(9)
Republic of Panama Interest Reduction Bond 21,325 9,000 .16
3.50% due 12/29/49
4,250 1,929 .03
---------- ----------
44,229 .78
---------- ----------
Peru - 1.16%
Republic of Peru /Agent-Bankers Trust Company/
Loan Participation Agreements
(Participation-Citibank, NA.) (1)(6)(8)(9)
Republic of Peru /Agent-Chemical Bank/ 10,764 3,780 .07
Loan Participation Agreements
(Participation-Citibank, NA)(1)(6)(8)(9)
Republic of Peru/Agent-Chemical Bank/ 3,544 1,260 .02
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(6)(8)(9)
Republic of Peru/Agent-Citibank, NA/ 4,085 1,440 .02
Loan Participation Agreements
(Participation-Salomon Brothers) (1)(6)(8)(9)
Republic of Peru/Agent-Citibank, NA/ 20,278 6,444 .11
Loan Participation Agreements
(Participation-Citibank, NA) (1)(6)(8)(9)
Republic of Peru/Agent-Citibank, NA/ 20,971 7,020 .12
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(6)(8)(9)
Republic of Peru/Agent-Morgan Guaranty Trust/NA/ 41,364 14,562 .25
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(6)(8)(9)
Republic of Peru/Agent-Wells Fargo Bank 8,720 3,060 .05
Loan Participation Agreements
(Participation-Citibank, NA) (1)(6)(8)(9)
Republic of Peru/Agent-Wells Fargo Bank/ 20,657 7,326 .13
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(6)(8)(9)
Republic of Peru/Agent-Wells Fargo Bank/ 35,534 12,528 .22
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(6)(8)(9)
26,550 9,540 .17
---------- ----------
66,960 1.16
---------- ----------
Philippines - 0.04%
Subic Power Corp. 9.50% December 28, 2008
2,670 2,535 .04
---------- ----------
2,535 .04
---------- ----------
Poland - 0.03%
Republic of Poland Discount Bond
7.125% October 27, 2024 (6)
2,500 1,894 .03
South Africa - 0.25%
Republic of South Africa 13.00% August 31, 2010
56,750 14,343 .25
TOTAL BONDS AND NOTES (cost: $ 206,915,000) ---------- ----------
248,914 4.31
---------- ----------
SHORT-TERM SECURITIES
CORPORATE SHORT-TERM NOTES - 4.02%
Abbey National North America 5.72% due 01/29/96
Bayerische Landesbanke Girozentrale 5.66%-5.70%due01/3-02/05/96 10,000 9,954 .17
Ford Credit Europe PLC 5.71% due 1/17/96 39,800 39,667 .69
Glaxo Welcome PLC.5.65%-5.70% due 01/22-02/14/96 11,800 11,769 .20
Halifax Building Society. 5.67% due 1/16/96 30,100 29,959 .52
National Australia Funding(Dela) Inc.5.70%-5.75%due 1/11-1/22/96 50,000 49,872 .86
Nestles Capital Corp. 5.56%-5.69% due 01/30/96-02/08/96 26,400 26,338 .46
Toyota Motor Credit Corp. 5.68-5.71% due 01/12/96-02/09/96 30,800 30,631 .53
UBS Finance ( Delaware ) Inc. 5.85% due 01/02/96 26,550 26,401 .46
7,600 7,598 .13
---------- ----------
232,189 4.02
Federal Agency Discount Notes - 0.17%
Federal Farm Credit 5.55% due 02/02/96 ---------- ----------
10,000 9,949 .17
---------- ----------
Certificates of Deposit - 1.77%
Banque Nationale de Paris 5.780% due 02/01/96
Bayerische Hypotheken-Und Wechsel-Bank AG 37,000 36,999 .64
5.81% due 1/18/96
Deutsche Bank 5.77% due 01/19/96 25,000 25,000 .43
National Westminister Bank PLC. 5.78% due 01/16/96 15,000 15,000 .26
Societe Generale 5.78% due 01/16/96 10,000 10,000 .17
15,200 15,200 .27
---------- ----------
102,199 1.77
---------- ----------
Non-U.S. Government Short -Term Obligations - 0.45%
Certificados de la Tesoreria due 1/18/96 ---------- ----------
Hidroelectrica Piedra DelAguila, S.A. 15.00% due 11/27/96 10,460.00 13,353 .24
Mesbla SA, Series 2, 13.25% convertible 6,500,000 6,500 .11
bond November 1, 1996
Polish Government Treasury Bills due 4/18-7/31/96 R$ 25,190,000 251 -
PLZ 15,800 5,933 .10
---------- ----------
26,037 .45
Non-U.S. Currency - 0.96%
Chilean Peso
New Taiwanese Dollar CHP 5,940,689 14,632 .26
NT$ 1,105,164 40,503 .70
---------- ----------
55,135 .96
---------- ----------
TOTAL SHORT-TERM SECURITIES (cost:$429,487,000)
425,509 7.37
TOTAL INVESTMENT SECURITIES (cost: $5,084,244,000) ---------- ----------
Excess of liabilities over cash and receivables 5,814,650 100.76
43,688 .76
NET ASSETS ---------- ----------
$5,770,962 100.00
</TABLE>
1. Non- income-producing securities.
2. Purchased in a private placement transaction: resale to the public may
require registration, and no
right to demand registration under U.S. law exists. As of December 31,
1995, the total market value
and cost of such securities was $394,170,000 and
$407,230,000,respectively, and the market value
represented 6.83% 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 advisor.
5. Does not include an agreement, totaling $43,000,000, to purchase over a
multi-year period shares of
New Asia East Investment Fund, a company managed by Capital International,
Inc. The commitment to
purchase will not be recorded until certain regulatory approvals are
obtained.
6. Coupon rate may change periodically.
7. Respresents a zero coupon bond which will convert to a coupon-bearing
security at a later date.
8. Security is currently in default.
9. Participation interests were acquired through the financial instituition
indicated parenthetically.
Non-U.S. Currency Symbols:
ARP - Argentine Peso
C$ - Canadian Dollar
CHP - Chilean Peso
INR - Indian Rupee
NT$ - New Taiwanese Dollar
PHP - Philippine Peso
R$ - Brazilian Real
ZAR - South African Rand
See Notes to Financial Statements
EMERGING MAREKTS GROWTH FUND
EQUITY-TYPE SECURITIES ELIMINATED
EQUITY-TYPE SECURITIES ADDED TO THE FROM THE
PORTFOLIO SINCE JUNE 30, 1995 PORTFOLIO SINCE JUNE 30, 1995
- ----------------------------------- ---------------------------------
<TABLE>
<CAPTION>
<S> <C>
Acer Akbank Turk
Advanced Semiconductor Engineering Banco Comercial Portugues
AECI Banco de Credito del Peru (1)
Aluminum de Grece Industrial and Commercial Essar Gujarat
Arab-Malaysian Finance Hopewell Holdings
Asia Pacific Resources International Hutchison Delta Finance
Asian Paints (India) PT Inti Indorayon Utama
Banco Nacional ITI Sociedade de Investimentos Turisticos na
Banco Osorno y La Union Ilha da Madeira
Banque Commerciale du Maroc Medya Holding
Bharat Forge Samsung Co.
Bombay Dyeing and Manufacturing Tan Chong Motor Holdings
C & P Homes Tolmex
Chernogorneft Tung Ho Steel Enterprise
Companhia de Tecidos Norte Minas - COTEMINAS
Corporacion Geo
PT Eka Gunatma Mandiri
Essar Oil
PT Fajar Surya Wiesea
Gez Investments
PT Hanjaya Mandala Sampoerna
Hindustan Lever
Hong Leong Credit
PT Indo-Rama Synthetics
International Pepsi-Cola Bottling Investments
Iscor
Korea Mobile Telecommunications
PT Lippo Bank
Lukoil Holding
Malbak
Mol Magyar Olaj Es Gazipari
PT Mulia Industrindo
New Century Capital Partners
New World Infrastructure
ONA
Perusahaan Perseroan (Persero)
PT Telekomunikasi Indonesia
Polifin
Rembrandt Group
SCF Finance and Securities
PT Semen Gresik
Siam City Credit Finance and Securities
Siliconware Precision Industries
Sin-Yih Ceramic
Societe des Brasseries du Maroc
PT Sorini
South Africa Capital Growth Fund
Southeast Asia Cement
State Bank of Mauritius
Taiwan American Fund
Taiwan Opportunities Fund
Taiwan Semiconductor Manufacturing
PT Tambang Timah
Ton Yi Industrial
U-Ming Marine Transport
Wafabank
</TABLE>
(1) Banco de Credito del Peru shares were exchanged for
holdings in Credicorp.
<TABLE>
<CAPTION>
<S> <C> <C>
EMERGING MARKETS GROWTH FUND
Statement of Assets and Liabilities
at December 31, 1995 (dollars in thousands)(Unaudited)
- --------------------------------------------------------------------------
Assets:
Investment securities at market
(cost: $5,084,244) ............... $5,814,650
Cash ............................... 440
Receivables for--
Sales of investments ............. $32,914
Sales of fund's shares 14,979
Open forward currency contracts 41
Dividends and accrued interest ... 27,084 75,018
------------------ ----------------
5,890,108
Liabilities:
Non-U.S. taxes payable 5,056
Payables for--
Purchases of investments ......... 31,363
Unfunded capital commitments 74,322
Management services .............. 3,273
Accrued expenses ................. 5,132 114,090
------------------- ----------------
119,146
----------------
Net Assets at December 31, 1995 -- $5,770,962
Equivalent to $50.28 per share on ================
114,773,911 shares of $0.01 par
value capital stock outstanding
(authorized capital stock --
200,000,000 shares).........
Statement of Operations for the Six Months Ended December 31, 1995
(dollars in thousands)(Unaudited)
- --------------------------------------------------------------------------
Investment Income:
Income:
Dividends ........................ $37,605
Interest ......................... 35,789 $73,394
------------------
Expenses:
Management services fee .......... 19,736
Custodian fee .................... 4,273
Registration statement and 545
prospectus.......................
Auditing and legal fees .......... 87
Reports to shareholders .......... 4
Taxes other than federal 1
income tax .....................
Postage, stationery and supplies 1
Other expenses ................... 301 24,948
------------------ ----------------
Income before non-U.S. taxes........ 48,446
Non-U.S. taxes...................... (364)
----------------
Net investment income .............. 48,082
----------------
Realized Gain and Unrealized 29,360
Depreciation on Investments:
Realized gain before non-U.S. taxes.....
Non-U.S. taxes...................... (531)
------------------
Net realized gain................. 28,829
Net change in unrealized (129,622)
depreciation on investments.....................
Net unrealized appreciation on open 41
forward currency contracts......... ------------------
Net unrealized depreciation ...... (129,581)
Non-U.S. taxes.. 2,005 (127,576)
------------------ ----------------
Net realized gain and unrealized (98,747)
depreciation on investments..... ----------------
Net Decrease in Net Assets Resulting ($50,665)
from Operations ................. ================
Statement of Changes in Net Assets (dollars in thousands)
- ---------------------------------------------------------------------------
Six Months Ended Year Ended
December 31, 1995(1) June 30, 1995
------------------ ----------------
Operations: $85,015
Net investment income.............. $48,082
Net realized gain on 28,829 305,354
investments .......................
Net unrealized depreciation (127,576) (486,957)
on investments ................... ------------------ ----------------
Net decrease in net assets (50,665) (96,588)
resulting from operations ...... ------------------ ----------------
Dividends and Distributions Paid (40,981) (61,624)
to Shareholders:
Dividends from net
investment income ................
Distributions from net realized (140,664) (456,090)
gain on investments .............. ------------------ ----------------
Total dividends and (181,645) (517,714)
distributions .................. ------------------ ----------------
Capital Share Transactions: 251,679 1,502,619
Proceeds from shares sold:
4,675,641 and 26,840,022 shares,
respectively.....................
Proceeds from shares issued in 179,783 513,177
reinvestment of net investment ------------------ ---------------
income dividends and
distributions of net realized
gain on investments:
3,678,055 and 8,593,036 shares,
respectively......................
Net increase in net assets 431,462 2,015,796
resulting from capital share ------------------ ----------------
transactions ...................
Total Increase in Net Assets 199,152 1,401,494
Net Assets: 5,571,810 4,170,316
Beginning of period ............... ------------------ ----------------
End of period (including undistributed
net investment income and excess
distributions over net investment
income: $4,691 and $2,410,respectively) $5,770,962 $5,571,810
================== ===============
</TABLE>
(1) Unaudited.
See Notes to Financial Statements
EMERGING MARKETS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 traded on a national securities exchange (or
reported on the NASDAQ national market) and securities traded in the
over-the-counter market are stated at the last reported sales price on the day
of valuation; other securities, and securities for which no sale was reported
on that date, are stated at the last quoted 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 of Directors as
the primary market. 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 prices for securities of comparable maturity, quality, and type.
Short-term securities with original or remaining maturities in excess of 60
days, including forward currency contracts, 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,
including forward currency contracts, 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 period. 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.
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 $4,273,000 includes $119,000 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 December 31, 1995, net unrealized appreciation on investments,
excluding forward currency contracts, for federal income tax purposes
aggregated $719,831,000, net of accumulated deferred taxes totaling $2,162,000
on net unrealized appreciation of Chilean and Indian securities, of which
$1,295,909,000 related to appreciated securities and $576,078,000 related to
depreciated securities. There was no difference between book and tax realized
gains on securities transactions for the six months ended December 31, 1995.
The cost of portfolio securities, excluding forward currency contracts, for
federal income tax purposes was $5,135,657,000 at December 31, 1995.
4. The fee of $19,736,000 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 December 31, 1995, accumulated excess distributions of net realized
gains was $6,232,000 and additional paid-in capital was $5,043,938,000. The
fund made purchases and sales of investment securities, excluding short-term
securities, of $1,402,969,000 and $481,745,000, respectively, during the six
months ended December 31, 1995.
Dividend and interest income is recorded net of non-U.S. taxes paid. For
the six months ended December 31, 1995, such non-U.S. taxes were $4,279,000.
Net realized currency losses on dividends, interest, withholding taxes
reclaimable, and sales of non-U.S. bonds were $691,000 for the six months ended
December 31, 1995.
The fund may enter into forward currency contracts, which represent an
agreement to exchange currencies of different countries at a specified future
date at a specified rate. The fund purchased forward currency contracts to
hedge the foreign exchange exposure in the Polish Government Treasury Bills
held by the fund. The Polish Government has pegged the Zloty to a basket of
currencies, and the forward currency contracts protect the fund against
movements in these currencies against the U.S. dollar. The fund's use of
forward currency contracts involves market risk in excess of the amount
recognized in the statement of assets and liabilities. The contracts are
recorded in the statement of assets and liabilities at their net unrealized
value. The face or contract amount in U.S. dollars reflects the total exposure
the fund has in that particular contract. Losses may arise upon entering these
contracts from the potential inability of counterparties to meet the terms of
their contracts and from the possible movements in non-U.S. exchange rates and
securities values underlying these instruments. At December 31, 1995, the fund
had outstanding forward currency contracts to sell non-U.S. currencies as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NON-U.S. CURRENCY SALE CONTRACTS
Contract Amount U.S. Valuation at 12/31/95
------------------------ --------------------------
Non-U.S. U.S. Amount Unrealized
Appreciation
- -------------------------------------------------------------------------------------------
French Francs
expiring 2/9/96 FF 1,288,000 $ 263,000 $ 263,000 $ 0
German Deutschemarks
expiring 2/9/96 DM 2,642,000 1,873,000 1,843,000 30,000
Pound Sterling
expiring 2/9/96 L 256,000 403,000 397,000 6,000
Swiss Francs
expiring 2/9/96 SFR 318,000 281,000 276,000 5,000
-------------
$41,000
=============
</TABLE>
******************
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Six months Year ended June 30
ended ------------------------------------------------
12/31/95/1/
1995 1994 1993 1992 1991
---------- ------------------------------------------------
Net Asset Value, Beginning of
Period $52.36 $58.75 $44.95 $38.64 $32.73 $32.81
-------- -------- -------- ------- ------- -------
Income from Investment Operations:
Net investment income .......... .43 .87 .53 .62 .55 .83
Net realized and unrealized
gains (losses) on investments
before non-U.S. taxes ......... (.87) (.79) 15.29 7.33 8.87 3.89
Non-U.S. taxes ................. - (.03) (.39) .06 (.28 ) (.38 )
-------- -------- -------- ------- ------- -------
Total income from
investment operations......... (.44) .05 15.43 8.01 9.14 4.34
-------- -------- -------- ------- ------- -------
Less Distributions:
Dividends from net
investment income.............. (.37) (.63) (.49) (.56) (.56) (.92)
Distributions from net
realized gain.................. (1.27) (5.81) (1.14) (1.14) (2.67) (3.50)
-------- -------- -------- ------- ------- -------
Total distributions ........... (1.64) (6.44) (1.63) (1.70) (3.23) (4.42)
-------- -------- -------- ------- ------- -------
Net Asset Value, End of Period ... $50.28 $52.36 $58.75 $44.95 $38.64 $32.73
======= ======= ======= ======= ======== =======
Total Return .................... (.75)%/2/ (1.22)% 34.33% 21.55% 29.73% 18.08%
Ratios/Supplemental Data:
Net assets, end of period
(in millions).................... $5,771 $5,572 $4,170 $2,574 $1,561 $703
Ratio of expenses to average
net assets....................... .44%/2/ .91% 1.00% 1.01% 1.11% 1.18%
Ratio of expenses and non-U.S.
taxes to average net assets ..... .44%/2/ .94% 1.04% 1.07% 1.18% 1.31%
Ratio of net income to average
net assets ...................... .84%/2/ 1.70% .91% 1.82% 1.84% 2.78%
Portfolio turnover rate .......... 9.31%/2/ 23.75% 18.13% 11.97% 16.03% 26.38%
</TABLE>
/1/ Unaudited
/2/ Based on operations for the period shown and accordingly,
not representative of a full year's operations.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
NEW WORLD INVESTMENT FUND
Semi-Annual Financial Statements as of December 31, 1995.
Investment Portfolio - December 31, 1995 (Unaudited)
Equity-Type Securities
------------------------------------
INDUSTRY DIVERSIFICATION Common Preferred Convertible
Stocks Stocks Bonds Bonds Percent of Net Assets
- ----------------------------------- -----------------------------------------------------------------------------
Telecommunications 10.10% 10.75% - 0.25% 21.10%
Building Materials & Components 7.35 1.05 1.09% - 9.49
Utilities: Electric & Gas 5.52 3.05 - 0.43 8.79
Banking 4.14 0.84 1.77 - 6.75
Beverages & Tobacco 2.90 1.38 - - 4.28
Metals: Steel 1.98 1.57 0.10 0.43 4.08
Appliances & Household Durables .24 3.52 - - 3.76
Other Industries 18.43 6.10 - 9.05 33.58
------ ------ ----- ------ ------
50.66% 28.26% 2.96% 9.95% 91.83
Short-Term Securities 8.06
Excess of cash and receivables over 0.11
liabilities -------
Net Assets 100.00%
=======
</TABLE>
*******
<TABLE>
<CAPTION>
<S> <C> <C>
NEW WORLD INVESTMENT FUND
TEN LARGEST EQUITY HOLDINGS Percent of Net Assets Market Value of Holdings
12/31/95 (in thousands)
- -------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras 9.08% $21,149
Telefonos de Mexico 4.09 9,516
CEMEX 3.96 9,230
Brasmoter 3.52 8,198
Telefonica de Argentina 2.96 6,901
Panamerican Beverage 2.81 6,531
Kimberly-Clark de Mexico 2.22 5,171
Apasco 2.15 5,003
Cifra 2.09 4,871
Grupo Financiero Banamex Accival 2.08 4,853
----- -------
34.96% $81,423
===== =======
</TABLE>
NEW WORLD INVESTMENT FUND
Investment Portfolio - December 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C>
EQUITY-TYPE SECURITIES Number of Shares Market Value Percent of
(common and preferred stocks and convertible debentures) or Principal Amount (000) Net Assets
- ----------------------------------------------------------- ------------------ ------- ----------------
Argentina - 12.34%
Astra Compania Argentina de Petroleo SA 1,386,000 $2,564 1.10%
Banco de Galicia y Buenos Aires SA, Class B
(American Depositary Receipts) 4,956 102
Banco de Galicia y Buenos Aires SA .88
7.00% convertible bond August 1, 2002 $2,100,000 1,942
Banco del Sud, Class B 116,950 871 .37
Banco Frances del Rio de la Plata SA
(American Depositary Receipts) 135,700 3,647 1.57
BI SA (acquired 10/31/94, cost: $3,000,000)(1) 3,000,000 3,000 1.29
Hidroneuquen SA
(acquired 11/12/93, cost: $2,437,000) (1) (2) 2,436,763 2,437 1.05
IRSA Inversiones y Representaciones SA
(Global Depositary Receipts) 33,179 846 .36
Molinos Rio de la Plata, Class B 29,482 242 .10
Nortel Inversora SA, Class A, preferred (American
Depository Receipts)(acquired 11/24/92, cost: $1,503,000) (1) 211,560 2,272 .98
Siderca SA Industrial y Comercial 1,496,888 1,452 .62
Sociedad Comercial del Plata SA 133,000 352
Sociedad Comercial del Plata SA (American Depositary .23
Receipts) (acquired 4/28/95, cost: $147,000) (1)(2) 6,700 178
Telecom Argentina STET-France Telecom SA, Class B 295,500 1,395
Telecom Argentina STET-France Telecom SA, Class B .83
(American Depositary Shares) 11,000 524
Telefonica de Argentina SA, Class B 910,000 2,457
Telefonica de Argentina SA, Class B 2.96
(American Depositary Shares) 163,100 4,444
------ -----
28,725 12.34
------ -----
Brazil - 30.66%
Banco Bradesco SA, preferred nominative 30,395,253 266
Banco Bradesco SA, preferred nominative .11
rights, expire January 31, 1996 (2) 710,702 1
Brasmotor SA, preferred nominative 41,276,787 8,198 3.52
Centrais Eletricas Brasileiras SA, Class B,
preferred nominative(American Depositary Receipts) 59,799 807
Centrais Eletricas Brasileiras SA, ordinary nominative 1,632,000 442
Centrais Eletricas Brasileiras SA, ordinary nominative .93
(American Depositary Receipts) 67,219 907
CESP-Companhia Energetica de Sao Paulo,
preferred nominative(American Depositary Receipts) (2) 239,678 1,977
CESP-Companhia Energetica de Sao Paulo,
CESP-Companhia Energetica de Sao Paulo,
preferred nominative(American Depositary Receipts) 1.03
(acquired 8/30/94, cost: $711,000) (1) (2) 42,112 347
CESP-Companhia Energetica de Sao Paulo,
ordinary nominative (2) 3,000,000 68
COFAP-Companhia Fabricadora de Pecas,
preferred noiminative 99,019 489 .21
Companhia Cervejaria Brahma, preferred nominative 7,810,421 3,215 1.38
Companhia Cimento Portland Itau, preferred nominative 9,555,000 2,281 .98
COTEMINAS-Companhia de Tecidos Norte de Minas-COTEMINAS
preferred nominative 5,835,000 1,952 .84
Companhia Energetica de Minas Gerais-CEMIG,
preferred nominative(American Depositary Receipts) (2) 117,586 2,572
Companhia Energetica de Minas Gerais-CEMIG,
preferred nominative(American Depositary Receipts) 1.70
(acquired 9/22/94, cost: $1,616,000) (1) (2) 63,583 1,391
Companhia Metalurgica Barbara, preferred nominative (2) 558,795,763 161 .07
Companhia Siderurgica Belgo-Mineira,
preferred nominative 11,881,518 666 .29
Companhia Vale do Rio Doce, preferred nominative
(American Depositary Receipts) 73,066 2,977 1.28
Dixie-TOGA, preferred nominative, receipts (2) 1,390,000 1,216 .52
GP Capital Partners, LP
(acquired 1/28/94, cost: $3,000,000) (1) (2) (3) 3,000 3,000 1.29
Industrias Klabin de Papel e Celulose SA,
preferred nominative(American Depositary Receipts) 202,885 1,750 .75
Lojas Americanas SA, preferred nominative 51,798,049 1,215
Lojas Americanas SA, ordinary nominative 19,233,600 420
Lojas Americanas SA, preferred nominative, .86
warrants, expire May 3, 1996 (2) 531,552 366
Lojas Arapua, preferred nominative (Global Depositary
Receipts) (2) 104,000 780 .34
Mecanica Pesada, preferred nominative 190,000 782
Mecanica Pesada, ordinary nominative 70,000 490 .55
Mesbla SA, preferred nominative (2) 32,349,795 401 .17
Osa, preferred nominative 90,000,000 695 .30
Petrobras Distribuidora SA-BR, preferred nominative 111,542,000 2,985 1.28
Rhodia-Ster SA (Global Depositary Receipts) 113,100 990 .43
Sadia Concordia SA Industria e Comercio,
preferred nominative 1,163,000 862 .37
Telecomunicacoes Brasileiras SA, preferred nominative 552,090 27
Telecomunicacoes Brasileiras SA, preferred nominative 9.08
(American Depositary Receipts) 445,837 21,122
Telecomunicacoes de Minas Gerais SA,ordinary nominative 4,748,000 244 .10
Telecomunicacoes de Sao Paulo SA-Telesp,
preferred nominative 26,497,114 3,899
Telecomunicacoes de Sao Paulo SA-Telesp, 1.83
ordinary nominative 2,554,000 369
Vidrararia Santa Marina, ordinary nominative 308,700 1,048 .45
------ -----
71,378 30.66
------ -----
Chile - 5.54%
Banmedica SA 2,362,500 $879 .38%
CAP SA 247,599 1,070 .46
Chilgener SA (American Depositary Receipts) 38,778 969 .42
Compania Tecno Industrial SA 9,720,000 563 .24
Empresa Nacional de Electricidad SA
(American Depositary Receipts) 135,409 3,081 1.32
Enersis Spon (American Depositary Receipts) 143,000 4,075 1.75
Forestal Terranova 247,599 351 .15
Invercap SA 360,599 542 .23
Sociedad Quimica y Minera de Chile SA, Class A 286,600 1,362 .59
------ ----
12,892 5.54
------ ----
Colombia - 1.36%
Banco de Colombia SA (Global Depositary Receipts) 65,000 325
Banco de Colombia SA 5.20% convertible bond .69
February 1, 1999(acquired 1/27/94, cost: $1,975,000) (1) $1,700,000 1,275
Cementos Diamante, SA 68,970 320 .14
Cementos Paz del Rio (American Depositary Receipts)
(acquired 9/21/94, cost: $1,498,000) (1) (2) 86,000 1,247 .53
Corporacion Financiera del Valle SA, Class B (American
Depositary Receipts) (acquired 2/4/93, cost $0) (1) 18 - -
------ -----
3,167 1.36
------ -----
La Cemento Nacional CA (Global Depositary Receipts) 9,824 1,670 .72
------ -----
Mexico - 25.90%
Apasco, SA de CV 1,215,976 5,003 2.15
Bufete Industrial, SA, ordinary participation certificates
(American Depositary Receipts) (2) 105,000 1,575 .68
CEMEX, SA, Class A 67,500 224
CEMEX, SA, Class B 1,003,100 3,657
CEMEX, SA, Class B, 4.25% convertible bond, 3.96
November 1, 1997(aquired 9/28/94, cost: $3,016,000) (1) $3,000,000 2,535
CEMEX, SA, ordinary participation certificates 847,552 2,814
Cifra, SA de CV, Class B 3,028,930 3,163
Cifra, SA de CV, Class C 1,682,142 1,708 2.09
Corporacion Geo, SA de CV, Class B
(acquired 8/29/95, cost: $1,245,000) (1) 350,300 1,035 .44
Embotelladores del Valle de Anahuac, SA de CV, Class B 243,100 222 .10
Grupo Carso, SA de CV, Class A1 589,900 3,195 1.37
Grupo Casa Autrey, SA de CV
(American Depositary Receipts) 24,500 328 .14
Grupo Financiero Banamex Accival, SA de CV, Class B 2,268,300 3,816
Grupo Financiero Banamex Accival, SA de CV, Class L 590,360 881
Grupo Financiero Banamex Accival, SA de CV, 2.08
7.00% convertible debentures December 15, 1999 $194,000 156
Grupo Financerio Bancomer, SA de CV, Class L
57.46% convertible debentures May 16, 2002 (4) MXP5,750,000 $756 .32%
Grupo Financiero Banorte, SA de CV, Class B 1,222,094 1,143 .49
Grupo Televisa, SA, ordinary participation certificates 106,000 1,256
Grupo Televisa, SA, ordinary participation certificates 1.23
(American Depositary Receipts) 71,000 1,598
Internacional de Ceramica, SA de CV, Class B (2) 55,200 68
Internacional de Ceramica, SA de CV .43
(American Depositary Receipts) (2) 170,400 937
Kimberly-Clark de Mexico, SA de CV, Class A 275,000 4,168
Kimberly-Clark de Mexico, SA de CV, Class B 70,000 1,003 2.22
Panamerican Beverages, Inc., Class A 204,100 6,531 2.81
Sigma Alimentos, SA de CV, Class B 110,000 702 .30
Telefonos de Mexico, SA de CV, Class A 1,650,000 2,664
Telefonos de Mexico, SA de CV, Class L 2,475,000 3,983
Telefonos de Mexico, SA de CV, Class L 4.09
(American Depositary Receipts) 90,000 2,869
Tubos de Acero de Mexico, SA (2) 151,000 1,107
Tubos de Acero de Mexico, SA
(American Depositary Receipts) (2) 141,200 989
Tubos de Acero de Mexico, SA 1.00
7.50% convertible Eurobond, June 12, 1997 $250,000 226
------ ------
60,312 25.90
------ ------
Peru - 2.61%
Cemento Norte Pacasmayo SA, Class C 234,952 449 .19
Credicorp Ltd. (2) 275,920 4,760 2.04
Ontario-Quinta AVV (acquired 8/15/94, cost: $900,000) (1) 877,083 877 .38
------ -----
6,086 2.61
------ -----
Philippines - 0.84%
Ayala Land, Inc., Class B 843,750 1,030 .44
Philippine Long Distance Telephone Co. (Global Depositary
Receipts) 30,000 930 .40
------ -----
1,960 .84
------ -----
Portugal - 0.41%
Portugal Telecom, SA (American Depository Receipts) 50,500 960 .41
------ -----
United States - 0.17%
Atlantic Tele-Network, Inc. (2) 36,700 397 .17
------ -----
Uruguay - 0.73%
Banco Comercial Portugues, SA (Global Depositary Receipts)
Receipts) 115,000 1,696 .73
------ -----
Venezuela - 0.31%
Compania de Inmuebles y Valores Caracas (2) 20,494,000 - -
Fabrica Nacional de Cementos SACA 4,098,800 $301 .13%
Venezolana de Cementos, SACA, Class A 193,800 238
Venezolana de Cementos, SACA, Class B 173,094 186 .18
------ -----
725 .31
------ -----
Miscellaneous - 0.29%
Stocks in initial period of acquisition 2,439,000 680 .29
------ ------
TOTAL EQUITY-TYPE SECURITIES(cost: $150,632,000) 190,648 81.88
------ ------
Principal Amount
(000)
BONDS AND NOTES
- ----------------------------------------------------------- ------------------ ------- -----------------
Argentina - 1.92%
Republic of Argentina Bocon PIK 4.57% April 1, 2001 (4) ARP750 408 .18
Republic of Argentina Eurobond Series L 6.8125%
March 31, 2005 (4) $3,000 2,138 .92
Republic of Argentina Par Eurobond Series L 5.00%
March 31, 2003 (4) 2,500 1,431 .60
Bridas Corporation SR 12.50% November 15, 1999 250 250 .11
Central Puerto SA 10.75% Eurobond November 2, 1997 250 255 .11
------ ----
4,482 1.92
------ ----
Brazil - 1.99%
Abril SA 12.00% October 25, 2003
(acquired 10/17/95, cost: $250,000) (1) 250 252 .11
Federal Republic of Brazil Capitalization Bond PIK 8.00%
April 15, 2014 2,918 1,667 .72
Federal Republic of Brazil Debt Conversion Bond Series L
6.875% April 15, 2012 (4) 3,250 1,865 .80
Republic of Minas Gerais Series A 7.875%
Feburary 10, 1999 1,000 840 .36
------ ------
4,624 1.99
------ ------
Colombia - 0.25%
Comunicacion Celular SA 0%/13.125% November 15, 2003
(acquired 11/17/95, cost: $548,000) (1)(5) 1,000 571 .25
------ ------
Ecuador - 1.01%
Republic of Ecuador Discount Bonds 6.8125%
February 28, 2025 (4) 1,750 888 .38
Republic of Ecuador Past Due Interest Bonds 6.8125%
February 28, 2015 (4) 4,341 1,455 .63
------ ------
2,343 1.01
------ ------
Mexico - 1.22%
Banco Nacional de Comercio Exterior International Finance
7.25% February 02, 2004 $500 $387 .17%
Ispat Mexicana, SA de CV 10.375%
Senior Notes due March 15, 2001 250 229 .10
MC-Cuernavaca Toll Road Trust 9.25% July 25, 2001
(acquired 05/15/95, cost: $576,000) (1) 763 522 .22
Tubos de Acero de Mexico 13.75% December 8, 1999
(acquired 11/23/94, cost: $990,000) (1) 1,000 1,013 .43
United Mexican States Discount Bond Series A 6.766%
December 31, 2019 (4) 250 180
United Mexican States Discount Bond Series B 6.766% .16
December 31, 2019 (4) 250 180
United Mexican States Eurobond Series B 6.25%
December 31, 2019 500 328 .14
------ -----
2,839 1.22
------ -----
Panama - 1.63%
Republic of Panama/Agent-Bank of America NTSA/
Loan Participation Agreements (Participation-
Citibank, NA) (2)(4)(6)(7) 6,918 2,916 1.25
Republic of Panama/Agent-Bank of America NTSA/
Loan Participation Agreements(Participation-Morgan
Guaranty Trust, NA) (2)(4)(6)(7) 425 180 .08
Republic of Panama/Agent-Lloyds Bank International
Limited/Loan Participation Agreements
(Participation-Chase Manhattan Bank, NA) (2)(4)(6)(7) 875 360 .15
Republic of Panama Interest Reduction Bond
3.50% December 29, 2049 (2)(4)(6)(7) 750 340 .15
------ ------
3,796 1.63
------ ------
Peru - 1.93%
Republic of Peru/Agent-Bankers Trust Company/
Loan Participation Agreements (Participation-
Citibank, N.A.) (2)(4)(6)(7) 975 342 .15
Republic of Peru/Agent-Citibank, N.A./Loan Participation
Agreements (Participation-Citibank, N.A.) (2)(4)(6)(7) 2,583 900 .38
Republic of Peru/Agent-Citibank, N.A./Loan Participation
Agreements (Participation-Morgan Guaranty Trust) (2)(4)(6)(7) 2,661 936 .40
Republic of Peru/Agent-Citibank, N.A./Loan Participation
Agreements (Participation-Salomon Brothers Inc.) (2)(4)(6)(7) 1,851 648 .28
Republic of Peru/Agent-Wells Fargo Bank/Loan Participation
Agreements (Participation-Citibank, N.A.) (2)(4)(6)(7) 820 288 .12
Republic of Peru/Agent-Wells Fargo Bank/Loan Participation
Agreements (Participation-Morgan Guaranty Trust) (2)(4)(6)(7) 3,407 1,206 .52
Republic of Peru/Agent-Wells Fargo Bank, N.A./Loan
Participation Agreements (Participation-
J.P. Morgan) (2)(4)(6)(7) 506 180 .08
------ -----
4,500 1.93
------ -----
TOTAL BONDS AND NOTES(cost: $19,948,000) 23,155 9.95
------ -----
SHORT-TERM SECURITIES
Corporate Short-Term Notes - 0.62%
Deutsche Bank Financial Inc. 5.76% due 01/05/96 4,700 4,696 2.02
British Gas Capital Inc. 5.72% due 01/08/96 6,600 6,591 2.83
Glaxo Wellcome PLC 5.58% due 03/11/96 1,000 989 .42
------ -----
12,276 5.27
------ -----
Non-U.S. Government Short-Term Obligations - 0.29%
Certificados De La Tesoreria due 01/18/96 MXP125 160 .07
Hidroelectrica Piedra Del Aguila, S.A. 15.00% due 11/27/96
(acquired 12/27/95, cost: $498,000) (1) $500 500 .22
------ -----
660 .29
Non-U.S. Corporation Short-Term Obligations - 0.04%
Mesbla SA, Series 2, 13.25% due 11/1/96 R$10,270 103 .04
------ -----
Federal Agency Discount Notes - 0.51%
Federal Home Loan Bank 5.54% due 02/07/96 $1,200 1,193 .51
------ -----
Non-U.S. Currency - 1.95%
Chilean peso CHP1,843,955 4,542 1.95
------ -----
TOTAL SHORT-TERM SECURITIES(cost: $20,053,000) 18,774 8.06
------ -----
TOTAL INVESTMENT SECURITIES (cost: $190,633,000) 232,577 99.89
Excess of cash and receivables over liabilities 254 .11
-------- ----------
NET ASSETS $232,831 100.00%
======== ==========
</TABLE>
(1) Purchased in a private placement transaction; resale to the public may
require registration and no
right to demand registration under U.S. law exists. As of December 31, 1995,
the total market value and
cost of such securities was $22,452,000 and $23,910,000 respectively, and the
market value represented
9.64% of net assets.
(2) Non-income-producing securities.
(3) Unfunded capital commitments represent binding commitments made by the fund
which may be paid in the future.
(4) Coupon rate may change periodically.
(5) Represents a zero-coupon bond which will convert to an interest-bearing
security at a later date.
(6) Security is currently in default.
(7) Participation interests were acquired through the financial institution
indicated parenthetically.
Non-U.S. currency symbols:
ARP - Argentine peso
R$ - Brazilian real
CHP - Chilean peso
MXP - Mexican peso
See Notes to Financial Statements
NEW WORLD INVESTMENT FUND
Equity - type securities added to the portfolio since June 30, 1995
- ---------------------------------------------------------------------
Banco del Sud
Corporacion Geo
Dixie-TOGA,
Enersis
Lojas Arapua
Molinos Rio de la Plata
Siderca
Equity - type securities eliminated from the portfolio since June 30, 1995
- ------------------------------------------------------------------------
Aracruz Celulose
Banco de Credito del Peru*
Bca Quadrum
Compania Cervecerias Unidas
Compania de Telecomunicaciones de Chile
Corticeira Amorim-Sociedad Gestora de
Participacoes Socais
Ericsson do Brazil Comercio e Industria
Gruma
Philippine National Bank
Tolmex
YPF
*Banco de Creditodel Peru shares were exchanged for holding in Credicorp Ltd.
NEW WORLD INVESTMENT FUND
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1995 (DOLLARS IN THOUSANDS) (UNAUDITED)
Assets:
Investment securities at market (cost: $190,633)
$232,577
Cash 148
Receivables for--
Sales of investments $2,669
Dividends and accrued interest 1,582 4,251
------- -------
236,976
Liabilities: -------
Non-U.S. taxes payable 1,360
Payables for--
Purchases of investments 924
Unfunded capital commitments 1,531
Management services 175
Accrued expenses 155 2,785
------- -------
4,145
-------
Net Assets at December 31, 1995 --
Equivalent to $19.08 per share on
12,205,648 shares of beneficial interest
issued and outstanding, par value $0.001
per share; unlimited shares authorized $232,831
========
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1995 (DOLLARS IN THOUSANDS)(UNAUDITED)
Investment Income:
Income:
Dividends $1,723
Interest 2,248 $3,971
-------
Expenses:
Management services fee 1,117
Custodian fee 155
Auditing and legal fees 43
Reports to shareholders 3
Registration statement and prospectus 26
Taxes other than federal
Income tax 1
Other expenses 75 1,420
------- -------
Income before non-U.S. taxes 2,551
Non-U.S. taxes (150)
Net investment income 2,401
-------
Realized Gain and Unrealized Appreciation on
Investments:
Realized gain before non-U.S. taxes 3,043
Non-U.S. taxes (190)
-------
Net realized gain 2,853
Net change in unrealized appreciation:
Beginning of period 41,534
End of period 41,832
-------
Net unrealized appreciation 298
Decrease in unrealized Non-U.S. taxes 674 972
------- -------
Net realized gain and unrealized appreciation
on investments 3,825
-------
Net Increase in Net Assets Resulting from Operations
6,226
=======
STATEMENT OF CHANGES IN NET ASSETS (DOLLARS IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------
Six Months Ended Year Ended
December 31,1995* June 30,1995
----------------------------------
Operations:
Net investment income $2,401 $4,566
Net realized gain on investments 2,853 48,589
Net unrealized appreciation (depreciation)on
investments
972 (94,235)
------- --------
Net increase (decrease) in net assets
resulting from operations
6,226 (41,080)
------- --------
Dividends and Distributions Paid to Shareholders:
Dividends from net investment income - (366)
Distributions from net realized gain on
investments
(6,979) (89,986)
------- --------
Total dividends and distributions (6,979) (90,352)
------- --------
Capital Share Transactions:
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments: 377,428 and 3,415,584 shares,
respectively
6,979 90,342
Cost of shares repurchased: 760,273 and
595,821 shares, respectively
(15,839) (21,892)
-------- --------
Net increase (decrease) in net assets
resulting from capital share transactions
(8,860) 68,450
-------- --------
Total Decrease in Net Assets (9,613) (62,982)
Net Assets:
Beginning of period 242,444 305,426
-------- --------
End of period (including excess of distributions
net investments income:
$1,403 and $3,784,respectively)
$232,831 $242,444
======== ========
</TABLE>
*Unaudited
See Notes to Financial Statements
Notes to Financial Statements
1. New World Investment Fund (the "fund") is registered under the Investment
Company Act of 1940 as a closed-end, nondiversified 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 traded on a national securities exchange (or
reported on the NASDAQ national market) and securities traded in the
over-the-counter market are stated at the last reported sales price on the day
of valuation; other securities, and securities for which no sale was reported
on that date, are stated at the last quoted 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 of Trustees as
the primary market. 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, 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
Trustees.
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 period. 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.
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 $155,000 includes $2,500 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. 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 December 31, 1995, net unrealized appreciation on investments for
book and federal income tax purposes aggregated $41,273,000, net of
accumulated deferred taxes totaling $671,000 on net unrealized appreciation of
Chilean securities, of which $68,796,000 related to appreciated securities and
$27,523,000 related to depreciated securities. There was no difference between
book and tax realized gains on securities transactions for the six months ended
December 31, 1995. The cost of portfolio securities for book and federal income
tax purposes was $190,633,000 at December 31, 1995.
4. The fee of $1,117,000 for management services was paid pursuant to an
agreement with Capital International, Inc. (CII), with which certain officers
and Trustees 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, plus 0.80% of such
assets in excess of $400 million. CII is owned by Capital Group International,
Inc., which is a wholly owned subsidiary of The Capital Group Companies, Inc.
5. As of December 31, 1995, accumulated undistributed net realized gain on
investments was $1,032,000 and additional paid-in capital was $192,029,000. The
fund made purchases and sales of investment securities, excluding short-term
securities, of $36,095,000 and $44,766,000, respectively, during the six months
ended December 31, 1995.
Dividend and interest income is recorded net of non-U.S. taxes paid. For
the six months ended December 31, 1995, such non-U.S. taxes were $152,000. Net
realized currency losses on dividends, interest, withholding taxes reclaimable,
and sales of non-U.S. bonds and notes were $3,000 for the six months ended
December 31, 1995.
NEW WORLD INVESTMENT FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA AND RATIOS
Years ended June 30
Six Months Ended ----------------------------------
December 31, 1995(1) 1995 1994 1993 1992
--------------------- -----------------------------------
Net Asset Value, Beginning of Period $19.26 $31.27 $24.89 $20.98 $17.79
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income 0.19 .43 .50 .37 .41
Net realized and unrealized gains
(losses) on investments before
non-U.S. taxes 0.27 (2.49) 8.83 5.59 4.38
Non-U.S. taxes (0.05) (.10) (.50) (.01) (.20)
------- ------- ------- ------- -------
Total income (loss) from investment
operations .41 (2.16) 8.83 5.95 4.59
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income - (.04) (.21) - (.46)
Distributions from net realized
gains
(.59) (9.81) (2.24) (2.04) (.94)
------- ------- ------- ------- -------
Total distributions (.59) (9.85) (2.45) (2.04) (1.40)
------- ------- ------- ------- -------
Net Asset Value, End of Period 19.08 19.26 31.27 24.89 20.98
======= ======= ======= ======= =======
Total Return 2.23% (2) (15.47%) 35.97% 31.28% 26.57%
Ratios/Supplemental Data:
Net assets, end of period
(in millions)
$233 $242 $305 $212 $180
Ratio of expenses to average
net assets 0.60% (2) 1.27% 1.36% 1.40% 1.53%
Ratio of expenses and non-U.S.
taxes to average net assets 0.67% (2) 1.40% 1.50% 1.62% 1.71%
Ratio of net income to average
net assets 1.02% (2) 1.58% 1.43% 1.70% 1.92%
Portfolio turnover rate 16.54% (2) 44.19% 21.47% 17.23% 21.66%
</TABLE>
1 Unaudited
2 These ratios are based on operations for the period shown and, accordingly,
are not representative of
a full year's operations.
PART C - OTHER INFORMATION
Item 15. 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."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to thte foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 16. Exhibits
(1) Articles of Incorporation Emerging Markets Growth Fund, Inc.(1)
(2) By-Laws of Emerging Markets Growth Fund, Inc.(1)
(3) Not Applicable.
(4) Agreement and Plan of Reorganization.
(5) Shareholders Agreement.
(6) Investment Advisory and Service Agreement.(1)
(7) Not Applicable.
(8) Not Applicable.
(9) (1) Form of Custodian Contract.(1)
(2) Form of Sub-Custody Agreement.(1)
(10) Not Applicable.
(11) Opinion and Consent of Dechert Price & Rhoads as to the legality of the
securities registered.
(12) Opinion and Consent of Dechert Price & Rhoads supporting the tax matters
and consequences to shareholders.(2)
(13) Not Applicable.
(14) Consent of Price Waterhouse LLP.
(15) Not Applicable.
(16) Powers of Attorney.
(17) (1) Emerging Markets Growth Fund, Inc. Prospectus dated February 14, 1996.
(2) New World Investment Fund Prospectus dated December 1, 1995.
- ---------
(1) Previously filed and incorporated by reference herein. See SEC file
811-4692.
(2) To be filed by Post-Effective Amendment pursuant to "Dear Registrant"
letter dated February 15, 1996.
Item 17. Undertakings
(1) The undersigned registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act [17 CFR
230.145c], the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the registration
statement and will not be used until the amendment is effective, and that, in
determining any liability under the 1933 Act, each post-effective amendment
shall be deemed to be a new registration statement for the securities offered
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering of them.
(3) The undersigned registrant agrees to file by Post-Effective Amendment the
opinion of counsel regarding the tax consequences of the proposed
reorganization required by Item 16(12) of Form N-14 within a reasonable time
after receipt of such opinion.
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933, 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, as of the 22nd day of April, 1996.
EMERGING MARKETS GROWTH FUND, INC.
By:/s/Roberta A. Conroy
-------------------------------
Roberta A. Conroy
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons as of the 22nd
day of April, 1996, in the capacities indicated.
Signature Title
- --------- -----
(1) Principal Executive Officer:
/s/David I. Fisher Vice Chairman
----------------------------
(David I. Fisher)
(2) Principal Financial Officer and
Principal Accounting Officer:
/s/Steven N. Kearsley Treasurer
-----------------------------
(Steven N. Kearsley)
(3) Directors:
Issa Al-Sowaidi* 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
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 22nd day of April, 1996, by and between Emerging Markets Growth Fund,
Inc., a Maryland corporation with its principal place of business at 11100
Santa Monica Boulevard, Los Angeles, California 90025 (the "Acquiring Fund"),
and New World Investment Fund, a Massachusetts business trust with its
principal place of business at 11100 Santa Monica Boulevard, Los Angeles,
California 90025 (the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all or
substantially all of the assets of the Acquired Fund to the Acquiring Fund in
exchange solely for shares of common stock, ($0.01 par value per share), of the
Acquiring Fund (the "Acquiring Fund Shares"), the assumption by the Acquiring
Fund of certain identified liabilities of the Acquired Fund, and the
distribution of the Acquiring Fund Shares to the shareholders of the Acquired
Fund in complete liquidation of the Acquired Fund as provided herein, all upon
the terms and conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquiring Fund and the Acquired Fund are closed-end,
registered investment companies of the management type, and the Acquired Fund
owns securities which generally are assets of the character in which the
Acquiring Fund is permitted to invest;
WHEREAS, the Board of Directors of the Acquiring Fund has determined that
the exchange of all or substantially all of the assets of the Acquired Fund for
Acquiring Fund Shares and the assumption of certain identified liabilities of
the Acquired Fund by the Acquiring Fund is in the best interests of the
Acquiring Fund and its shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of this
transaction;
WHEREAS, the Board of Trustees of the Acquired Fund has determined that
the exchange of all or substantially all of the assets of the Acquired Fund for
Acquiring Fund Shares and the assumption of certain identified liabilities of
the Acquired Fund by the Acquiring Fund is in the best interests of the
Acquired Fund and its shareholders and that the interests of the existing
shareholders of the Acquired Fund would not be diluted as a result of this
transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN
EXCHANGE FOR THE ACQUIRING FUND'S SHARES, THE ASSUMPTION OF CERTAIN IDENTIFIED
ACQUIRED FUND LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the Acquired Fund
agrees to transfer all of the Acquired Fund's assets as set forth in paragraph
1.2 to the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor
(i) to deliver to the Acquired Fund the number of Acquiring Fund Shares,
including fractional Acquiring Fund Shares, determined by dividing the value of
the Acquired Fund's net assets computed in the manner and as of the time and
date set forth in paragraph 2.1 by the net asset value of one Acquiring Fund
Share computed in the manner and as of the time and date set forth in paragraph
2.2; and (ii) to assume certain identified liabilities of the Acquired Fund, as
set forth in paragraph 1.3. Such transactions shall take place at the closing
provided for in paragraph 3.1 (the "Closing").
1.2 The assets of the Acquired Fund to be acquired by the Acquiring
Fund shall consist of all property, including, without limitation, all cash,
cash equivalents, securities, commodities and futures interests and dividends
or interest receivables, claims and rights of action, rights to register shares
under applicable securities laws, and books and records, which are owned by the
Acquired Fund and any deferred or prepaid expenses shown as assets on the books
of the Acquired Fund on the closing date provided in paragraph 3.1 (the
"Closing Date").
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund
shall assume all liabilities, expenses, costs, charges and reserves (expected
to include expenses incurred in the ordinary course of the Acquired Fund's
operations, such as accounts payable relating to custodian and transfer agency
fees, legal and audit fees) reflected on an unaudited statement of assets and
liabilities of the Acquired Fund prepared by Capital International, Inc., the
investment adviser of the Acquired Fund and the Acquiring Fund, as of the
Closing Date in accordance with generally accepted accounting principles
consistently applied from the prior audited period. The Acquiring Fund shall
assume only those liabilities of the Acquired Fund reflected on that unaudited
statement of assets and liabilities and shall not assume any other liabilities.
1.4 Immediately after the transfer of assets provided for in paragraph
1.1, the Acquired Fund will distribute pro rata to the Acquired Fund's
shareholders of record, determined as of immediately after the close of
business on the Closing Date (the "Acquired Fund Shareholders"), the Acquiring
Fund Shares received by the Acquired Fund pursuant to paragraph 1.1 and will
completely liquidate. The Acquired Fund shall take any further actions in
connection with its liquidation as required by applicable law. Such
distribution and liquidation will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on the
books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Acquired Fund Shareholders. The aggregate
net asset value of Acquiring Fund Shares to be so credited to Acquired Fund
Shareholders shall be equal to the aggregate net asset value of the Acquired
Fund shares owned by such shareholders as of immediately after the close of
business on the Closing Date. All issued and outstanding shares of the
Acquired Fund will simultaneously be canceled on the books of the Acquired
Fund, although share certificates representing interests in the Acquired Fund
will represent a number of Acquiring Fund Shares after the Closing Date as
determined in accordance with paragraph 2.3. The Acquiring Fund will not issue
certificates representing the Acquiring Fund Shares in connection with such
exchange except upon request by a shareholder of the Acquired Fund.
1.5 Ownership of Acquiring Fund Shares will be shown on the share
transfer books of the Acquiring Fund. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's then-current prospectus.
2. VALUATION
2.1 The value of the Acquired Fund's assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of the
normal close of business of the New York Stock Exchange on the Closing Date,
using the valuation procedures set forth in the Acquiring Fund's then-current
prospectus.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset value per share computed as of immediately after the close of business of
the New York Stock Exchange on the Closing Date, using the valuation procedures
set forth in the Acquiring Fund's then-current prospectus
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's assets shall be
determined by dividing the value of the net assets of the Acquired Fund
determined using the same valuation procedures referred to in paragraph 2.1 by
the net asset value of an Acquiring Fund Share determined in accordance with
paragraph 2.2.
2.4 All computations of value with respect to the Acquiring Fund shall
be made by Capital International, Inc. in accordance with its regular practice
for the Funds.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be June 28, 1996 or such other date as the
parties may agree in writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of immediately after the close of
business on the Closing Date unless otherwise agreed to by the parties. The
close of business on the Closing Date shall be as of 4:30 p.m., New York time.
The Closing shall be held at the offices of Capital International, Inc. or at
such other place and time as the parties shall mutually agree. If, immediately
before the Closing Date, (a) a primary market for the Acquiring Fund or
Acquired Fund is closed to trading or trading thereon is restricted or (b)
trading or the reporting of trading on a primary market for the Acquiring Fund
or Acquired Fund or elsewhere is disrupted, so that accurate appraisal of the
net asset value of the Acquired Fund and the NAV per Acquiring Fund Share is
impracticable, the Closing Date shall be postponed until the first business day
after the day when such trading shall have been fully resumed and such
reporting shall have been restored.
3.2 The Chase Manhattan Bank, N.A., as custodian for the Acquired Fund
(the "Custodian"), shall deliver at the Closing a certificate of an authorized
officer stating that: (a) the Acquired Fund's portfolio securities, cash, and
any other assets shall have been delivered in proper form to the Acquiring
Fund; and (b) all necessary taxes including without limitation all applicable
federal and state stock transfer stamps, if any, shall have been paid, or
provision for payment shall have been made, in conjunction with the delivery of
portfolio securities.
3.3 American Funds Service Company (the "Transfer Agent"), on behalf
of each of the Acquired Fund and the Acquiring Fund, shall deliver at the
Closing a certificate of an authorized officer stating that its records contain
the names and addresses of the Acquired Fund Shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Acquired Fund or provide evidence satisfactory to the Acquired Fund
that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing each party shall
deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Acquired Fund is a business trust duly organized under the
laws of the Commonwealth of Massachusetts;
(b) The Acquired Fund is a registered closed-end investment company
and its registration with the Securities and Exchange Commission (the
"Commission") as an investment company under the 1940 Act and with respect to
its shares under the 1933 Act are in full force and effect;
(c) The Acquired Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation of its
Declaration of Trust or By-Laws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Acquired Fund is a party or
by which either is bound;
(d) The Acquired Fund has no material contracts or other commitments
(other than this Agreement) which will be terminated with liability to it prior
to the Closing Date;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Acquired Fund or any properties or
assets held by it. The Acquired Fund knows of no facts which might form the
basis for the institution of such proceedings and is not a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(f) The Statement of Assets and Liabilities of the Acquired Fund at
June 30, 1995, has been audited by Price Waterhouse LLP, independent certified
public accountants, and is in accordance with generally accepted accounting
principles consistently applied, and such statement (a copy of which has been
furnished to the Acquiring Fund) presents fairly, in all material respects, the
financial position of the Acquired Fund as of such date, and there are no known
contingent liabilities of the Acquired Fund as of such date not disclosed
therein;
(g) Since June 30, 1995, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquired Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Acquiring Fund. For the purposes of this subparagraph (g),
a decline in net asset value per share of the Acquired Fund, the discharge of
Acquired Fund liabilities, or the redemption of Acquired Fund shares by
Acquired Fund Shareholders shall not constitute a material adverse change;
(h) At the Closing Date, all material Federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
date shall have been filed and are or will be correct, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and, to the best of the Acquired Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(i) For each taxable year of its operation, the Acquired Fund has met
the requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such;
(j) All issued and outstanding shares of the Acquired Fund are, and at
the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. All of the issued and outstanding shares of the Acquired
Fund will, at the time of Closing, be held by the persons and in the amounts
set forth in the records of the Transfer Agent, as provided in paragraph 3.3.
The Acquired Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any of the Acquired Fund shares, nor is
there outstanding any security convertible into any of the Acquired Fund
shares;
(k) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be transferred to the
Acquiring Fund pursuant to paragraph 1.2, subject to the shareholder approval
referred to in Section 5, and full right, power, and authority to sell, assign,
transfer and deliver such assets hereunder, and upon delivery and payment for
such assets, the Acquiring Fund will acquire good and marketable title thereto,
subject to no restrictions on the full transfer thereof, including such
restrictions as might arise under the 1933 Act, other than as disclosed to the
Acquiring Fund;
(l) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action on
the part of the Acquired Fund's Trustees, and, subject to the approval of the
Acquired Fund Shareholders, this Agreement will constitute a valid and binding
obligation of the Acquired Fund, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(m) The information to be furnished by the Acquired Fund for use in
registration statements, consent solicitation materials and other documents
which may be necessary in connection with the transactions contemplated hereby
shall be accurate and complete in all material respects and shall comply in all
material respects with Federal securities and other laws and regulations
thereunder applicable thereto; and
(n) The information statement of the Acquired Fund (the "Information
Statement") to be included in the Registration Statement referred to in
paragraph 5.6 (other than information therein that relates to the Acquiring
Fund) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
are made, not materially misleading.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland;
(b) The Acquiring Fund is a registered closed-end investment company
and its registration with the Securities and Exchange Commission (the
"Commission") as an investment company under the Investment Company Act of 1940
(the "1940 Act") and with respect to its shares under the Securities Act of
1933 (the "1933 Act") are in full force and effect;
(c) The current prospectus of the Acquiring Fund conforms in all
material respects to the applicable requirements of the 1933 Act and the 1940
Act and the rules and regulations of the Commission thereunder and do not
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not materially
misleading;
(d) At the Closing Date, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets;
(e) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result in a material violation of the
Acquiring Fund's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquiring Fund is a party or by which is bound;
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or threatened against the Acquiring Fund or any of its properties or assets.
The Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(g) The Statement of Assets and Liabilities of the Acquiring Fund at
June 30, 1995, has been audited by Price Waterhouse LLP, independent certified
public accountants, and is in accordance with generally accepted accounting
principles consistently applied, and such statement (a copy of which has been
furnished to the Acquired Fund) presents fairly, in all material respects, the
financial position of the Acquiring Fund as of such date, and there are no
known contingent liabilities of the Acquiring Fund as of such date not
disclosed therein;
(h) Since June 30, 1995, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred. For the purposes of this
subparagraph (h), a decline in net asset value per share of the Acquiring Fund,
the discharge of Acquiring Fund liabilities, or the redemption of Acquiring
Fund shares by Acquiring Fund shareholders, shall not constitute a material
adverse change;
(i) At the Closing Date, all material Federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed by such
date shall have been filed and are or will be correct, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the payment
thereof, and, to the best of the Acquiring Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to such
returns;
(j) All issued and outstanding Acquiring Fund Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the Acquiring Fund. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any Acquiring Fund Shares, nor is there outstanding any security convertible
into any Acquiring Fund Shares;
(k) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action, if
any, on the part of the Directors of the Acquiring Fund, and this Agreement
will constitute a valid and binding obligation of the Acquiring Fund
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to
or affecting creditors' rights and to general equity principles;
(l) The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to
the terms of this Agreement will, at the Closing Date, have been duly
authorized and, when so issued and delivered, will be duly and validly issued
Acquiring Fund Shares, and will be fully paid and non-assessable by the
Acquiring Fund;
(m) The information to be furnished by the Acquiring Fund for use in
registration statements, consent solicitation materials and other documents
which may be necessary in connection with the transactions contemplated hereby
shall be accurate and complete in all material respects and shall comply in all
material respects with Federal securities and other laws and regulations
applicable thereto;
(n) The Information Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
materially misleading;
(o) The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state blue sky or securities laws as may be necessary in order to
continue its operations after the Closing Date; and
(p) For each taxable year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such.
COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date,
it being understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions, and any other
distributions that may be advisable.
5.2 The Acquired Fund will solicit the written consents of the
Acquired Fund Shareholders to approve this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
5.4 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund Shares.
5.5 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all actions, and do
or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.6 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Information Statement, referred to in paragraph 4.1(n),
all to be included in a Registration Statement on Form N-14 of the Acquiring
Fund (the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934 (the "1934 Act") and the 1940 Act in connection
with the solicitation of the Acquired Fund Shareholders' written consents to
approve this Agreement and the transactions contemplated herein.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1 All representations and warranties of the Acquiring Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
6.2 The Acquiring Fund shall have delivered to the Acquired Fund a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in a form reasonably satisfactory to the
Acquired Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Fund made in this Agreement are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement and as to such other matters
as the Acquired Fund shall reasonably request; and
6.3 The Acquired Fund shall have received on the Closing Date the
opinion of Dechert Price & Rhoads, counsel to the Acquiring Fund, in a form
reasonably satisfactory to the Acquired Fund, and dated as of the Closing Date,
that:
(a) The Acquiring Fund has been duly formed and is validly existing
and in good standing under the laws of the State of Maryland; (b) the Acquiring
Fund has the power to carry on its business, as presently conducted; (c) the
Agreement has been duly authorized, executed and delivered by the Acquiring
Fund and constitutes a valid and legally binding obligation of Acquiring Fund
enforceable against the Acquiring Fund in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
laws of general applicability relating to or affecting creditors' rights and to
general equity principles; (d) the execution and delivery of the Agreement did
not and the exchange of the Acquired Fund's assets for shares of the Acquiring
Fund pursuant to the Agreement will not violate the Acquiring Fund's Articles
of Incorporation or Bylaws or result in a default under or breach of any of the
agreements filed as exhibits to (or incorporated by reference in) the Acquiring
Fund's registration statement on Form N-2; and (e) to the knowledge of such
counsel, all regulatory consents, authorizations, approvals or filings required
to be obtained or made by the Acquiring Fund under the Federal laws of the
United States or the State of Maryland for the exchange of the Acquired Fund's
assets for shares of the Acquiring Fund, pursuant to the Agreement have been
obtained or made.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all of the obligations to be performed by it hereunder on
or before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities, as of the Closing
Date, certified by the Treasurer of the Acquired Fund;
7.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund and dated as of the Closing Date, to the
effect that the representations and warranties of the Acquired Fund made in
this Agreement are true and correct at and as of the Closing Date, except as
they may be affected by the transactions contemplated by this Agreement, and as
to such other matters as the Acquiring Fund shall reasonably request; and
7.4 The Acquiring Fund shall have received on the Closing Date the
opinion of Dechert Price & Rhoads, counsel to the Acquired Fund dated as of the
Closing Date, that:
(a) The Acquired Fund has been duly formed under the laws of the
Commonwealth of Massachusetts; (b) the Acquired Fund has the power to carry on
its business, as presently conducted; (c) the Agreement has been duly
authorized, executed and delivered by the Acquired Fund and constitutes a valid
and legally binding obligation of the Acquired Fund enforceable against the
Acquired Fund in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and laws of general
applicability relating to or affecting creditors' rights and to general equity
principles; (d) the execution and delivery of the Agreement did not and the
exchange of the Acquired Fund's assets for shares of the Acquiring Fund
pursuant to the Agreement will not violate the Acquired Fund's Declaration of
Trust or Bylaws or result in a default under or breach of any of the agreements
filed as exhibits to (or incorporated by reference in) the Acquired Fund's
registration statement on Form N-2; (e) to the knowledge of such counsel, all
regulatory consents, authorizations, approvals or filings required to be
obtained or made by the Acquired Fund under the Federal laws of the United
States or the Commonwealth of Massachusetts for the exchange of the Acquired
Fund's assets for shares of the Acquiring Fund, pursuant to the Agreement have
been obtained or made; and (f) the shares of the Acquiring Fund to be
distributed to Acquired Fund shareholders under this Agreement, assuming due
authorization and delivery as contemplated by this Agreement, will be validly
issued and outstanding and fully paid and non-assessable.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND
THE ACQUIRED FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the Acquired Fund's
Declaration of Trust and By-Laws and certified copies of the resolutions
evidencing such approval shall have been delivered to the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor
the Acquired Fund may waive the conditions set forth in this paragraph 8.1;
8.2 On the Closing Date, no action, suit or other proceeding shall be
threatened or pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Acquiring Fund or the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions;
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act; and
8.5 The parties shall have received the opinion of Dechert Price &
Rhoads, counsel to Acquired Fund and Acquiring Fund substantially to the effect
that the transaction contemplated by this Agreement constitutes a tax-free
reorganization for Federal income tax purposes. The delivery of such opinion
is conditioned upon receipt by Dechert Price & Rhoads of representations it
shall request of the parties. Notwithstanding anything herein to the contrary,
neither the Acquiring Fund nor the Acquired Fund may waive the condition set
forth in this paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Fund and the Acquired Fund each represents and
warrants to the other that it has no obligations to pay any brokers or finders
fees in connection with the transactions provided for herein.
9.2 Each party to this Agreement shall pay one half of the expenses
incurred in connection with entering into and consummating the transaction
contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Acquired Fund agree that neither
party has made any representation, warranty or covenant not set forth herein
and that this Agreement constitutes the entire agreement between the parties.
10.2 The representations and warranties contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall
not survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
This Agreement and the transaction contemplated hereby may be terminated
and abandoned by either party, by mutual agreement or by resolution of the
party's Board of Directors/Trustees at any time prior to the Closing Date, if
circumstances should develop that, in the opinion of such Board, make
proceeding with the Agreement inadvisable. In the event of termination under
this Section 11, there shall be no liability for damages on the part of either
Fund, its officers, or Directors/Trustees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the
Acquired Fund and the Acquiring Fund; provided, however, that following the
receipt of the written consents of the Acquired Fund Shareholders pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring Fund Shares
to be issued to the Acquired Fund Shareholders under this Agreement to the
detriment of such shareholders without their further approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed duly given
if delivered or mailed by registered mail, postage prepaid, addressed to the
Acquired Fund or the Acquiring Fund at 11100 Santa Monica Boulevard, Los
Angeles, California 90025 Attention: Roberta A. Conroy.
14. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
14.3 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no assignment
or transfer hereof or of any rights or obligations hereunder shall be made by
any party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Agreement.
14.4 It is expressly agreed that the obligations of the Acquired Fund
hereunder shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents, or employees of the Acquired Fund personally, but
bind only the property of the Acquired Fund. The execution and delivery of
this Agreement have been authorized by the Trustees of the Acquired Fund and
signed by authorized officers of the Acquired Fund acting as such, and neither
such authorization by such Trustees nor such execution and delivery by such
officers shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the
property of the Acquired Fund.
14.5 This Agreement shall be governed by and construed in accordance with
the laws of the State of California; provided that, in the case of any conflict
between such laws and the federal securities laws, the latter shall govern.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its President or Vice President and its seal to be affixed
thereto and attested by its Secretary or Assistant Secretary.
Attest: EMERGING MARKETS GROWTH FUND, INC.
/s/Roberta A. Conroy By:/s/ Nancy Englander
- ---------------------------- -------------------------
Roberta A. Conroy Nancy Englander
Vice President and Secretary President
Attest: NEW WORLD INVESTMENT FUND
/s/Roberta A. Conroy By:/s/David I. Fisher
- ---------------------------- -------------------------
Roberta A. Conroy David I. Fisher
Vice President and Secretary President
EMERGING MARKETS GROWTH FUND, INC.
SHAREHOLDERS AGREEMENT
----------------------
AGREEMENT made as of this _____ day of _______________, 199__, by and
among (i) EMERGING MARKETS GROWTH FUND, INC. (the "Fund"), a corporation
organized under the laws of Maryland; and (ii) and each person currently a
shareholder or a person who hereafter shall become a shareholder of the Fund
("Shareholders").
WHEREAS, the Shareholders are holders of common stock of the Fund, $.01
par value per share ("Shares");
WHEREAS, the Shareholders desire to promote their interests in the Fund,
to govern their relationship in connection with the Fund, to provide for its
operation and management, and to provide for the occurrence and consequences of
various contingencies, as more particularly described in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Effectiveness
This Agreement shall take effect upon its execution by the holders of
66-2/3% of the issued and outstanding Shares.
2. Eligibility Requirements
The Fund has established suitability standards which require that each
investor that is a "company" (as that term is defined in the Investment Company
Act of 1940) must have total assets in excess of U.S. $5 million and each
individual investor 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. BY EXECUTION
OF THIS AGREEMENT, THE SHAREHOLDER REPRESENTS AND WARRANTS THAT THE SHAREHOLDER
MEETS THE ELIGIBILITY REQUIREMENTS OF THE FUND.
3. Restrictions on Transfer
No sale, assignment, transfer, encumbrance, hypothecation or other
disposition, voluntary or involuntary, by operation of law or otherwise, of any
Shares or of any interest therein, now or hereafter owned or held by any of the
Shareholders shall be valid unless made in accordance with the terms and
provisions of this Agreement. Any attempt at a transfer in violation of this
restriction shall be void.
4. Transfer to a Third-Party
Shares may be transferred by a Shareholder to a third party, including
another Shareholder, provided that the prospective purchaser (i) meets the
shareholder eligibility requirements as stated in paragraph 2 above; (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). It is acknowledged by the Shareholders that the officers of the
Fund shall have exclusive responsibility for determining who shall constitute
an affiliate of a prospective purchaser for purposes of the foregoing
limitation.
5. Encumbrances
No shareholder shall encumber any Shares, nor shall any Shareholder either
cause or permit that a lien or security interest of any nature whatsoever,
attach, be imposed on, or be executed against the Shares.
6. Confidential Information
Each of the Shareholders acknowledges that the International Finance
Corporation ("IFC") and the International Bank for Reconstruction and
Development (the "World Bank") may possess certain information and material
relevant to investment decisions of the Fund, and that they are obligated not
to disclose or reveal such information or material to third parties, including
the Fund. Each of the Shareholders specifically acknowledges that any officer
or employee of IFC who may from time to time serve on the Board of Directors
will not disclose to other members of the Board of Directors any confidential
information of which he is aware even if the failure to do so would be
detrimental to the Fund or its Shareholders.
7. Default
The failure of any party to comply materially with any of its respective
obligations under this Agreement shall constitute an act of default hereunder.
Upon an act of default, the non-defaulting party(ies) may commence an action
for the specific performance of this Agreement and for damages, in which event
the prevailing party shall be entitled to reimbursement of trial and appellate
costs and attorneys' fees.
8. Obligation of Transferees; Endorsement of Stock Certificates
It is expressly agreed and understood that any and all transferees of the
Shares shall at all times remain subject to the provisions of this Shareholders
Agreement and shall be bound to the same extent as the original party
transferring its Shares.
All certificates of stock subject hereto shall be endorsed by the Fund as
follows:
This certificate is subject to, and is transferable only upon compliance
with, the provisions of the current Shareholders Agreement a copy of which is
on file in the Office of the Secretary of Emerging Markets Growth Fund, Inc.
After endorsement, the Shareholder shall be entitled to exercise all
rights of ownership concerning such Shares, subject to the terms of this
Agreement.
9. Term
This Agreement shall terminate upon the earlier to occur of the following
events (i) the written consent of the holders of at least 66-2/3% of the issued
and outstanding Shares of the Fund, (ii) the public offering of Shares of the
Fund to persons who would not qualify as "accredited investors" under
Regulation D under the Securities Act of 1933, or (iii) at such time as this
Agreement shall become illegal or impermissible under applicable law.
10. Further Assurances
All parties hereto agree to execute and deliver such instruments and to
take such other actions as may be reasonably requested in order to carry out
the intent of this Agreement and to effect the transactions contemplated herein
as soon as practicable.
11. Amendment
This Agreement shall not be modified or amended except by written consent
of the holders of at least 66-2/3% of the issued and outstanding Shares of the
Fund. No waiver of any of the provisions of this Agreement shall be deemed to
or shall constitute a waiver of any other provision hereof, nor shall such
waiver constitute a continuing waiver.
12. Governing Law
This Agreement shall be subject to, governed by, and construed under the
laws of the United States and the State of Maryland, notwithstanding any
choice-of-law principles.
13. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original instrument but all of which shall
together constitute but one agreement.
14. Notices
Any notice, demand, offer, or other instruments required or permitted to
be given, made or sent hereunder shall be in writing, signed by the party
giving or making the same, and shall be sent by registered mail to all parties
hereto simultaneously at their respective addresses hereinafter set forth:
Fund Emerging Markets Growth Fund, Inc.
333 South Hope Street, 52nd Floor
Los Angeles, California 90071
Shareholder At the address set forth below or on the
records of the Fund.
Any party hereto shall have the right to change the place to which such
notice, offer, demand or writing shall be sent to it by a similar notice, sent
in a like manner to all parties hereto. The date of mailing of any offer,
demand, notice or instrument shall be deemed to be the date of such offer,
demand, notice or instrument, and it shall be effective from such date.
15. Severability
If any covenant or other provision of this Agreement is invalid, illegal
or incapable of being enforced, by reason of any rule, law or public policy,
all other conditions and provisions of this Agreement shall, nevertheless,
remain in full force and effect, and no covenant or provision shall be deemed
dependent on any other covenant or provision unless so expressed herein.
16. Captions
Captions and headings to the various paragraphs of this Agreement are for
convenience only and carry no legal effect and shall in no way affect the legal
interpretation or construction of the paragraphs of this Agreement.
17. Registration of Shares
All Shares will be held in book-entry form unless otherwise requested.
Please indicate below how Shares are to be registered:
Registration:
---------------------------------------
---------------------------------------
Address:
---------------------------------------
---------------------------------------
U.S. Federal I.D. # (if applicable)
-----------------
IN WITNESS WHEREOF, the parties hereto have executed this Shareholders
Agreement as of the day and year first above written.
EMERGING MARKETS GROWTH FUND, INC.
By:
--------------------------------
(Officer of the Fund)
I have read the Fund's Prospectus and this Shareholders Agreement and
agree to the terms contained therein. I certify, under penalties of perjury:
(1) that the U.S. Federal I.D. number shown in paragraph 17 above is correct;
and (cross out the following if not true) (2) that the U.S. Internal Revenue
Service has never notified me that I am subject to 31% backup withholding, or
has notified me that I am no longer subject to such backup withholding.
I accept designation as the purchaser of the shares of common stock of the
Fund and undertake to the Fund to purchase such shares for investment and not
with a view to, or for sale or other disposition in connection with any
distribution, nor with any present intention of selling or other disposing of
such shares.
Name of Shareholder:
-----------------------------
-----------------------------
By:
-----------------------------
(Signature of Individual or
Authorized Officer of
Institution)
----------------------------
(Title of Officer)
PLEASE SEND ALL CORRESPONDENCE TO THE FOLLOWING ADDRESS OF THE FUND:
Emerging Markets Growth Fund, Inc.
Attention: Abbe Shapiro
11100 Santa Monica Boulevard, 15th Floor
Los Angeles, California 90025
ACCOUNT INFORMATION
Account Registration -- Individual Account
Please check only one box. -- Joint Tenant with Rights of
Survivorship -- will be
registered in case of two
or more shareholders
unless otherwise
specified.
-- Tenants in Common -- will be
registered in case of two
or more shareholders when
the shareholders reside in
LA or TX unless otherwise
specified.
-- Uniform Transfers to Minors
Act (UTMA) or Uniform
Gifts to Minors Act (UGMA)
-- use the name of the
adult custodian on the
shareholder line and the
name of the child on the
co-shareholder line. Use
the child's Social
Security number.
-- Trust accounts -- please
indicate the name of the
trustee authorized to act
on behalf of the trust on
the shareholder line and
the name of the trust and
date of the trust on the
co-shareholder line.
-- Retirement plan -- please
indicate the name of the
trustee on the shareholder
line and the name of the
retirement plan on the co-
shareholder line.
-- Other form of ownership
(please specify)
--------------------------
- ---------------------------
Name of shareholder
- ---------------------------
Name of co-shareholder (if any)
- ---------------------------
Address
- ---------------------------
City State Zip
- --------------------------------------------
Social Security number or taxpayer ID number
(required by law)
Dividend and Capital Gain Instruction here:
__ All dividends and capital gain distributions will be reinvested into the
fund unless otherwise indicated here:
-- Reinvest dividends only.
-- Reinvest capital gain distributions
only.
-- Receive all dividends and capital gain
distributions in cash.
FOR INSTITUTIONAL SHAREHOLDERS:
- -- Please check here if your company does NOT wish to have its name disclosed
in certain marketing materials relating to the Fund.
DECHERT PRICE & RHOADS
1500 K STREET, N.W.
WASHINGTON, D.C. 20005-1208
April 22, 1996
Emerging Markets Growth Fund, Inc.
11100 Santa Monica Boulevard
Los Angeles, CA 90025
Dear Sirs:
We have acted as counsel to Emerging Markets Growth Fund, Inc., a Maryland
corporation (the "Fund"), and we have a general familiarity with the Fund's
business operations, practices and procedures. You have asked for our opinion
regarding the issuance of shares of common stock by the Fund in connection with
the acquisition by the Fund of the assets of New World Investment Fund which
will be registered on a Form N-14 Registration Statement (the "Registration
Statement") to be filed by the Fund with the Securities and Exchange
Commission.
We have examined originals or certified copies, or copies otherwise
identified to our satisfaction as being true copies, of various corporate
records of the Fund and such other instruments, documents and records as we
have deemed necessary in order to render this opinion. We have assumed the
genuineness of all signatures, the authenticity of all documents examined by us
and the correctness of all statements of fact contained in those documents.
On the basis of the foregoing, we are of the opinion that the shares of
common stock of the Fund being registered under the Securities Act of 1933 in
the Registration Statement will be legally and validly issued, fully paid and
non-assessable, upon transfer of the assets of New World Investment Fund
pursuant to the terms of the Agreement and Plan or Reorganization included in
the Registration Statement.
We hereby consent to the filing of this opinion with and as part of the
Registration Statement.
Very truly yours,
\s\ DECHERT PRICE & RHOADS
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in the Prospectus constituting part of this
registration statement on Form N-14 (the "Registration Statement") of our
report dated August 10, 1995, relating to the June 30, 1995 financial
statements and per share data and ratios of Emerging Markets Growth Fund,
Inc.,(the "Fund") and to the reference to us under the heading "Financial
Highlights" in such Prospectus. We also consent to the references to us under
the headings "Financial Highlights" and "Independent Accountants and Legal
Counsel" in the Fund's Prospectus dated February 14, 1996, which Prospectus has
been included in the Registration Statement. We also consent to the use of our
report dated August 10, 1995, relating to the financial statements and per
share data and ratios of New World Investment Fund and to the references to us
under the headings "Financial Highlights" and "Independent Accountants and
Legal Counsel" in New World Investment Fund's Prospectus dated December 1,
1995, which Prospectus has been included in the Registration Statement.
/s/PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Los Angeles, California
April 22, 1996
POWER OF ATTORNEY
I, Issa Al-Sowaidi, the undersigned Director of Emerging Markets Growth Fund,
Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, Nancy Englander, David I. Fisher and Peter C. Kelly or any of them, to
act as attorneys-in-fact for and in my name, place and stead: (1) to sign my
name as Director of said Corporation to the Registration Statement of the
Corporation on Form N-14 under the Securities Act of 1933, and any and all
amendments thereto, including post-effective amendments, and (2) to deliver
such Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Abu Dhabi, U.A.E., this 22nd day of April, 1996.
/s/Issa Al-Sowaidi
- ------------------
ISSA AL-SOWAIDI
POWER OF ATTORNEY
I, Robert B. Egelston, the undersigned Director of Emerging Markets Growth
Fund, Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, Nancy Englander, David I. Fisher and Peter C. Kelly or any of them, to
act as attorneys-in-fact for and in my name, place and stead: (1) to sign my
name as Director of said Corporation to the Registration Statement of the
Corporation on Form N-14 under the Securities Act of 1933 and any and all
amendments thereto, including post-effective amendments, and (2) to deliver
such Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Los Angeles, CA, this 20th day of April, 1996.
/s/Robert B. Egelston
- ---------------------
ROBERT B. EGELSTON
POWER OF ATTORNEY
I, Nancy Englander, the undersigned Director of Emerging Markets Growth Fund,
Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, David I. Fisher and Peter C. Kelly or any of them, to act as
attorneys-in-fact for and in my name, place and stead: (1) to sign my name as
Director of said Corporation to the Registration Statement of the Corporation
on Form N-14 under the Securities Act of 1933 and any and all amendments
thereto, including post-effective amendments, and (2) to deliver such
Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Sao Paulo, Brazil, this 16th day of April, 1996.
/s/Nancy Englander
- ------------------
NANCY ENGLANDER
POWER OF ATTORNEY
I, David I. Fisher, the undersigned Director of Emerging Markets Growth Fund,
Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, Nancy Englander, and Peter C. Kelly or any of them, to act as
attorneys-in-fact for and in my name, place and stead: (1) to sign my name as
Director of said Corporation to the Registration Statement of the Corporation
on Form N-14 under the Securities Act of 1933 and any and all amendments
thereto, including post-effective amendments, and (2) to deliver such
Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Los Angeles, CA, this 15th day of April, 1996.
/s/David I. Fisher
- ------------------
DAVID I. FISHER
POWER OF ATTORNEY
I, Beverly L. Hamilton, the undersigned Director of Emerging Markets Growth
Fund, Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, Nancy Englander, David I. Fisher and Peter C. Kelly or any of them, to
act as attorneys-in-fact for and in my name, place and stead: (1) to sign my
name as Director of said Corporation to the Registration Statement of the
Corporation on Form N-14 under the Securities Act of 1933 and any and all
amendments thereto, including post-effective amendments, and (2) to deliver
such Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Los Angeles, CA, this 16th day of April, 1996.
/s/Beverly L. Hamilton
- ----------------------
BEVERLY L. HAMILTON
POWER OF ATTORNEY
I, Marinus W. Keijzer, the undersigned Director of Emerging Markets Growth
Fund, Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, Nancy Englander, David I. Fisher and Peter C. Kelly or any of them, to
act as attorneys-in-fact for and in my name, place and stead: (1) to sign my
name as Director of said Corporation to the Registration Statement of the
Corporation on Form N-14 under the Securities Act of 1933 and any and all
amendments thereto, including post-effective amendments, and (2) to deliver
such Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Zeist, Netherlands, this 22nd day of April, 1996.
/s/Marinus W. Keijzer
- ---------------------
MARINUS W. KEIJZER
POWER OF ATTORNEY
I, Hugh G. Lynch, the undersigned Director of Emerging Markets Growth Fund,
Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, Nancy Englander, David I. Fisher and Peter C. Kelly or any of them, to
act as attorneys-in-fact for and in my name, place and stead: (1) to sign my
name as Director of said Corporation to the Registration Statement of the
Corporation on Form N-14 under the Securities Act of 1933 and any and all
amendments thereto, including post-effective amendments, and (2) to deliver
such Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at New York, NY, this 15th day of April, 1996.
/s/Hugh G. Lynch
- ----------------
HUGH G. LYNCH
POWER OF ATTORNEY
I, Helmut Mader, the undersigned Director of Emerging Markets Growth Fund,
Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, Nancy Englander, David I. Fisher and Peter C. Kelly or any of them, to
act as attorneys-in-fact for and in my name, place and stead: (1) to sign my
name as Director of said Corporation to the Registration Statement of the
Corporation on Form N-14 under the Securities Act of 1933 and any and all
amendments thereto, including post-effective amendments, and (2) to deliver
such Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Frankfurt, Germany, this 17th day of April, 1996.
/s/Helmut Mader
- ---------------
HELMUT MADER
POWER OF ATTORNEY
I, Teresa E. Martini, the undersigned Director of Emerging Markets Growth
Fund, Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, Nancy Englander, David I. Fisher and Peter C. Kelly or any of them, to
act as attorneys-in-fact for and in my name, place and stead: (1) to sign my
name as Director of said Corporation to the Registration Statement of the
Corporation on Form N-14 under the Securities Act of 1933 and any and all
amendments thereto, including post-effective amendments, and (2) to deliver
such Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Berkeley Heights, NJ, this 15th day of April, 1996.
/s/Teresa E. Martini
- --------------------
TERESA E. MARTINI
POWER OF ATTORNEY
I, John G. McDonald, the undersigned Director of Emerging Markets Growth Fund,
Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, Nancy Englander, David I. Fisher and Peter C. Kelly or any of them, to
act as attorneys-in-fact for and in my name, place and stead: (1) to sign my
name as Director of said Corporation to the Registration Statement of the
Corporation on Form N-14 under the Securities Act of 1933 and any and all
amendments thereto, including post-effective amendments, and (2) to deliver
such Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Stanford, CA, this 15th day of April, 1996.
/s/John G. McDonald
- -------------------
JOHN G. MCDONALD
POWER OF ATTORNEY
I, James K. Peterson, the undersigned Director of Emerging Markets Growth Fund,
Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, Nancy Englander, David I. Fisher and Peter C. Kelly or any of them, to
act as attorneys-in-fact for and in my name, place and stead: (1) to sign my
name as Director of said Corporation to the Registration Statement of the
Corporation on Form N-14 under the Securities Act of 1933, and any and all
amendments thereto, including post-effective amendments, and (2) to deliver
such Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Stamford, CT, this 15th day of April, 1996.
/s/James K. Peterson
- --------------------
JAMES K. PETERSON
POWER OF ATTORNEY
I, William Robinson, the undersigned Director of Emerging Markets Growth Fund,
Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, Nancy Englander, David I. Fisher and Peter C. Kelly or any of them, to
act as attorneys-in-fact for and in my name, place and stead: (1) to sign my
name as Director of said Corporation to the Registration Statement of the
Corporation on Form N-14 under the Securities Act of 1933, and any and all
amendments thereto, including post-effective amendments, and (2) to deliver
such Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Paris, France, this 15th day of April, 1996.
/s/William Robinson
- -------------------
WILLIAM ROBINSON
POWER OF ATTORNEY
I, Patricia A. Small, the undersigned Director of Emerging Markets Growth
Fund, Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, Nancy Englander, David I. Fisher and Peter C. Kelly or any of them, to
act as attorneys-in-fact for and in my name, place and stead: (1) to sign my
name as Director of said Corporation to the Registration Statement of the
Corporation on Form N-14 under the Securities Act of 1933, and any and all
amendments thereto, including post-effective amendments, and (2) to deliver
such Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Oakland, CA, this 19th day of April, 1996.
/s/Patricia A. Small
- --------------------
PATRICIA A. SMALL
POWER OF ATTORNEY
I, Walter P. Stern, the undersigned Director of Emerging Markets Growth Fund,
Inc., a Maryland corporation, do hereby constitute and appoint Roberta A.
Conroy, Nancy Englander, David I. Fisher and Peter C. Kelly or any of them, to
act as attorneys-in-fact for and in my name, place and stead: (1) to sign my
name as Director of said Corporation to the Registration Statement of the
Corporation on Form N-14 under the Securities Act of 1933, and any and all
amendments thereto, including post-effective amendments, and (2) to deliver
such Registration Statement and amendments, so signed, for filing with the
Securities and Exchange Commission under the provisions of the Securities Act
of 1933 as amended, granting to said attorneys-in-fact, and each of them, full
powers and authority to do and perform every act and thing whatsoever requisite
and necessary to be done in and about the premises as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at New York, NY, this 15th day of April, 1996.
/s/Walter P. Stern
- ------------------
WALTER P. STERN
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 DISAPPROVEDBY 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 $50.84 $ N/A $50.84
Total (2) $50.84 $ N/A $1,516,894,778
</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 1,081,640 shares previously
registered by the Fund that remained unsold as of October 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 October 31, 1995 the net
asset value and price per Share was $50.84.
(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 February 14, 1996.
===================================================
T A B L E O F C O N T E N T S
===================================================
Item Page No.
---- -------
<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 19
COMMON STOCK 25
PRINCIPAL SHAREHOLDERS 26
THE OFFERING 27
SHARES ELIGIBLE FOR FUTURE SALE 28
VALUATION 29
DIVIDENDS AND DISTRIBUTIONS 30
REPURCHASE OF SHARES 30
SHAREHOLDERS AGREEMENT AND RESTRICTIONS ON TRANSFER 32
PORTFOLIO TRANSACTIONS AND BROKERAGE 32
REPORTS, LISTING AND PUBLICATION OF VALUE 33
TAX CONSIDERATIONS 34
CUSTODIAN, DIVIDEND PAYING AGENT, TRANSFER AGENT AND REGISTRAR 38
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL 38
SUPPLEMENTAL INFORMATION 39
AVAILABLE INFORMATION 39
</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.
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), Russia, 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 Fund may also enter into transactions
in derivative instruments for risk management, investment and other purposes
including options on securities and securities indexes, futures contracts with
respect to securities, securities indexes, or currencies, swap agreements, and
equity-linked notes. These instruments may be more volatile than other
portfolio instruments held by the Fund, and there can be no assurance that use
of any such instrument will be successful in reducing portfolio risk or
increasing portfolio returns. Successful use of these instruments by the Fund
depends on the ability of the Adviser to correctly predict future movements in
interest rates, security prices, or other market indicators.
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 1,081,640 shares were unsold as of October
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 1,967 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, (11) settlement
risks, and (12) the risks associated with ownership of Russian securities.
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.
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 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 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 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>
/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 October 31, 1995, there were 477 holders of Shares, and
109,842,866 Shares outstanding. The Fund's aggregate net assets were
approximately $5,584 million. If all Shares offered by the Fund pursuant to
this Prospectus are sold, the Fund would have 139,679,506 Shares outstanding
and approximately $7,101 million in aggregate net assets (assuming all Shares
had been sold at prices based on the net asset value per Share as of October
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 $1,516,894,778 based on the price per Share as of October 31,
1995 if the 29,836,640 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.
12. Russia. The Russian market is one of the newer emerging
markets, and in certain respects one of the least developed emerging markets.
Investments in Russia will be subject to the risks set forth above as well as
certain heightened risks with regard to the ownership and custody of
securities. Ownership of securities in Russia is evidenced by entries in the
books of a company or its registrar. No certificates representing ownership of
Russian companies will be held by the Fund's custodian or subcustodian or in an
effective central depository system, which would be the case in most emerging
and developed markets. As a result of this system and the lack of effective
state regulation and enforcement, the Fund could lose its registration and
ownership of Russian securities through fraud, negligence or even mere
oversight. The Fund will attempt to ensure that its interest in securities
continues to be recorded by having its custodian obtain extracts of share
registers through regular confirmations, however, such extracts are not legally
enforceable and would not prevent loss or dilution of the Fund's ownership
rights from fraudulent or negligent acts or mere oversights. In certain
situations, management of a company may be able to exert considerable influence
over who can purchase and sell the company's shares by illegally instructing
the registrar to refuse to record transactions in the share register. The
acquisition of ADRs, depository receipts and other securities convertible or
exchangeable into Russian securities will not reduce this risk.
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, invest 100% of the Fund's assets in highly liquid
debt instruments or 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 long and short-term 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 October 31, 1995, the Fund had invested approximately 15.8% 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), Russia,
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 may enter into futures and options
thereon that relate to indexes or other baskets of securities.
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.
The Fund intends to enter into swap agreements that 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
would 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. Equity linked
notes will be considered equity securities for purposes of the Fund's
investment objective and policies.
The price of an equity linked note is derived from the value of the
underlying linked securities. The level and type of risk involved in the
purchase of an equity linked note by the Fund is similar to the risk involved
in the purchase of the underlying Latin America or other emerging market
securities. Such notes therefore may be considered to have speculative
elements. However, equity linked notes are also dependent on the individual
credit of the issuer of the note, which will generally be a trust or other
special purpose vehicle or finance subsidiary established by a major financial
institution for the limited purpose of issuing the note. Like other structured
products, equity linked notes are frequently secured by collateral consisting
of a combination of debt or related equity securities to which payments under
the notes are linked. If so secured, the Fund would look to this underlying
collateral for satisfaction of claims in the event that the issuer of an equity
linked note defaulted under the terms of the note.
Equity linked notes are often privately placed and may not be rated,
in which case the Fund will be more dependent on the ability of the Adviser to
evaluate the creditworthiness of the issuer, the underlying security, any
collateral features of the note, and the potential for loss due to market and
other factors. Ratings of issuers of equity linked notes refer only to the
creditworthiness of the issuer and strength of related collateral arrangements
or other credit supports, and do not take into account, or attempt to rate, any
potential risks of the underlying equity securities. The Fund has no
restrictions on investing in equity linked notes whose issuers are rated below
investment grade (e.g., rated below Baa by Moody's Investors Service, Inc. or
BBB by Standard & Poor's Corporation), or, if unrated, or equivalent quality.
Because rating agencies have not currently rated any issuer higher than the
rating of the country in which it is domiciled, and no Latin American country
other than Colombia is rated investment grade, equity linked notes related to
securities of issuers in such emerging market countries will be considered to
be below investment grade. Depending on the law of the jurisdiction in which
an issuer is organized and the note is issued, in the event of default, the
Fund may incur additional expenses in seeking recovery under an equity linked
note, and may have less legal recourse in attempting to do so.
As with any investment, the Fund can lose the entire amount it has
invested in an equity linked note. The secondary market for equity linked
notes may be limited. The lack of a liquid secondary market may have an
adverse effect on the ability of the Fund to accurately value the equity linked
notes in its portfolio, and may make disposal of such securities more difficult
for the Fund.
The ability of the Fund to invest in equity linked notes may be
limited by the provisions of the U.S. Commodity Exchange Act. 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 commodity exchanges is prohibited absent an
applicable exclusion or exemption. The CFTC has adopted a statutory
interpretation exempting certain so-called "hybrid instruments" from this
prohibition under certain circumstances.
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, cash or other liquid high-grade debt securities 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 payany 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, and for a former Director who regularly attends
Board meetings. 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>
Name, Address and Age Position with Registrant Principal Occupation During
- --------------------- ---------------- Past Five Years
---------------------------
<S> <C> <C>
DIRECTORS Director Director, Abu Dhabi Investment
Issa Al-Sowaidi Authority
Corniche Road
Abu Dhabi, U.A.E.
Age: 38
Robert B. Egelston* Vice Chairman of the Board and Director Senior Partner,
333 South Hope Street Capital Group Partners,
Los Angeles, CA 90071 Limited Partnership
Age: 65
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: 50 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: 58 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 Investment Management 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 Corporation
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: 50
Walter P. Stern* Chairman of the Board and Director Chairman of the Board,
630 Fifth Avenue Capital Group International,
New York, NY 10111 Inc.
Age: 67
OTHER OFFICERS Vice President and Secretary Assistant General Counsel,
Roberta A. Conroy The Capital Group Companies,
11100 Santa Monica Blvd. Inc.
Los Angeles, CA 90025
Age: 41
Hartmut Giesecke Vice President Chairman and Director,
1 Raffles Place Capital International K.K.
#24-00 OUB Centre and Senior Vice President
Singapore 0104 and Director, Capital
Age: 58 International, Inc.
Thomas W. Trimborn Vice President Vice President,
25 Bedford Street Capital International, Inc.
London, England WC2E 9HN
Age: 34
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: 54
Michael A. Felix Assistant Treasurer Vice President,
135 S. State College Blvd. Capital International, Inc.
Brea, CA 92621
Age: 35
</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 $129,000 in total compensation (all of which
was 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, Inc., 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 October
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 12.2%
as Trustee for the General Motors
Employees 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
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
139,679,506 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 October 31, 1995 was $50.84.
The total investment return, assuming dividend and capital gain distributions
were reinvested, from May 30, 1986 (the commencement of operations) through
October 31, 1995 was +886%.
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 & Johnson LLP, 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.
INVESTMENT PORTFOLIO, JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
EQUITY-TYPE SECURITIES
COMMON PREFERRED CONVERTIBLE PERCENT OF
INDUSTRY DIVERSIFICATION STOCKS STOCKS BONDS BONDS NET
ASSETS
Telecommunications 10.22% 3.61% - - 13.83%
Banking 10.68 0.39 0.55% - 11.62
Utilities: Electric & Gas 7.77 3.41 - 0.07 11.25
Beverages & Tobacco 3.80 0.97 - - 4.77
Metals: Steel 2.67 0.78 0.25 0.12 3.82
Energy Sources 2.51 0.69 - - 3.20
Equity Common Trusts 2.64 0.06 - - 2.70
Other Industries 24.67 2.67 1.16 2.98 31.48
-----------------------------------------------------
64.96% 12.58% 1.96% 3.17% 82.67
============================================
Short-Term Securities 17.37
Excess of liabilities over cash and (0.04)
receivables ------
Net Assets 100.00%
=======
</TABLE>
***********************
TEN LARGEST EQUITY HOLDINGS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Market Value
Acquisition of Holdings
Percent of Cost 6/30/95
Security Net Assets (in thousands)* (in
thousands)*
Centrais Electricas Brasileiras 3.24% $90,750 $180,298
Telecomunicacoes Brasileiras 2.39 61,437 133,126
Philippine Long Distance Telephone Co. 2.24 52,072 124,763
Telecom Argentina STET-France Telecom 1.9 87,517 105,984
Telefonos de Mexico 1.83 125,258 101,853
Bangkok Bank 1.74 25,468 96,714
Korea Electric Power 1.65 64,133 91,917
San Miguel 1.3 13,771 72,303
Companhia Energetica de Minas Gerais 1.18 32,970 65,590
Samsung Electronics Co. 1.11 20,313 61,185
------ -------- ----------
18.58% $573,689 $1,033,733
====== ======== ==========
</TABLE>
* These figures reflect cost blocks owned on 6/30/95.
<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 $5,571,81 100.00
0
========= =========
= =
</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
EQUITY-TYPE SECURITIES ADDED TO THE
PORTFOLIO SINCE DECEMBER 31, 1994
- -----------------------------------
Abacan Resource
Alphatec Electronics
Benpres Holdings
Central Costanera
Central Puerto
Cimenterie de l'Oriental
Compania de Inmuebles y Valores Caracas
Electricity Generating Authority of Thailand
Freeport-McMoran Copper & Gold
Grupo Financiero Banorte
Guangdong Electric Power
Hindalco Industries
Hocheng
Huaneng Power International
Jaya Real Property
JP Kenny Exploration & Production
Madras Cement
PT Mayora Indah
Migros Turk
PT Modern Photo Film
National Development Bank
Nedcor
Netas Northern Electric Telekomunikasyon AS
Portugal Telecom
PT Praxair Indonesia
Raymond Woolen Mills
Refrigeracao Parana
Shinhan Bank
Sigma Alimentos
Sime UEP Properties
Sociedad Comercial del Plata
SPT Telecom
Ssangyong Investment & Securities
SsangYong Oil Refining
Star Mining
Tata Engineering and Locomotive
Technology Resources Industries
TVI-Televisao Independente
Turkiye Sise ve Cam Fabrikalari
Yapi ve Kredi Bankasi
Zhenhai Refining & Chemical
Zywiec (Zaklady Piwowarskie w Zywcu SA)
EQUITY-TYPE SECURITIES ELIMINATED FROM THE
PORTFOLIO SINCE DECEMBER 31, 1994
- ------------------------------------------
A.G. Petzetakis
Ayudhya Insurance
Banco do Braxil
Banque Indosuez Lux Sivensa
PT Barito Pacific Timber
Carter Holt Harvey
Ceramica Carabobo
Coca-Cola FEMSA
Compania de Cemento Argos
Elf Gabon
Fomento Economico Mexicano
Formosa Growth Fund
Global Mark International*
Grupo Embotellador de Mexico
Grupo Financiero Bancomer
Grupo Financiero Serfin
Grupo Industrial Durango
Hellas Can-Packaging Manufacturers
Hylsamex
Interag
Ipako
Kia Motors
Korea Fund
Leong Hup Holdings
Mannesmann
MBf Capital
Oriental Holdings
President Enterprises
Ripasa SA Celulose e Papel
PT Semen Cibinong
PT Semen Gresik
PT Sepanjang Surya Gas
Tenaga Nasional
United Communication Industry
*Global Mark International's convertible debentures were
exchanged for holdings in PT Indofood Sukses Makmur.
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>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Emerging Markets Growth Fund
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the per-share data and ratios present fairly, in all
material respects, the financial position of Emerging Markets Growth Fund (the
"Fund") at June 30, 1995, the results of its operations, the changes in its net
assets, and the per-share data and ratios for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and per-share data and ratios (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based
upon our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1995 by correspondence with the
custodian and brokers and application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE
Los Angeles, California
August 10, 1995
TAX INFORMATION (UNAUDITED)
The fund makes an election under the Internal Revenue Code Section 853 to pass
through foreign taxes paid by the fund to its shareholders. The total amount
of foreign taxes passed through to shareholders for the year ended June 30,
1995 totals $0.58450 per share.
None of the distributions paid by the fund from investment income earned in the
year ended June 30, 1995 qualifies for the corporate dividends-received
deduction. None of the dividends paid to shareholders was derived from
interest on direct U.S. Treasury obligations.
This information is given to meet certain requirements of the Internal Revenue
Code and should not be used by shareholders for preparing their income tax
returns. for tax return preparation purposes, please refer to the annual
information on the taxability of distributions supplied by the fund.
PROSPECTUS 3,763,201 Shares of Beneficial Interest
NEW WORLD INVESTMENT FUND
New World Investment Fund (the "Fund') is a non-diversified,
closed-end management investment company organized as a business trust in the
United States under the laws of the Commonwealth of Massachusetts on March 1,
1989, and registered under the Investment Company Act of 1940, as amended. As
of the date of this Prospectus, the Fund had outstanding 11,828,220 shares of
beneficial interest, par value $.001 per share, and its aggregate net assets
were approximately $228,166,364. The Fund seeks, over the long term, a high
level of total return by investing primarily in securities of Latin American
issuers. Under normal market conditions, the Fund invests between 60% and 90%
of its total assets in equity securities of Latin American issuers. The Fund
also may invest in fixed-income securities of Latin American issuers and in
other investment companies or collective investment undertakings that invest in
Latin American equity and/or fixed-income securities. The Fund currently
intends to limit its investments in Latin American securities to securities
issued or traded in the markets of Argentina, Brazil, Chile, Colombia, Mexico,
Peru and Venezuela, although it may invest in additional Latin American markets
in the future.
The Fund's investment adviser is Capital International, Inc. (the
"Adviser").
The Fund is offering 3,763,201 shares of beneficial interest (the
"Shares") to the public in a continuous offering (the "Offering"). The
Offering will continue until all the Shares have been sold. There is no public
trading market for the Fund's shares. It is not currently anticipated that an
active secondary market will develop for any shares of the Fund and as such the
Shares may 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 the Shares. See "Shareholders
Agreement and Restrictions on Transfer."
Investment in Latin America involves certain special considerations,
such as limitations on foreign investment and repatriation of capital, price
volatility, limited liquidity and small market capitalization of the Latin
American securities markets, currency exchange rate fluctuations and
devaluations, high domestic inflation, government involvement in the private
sector, and political uncertainty, which are not typically associated with
investments in the United States. See "Investment Objective and Policies" and
"Special Considerations and Risk Factors."
The address of the Fund is 11100 Santa Monica Boulevard, Los Angeles,
CA 90025, and the Fund's telephone number is (310) 996-6000.
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 OR ANY STATE SECURITIES 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>
Price to Public (1)(2) Sales Load Proceeds to the Fund(2)(3)
<S> <C> <C> <C>
Per Share $19.29 N/A $19.29
Total(2) $72,592,147 N/A $72,592,147
</TABLE>
(1) The Shares are offered on a best efforts basis by the officers and
Trustees of the Fund. No commission or remuneration will be paid to such
persons in connection with the sale of Shares. The offering price of the
Shares is equal to the net asset value, next determined after the order to
purchase Shares has been received by the Fund. As of November 30, 1995, the
net asset value per share was $19.29.
(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 $32,995.92
THE DATE OF THIS PROSPECTUS IS DECEMBER 1, 1995.
Shareholder Transaction Expenses
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* . . . . . . . . . . . . . . . . . . . . . . . . 0.90%
Other Expenses** . . . . . . . . . . . . . . . . . . . . . . . 0.40%
Total Annual Fund Operating Expenses*** . . . . . . . . . . . . . 1.30%
The purposes of the table above is to help you understand all fees
and expenses that you, as a Fund shareholder, would bear directly or
indirectly.
* Effective September 10, 1995, the Investment Adviser's fee, which is payable
monthly, is assessed at the annual rates of 0.90% of the first $400 million of
aggregate net assets and 0.80% of aggregate net assets in excess of $400
million. Prior to September 10, 1995, the Adviser's fee was assessed at the
annual rates of 1.00% on the first $400 million of aggregate net assets and
0.80% of aggregate net assets in excess of $400 million.
** "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 aggregate net assets of the Fund as of June 30, 1995, assuming
all Shares being offered by this Prospectus are sold at net asset value as of
June 30, 1995. Total expenses excluding non-U.S. taxes (as a percentage of net
assets) are estimated at 1.20% for the current fiscal year, which reflects the
new investment advisory rate of 0.90%.
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>
One Year Three Years Five Years Ten Years
<S> <C> <C> <C>
$12 $38 $66 $145
</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
regulations of the Securities and Exchange Commission 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.
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 more
detailed information appearing elsewhere in this Prospectus.
THE FUND
New World Investment Fund (the "Fund") is a closed-end management investment
company organized as a business trust in the United States under the laws of
the Commonwealth of Massachusetts on March 1, 1989, and registered under the
Investment Company Act of 1940, as amended ("1940 Act"). As of the date of
this Prospectus, the Fund had outstanding 11,828,220 shares of beneficial
interest, par value $.001 per share, and its aggregate net assets were
approximately $228,166,364. The Fund is designed for investors seeking to
invest in securities of Latin American issuers. See "The Fund."
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek, over the long term, a high
level
of total return by investing primarily in securities of Latin American issuers.
The Fund's policy, under normal market conditions, is to invest between 60% and
90% of its total assets in equity securities of Latin American issuers. The
Fund may also invest in fixed-income securities of Latin American issuers and
Brady Bonds for liquidity management purposes and when the Fund's investment
adviser believes that such securities may provide a high level of total return.
The Fund intends currently to limit its investments in Latin American
securities to securities issued or traded in the markets of Argentina, Brazil,
Chile, Colombia, Mexico, Peru and Venezuela, although it may invest in
additional Latin American markets in the future. Under normal conditions, the
Fund may invest up to 10% of its assets outside of Latin America. The Fund
intends to allocate its assets geographically in accordance with its investment
adviser's view of investment opportunities at a given time, but will invest in
the securities of issuers in at least three different countries. As a
fundamental policy, the Fund may not invest more than 50% of its assets in
securities of issuers based in a single country.
The Fund also may invest from time to time in other investment companies or
collective investment undertakings that invest in Latin American equity and/or
fixed-income securities.
The Fund may invest in illiquid or restricted securities and may purchase
securities directly from the issuer and make certain investments, including
purchases of participation interests in bank loans, that may not have all the
characteristics of other equity or debt securities in which the Fund may
invest. The Fund intends, however, to invest primarily in securities that are
listed on bona fide securities exchanges or are actively traded in the
over-the-counter markets and, in any case, will not make additional investments
in securities (or participation interests) that are not readily marketable at
any time when more than 35% of its total assets are invested in such securities
(or participation interests). For temporary defensive purposes the Fund may
reduce its holdings of Latin American equity securities and increase its
holdings of bonds or short-term debt obligations of Latin American or other
issuers and cash (some or all of which may be denominated in U.S. dollars or
other non-Latin American currencies). See "Investment Objective and Policies."
The Fund may also enter into transactions in derivative instruments for risk
management, investment and other purposes including options on securities and
securities indexes, futures contracts with respect to securities, securities
indexes, or currencies, swap agreements, and equity-linked notes. These
instruments may be more volatile than other portfolio instruments held by the
Fund, and there can be no assurance that use of any such instrument will be
successful in reducing portfolio risk or increasing portfolio returns.
Successful use of these instruments by the Fund depends on the ability of the
Adviser to correctly predict future movements in interest rates, security
prices, or other market indicators.
THE OFFERING
The Fund is offering 3,763,201 shares of beneficial interest, par value $.001
each, (the "Shares") to the public in a continuous offering (the "Offering").
The Shares will be offered by the Fund on a continuous basis until all
3,763,201 Shares offered have been sold. 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 "Adviser"), investors may be
permitted to purchase Shares by tendering to the Fund securities which are
determined by the Adviser 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
prospective investor that is a "company" (as that term is defined in the 1940
Act) must have total assets in excess of US $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, as amended ("1933 Act"). That
is, such person must have an individual net worth in excess of US $1 million or
an individual income in excess of US $200,000 during each of the two most
recent years. The minimum initial purchase pursuant to the Offering (for
companies and natural persons) is $100,000 (approximately 5,184 Shares based on
the offering price at the date of this Prospectus) and $25,000 thereafter.
SHAREHOLDERS AGREEMENT AND RESTRICTIONS ON TRANSFER
All shares of the Fund, including the Shares to be issued in the Offering, are
equal with all other shares with respect to dividends, voting rights,
liquidation rights and other matters. See "Capitalization."
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" (as that term is defined in the 1940 Act) unless (i)
the prospective purchaser represents that it has net assets in excess of US $5
million; (ii) it transfers the lesser of its entire holding of shares or a
sufficient number of shares that their current net asset value, in the
aggregate, equals or exceeds the required minimum initial investment
(currently, $100,000); (iii) the Fund receives prior written notification of
the terms of any transfer and of the nature of the proposed transferee(s), and
if requested, the Fund receives evidence of the proposed transfer's compliance
with applicable law; and (iv) the Board of Trustees has not, within up to 30
days following receipt of the required notification from a prospective selling
shareholder, determined that the proposed transfer would have a material
adverse impact on the Fund or any of its shareholders and prohibited the
transfer. If the prospective purchaser is a natural person no shares may be
transferred unless (i) the prospective purchaser satisfies (ii), (iii) and (iv)
above, and (ii) the prospective purchaser has an individual net worth in excess
of US $1 million or an individual income in excess of US $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. All investors purchasing shares
pursuant to the 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
unlikelihood that a secondary market will develop 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 OFFER
The Fund's Board of Trustees 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 current 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 exemption from the Securities and
Exchange Commission (the "SEC") to permit the Fund to repurchase shares in
connection with tender offers while it is engaged in a continuous distribution
of its shares.
SPECIAL CONSIDERATIONS AND RISK FACTORS
The Fund, like other investors in Latin American securities, will be subject to
general economic and political conditions and risks in the Latin American
countries in which it invests. The Fund's investments in securities of Latin
American issuers involve certain considerations not typically associated with
investments in securities of U.S. companies or of U.S. government entities.
These considerations include, generally: (a) restrictions on investment and
repatriation of invested capital and on the Fund's ability to exchange local
currencies for U.S. dollars; (b) currency devaluations and fluctuations in
currency exchange rates; (c) greater price volatility, substantially less
liquidity, more limited regulation, and significantly smaller market
capitalizations of Latin American securities markets; (d) more pervasive
governmental involvement in the domestic economy; (e) higher rates of
inflation; (f) certain local tax law considerations; and (g) political
uncertainty (h) risks associated with investments in loan participations; (i)
settlement risks and other considerations.
Because of the limited forward market for the purchase of U.S. dollars in most,
if not all, Latin American countries and the limited circumstances in which the
Fund expects to hedge against declines in the value of Latin American
currencies generally, the Fund will be adversely affected by devaluations of
Latin American currencies against the U.S. dollar to the extent the Fund is
invested in securities denominated in currencies experiencing a devaluation.
In addition, accounting, auditing and financial reporting standards in Latin
American countries are different from U.S. standards. As a result, certain
material disclosures may not be made, and less information may be available to
the Fund and other investors than would be the case if the Fund's investments
were restricted to securities of U.S. issuers.
Shares of closed-end investment companies that are publicly traded frequently
trade at a discount from net asset value. This characteristic of shares of a
closed-end fund is a risk separate and distinct from the risk that the Fund's
net asset value will decrease. The Fund's outstanding shares are not, and it
is not expected that the Shares offered hereby will be, publicly traded. See
"Special Considerations and Risk Factors--Market Value and Net Asset Value."
While the Fund expects primarily to invest in Latin American equity securities
of companies that are listed on bona fide securities exchanges or are traded in
over-the-counter ("OTC") markets, it may, subject to local investment
restrictions, invest up to 35% of its assets in securities and participation
interests that are not readily marketable. Such investments may involve a high
degree of business and financial risk. Because of the absence of any liquid
trading market for these investments, the Fund may take longer to liquidate
these positions than is the case for securities of listed companies. In
addition to the relevant financial and business risks, companies not publicly
traded may not be subject to the same disclosure requirements applicable to
companies whose securities are publicly traded. See "Special Considerations
and Risk Factors--Illiquid or Restricted Securities."
The Fund is classified as a "non-diversified" investment company under the 1940
Act, which means that the Fund is not limited by that Act in the proportion of
its assets that may be invested in the securities of a single issuer. The Fund
is, however, subject to certain local laws limiting investments in a single
issuer and intends to comply with the diversification requirements imposed by
the U.S. Internal Revenue Code of 1986, as amended, for qualification as a
regulated investment company. As a non-diversified investment company, the
Fund may invest a greater proportion of its assets in the securities of a
smaller number of issuers and, as a result, may be subject to greater risk with
respect to its portfolio investments than a diversified company might be. See
"Investment Restrictions" and "Tax Considerations."
INVESTMENT ADVISER
Capital International, Inc. (the "Adviser") manages the investment portfolio
and business affairs of the Fund, subject to policies established by the Fund's
Board of Trustees. See "Management of the Fund -- The Investment Adviser."
ADVISORY FEES AND OTHER EXPENSES
The Fund pays the Adviser a monthly fee at an annual rate of 0.90% of the first
$400 million of the Fund's aggregate net assets and 0.80% of such aggregate net
assets in excess of $400 million. This Fee is higher than that paid by most
other U.S. registered investment companies investing solely in securities of
U.S. issuers, but the Adviser believes that it is comparable to that of U.S.
registered investment companies investing in securities of Latin American
issuers. Other Fund expenses are deducted from its assets or income. See
"Management of the Fund."
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 is also included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
PER-SHARE DATA AND RATIOS For the Fiscal Years Ended June 30,
1995 1994 1993
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $31.27 $24.89 $20.98
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .43 .50 .37
Net realized and unrealized (loss) gain on (2.49) 8.83 5.59
investments before non-U.S. taxes
Non-U.S. taxes (.10) (.50) (.01)
Total (loss) income from investment operations (2.16) 8.83 5.95
LESS DISTRIBUTIONS:
Dividends from net investment income (.04) (.21) --
Distributions from net realized gain (9.81) (2.24) (2.04)
Total distributions (9.85) (2.45) (2.04)
Net Asset Value, End of Period $19.26 $31.27 $24.89
Total Return (15.47%) 35.97% 31.28%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $242 $305 $212
Ratio of expenses to average net assets 1.27% 1.36% 1.40%
Ratio of expenses and non-U.S. taxes 1.40% 1.50% 1.62%
to average net assets
Ratio of net income to average net assets 1.58% 1.43% 1.70%
Portfolio turnover rate 44.19% 21.47% 17.23%
</TABLE>
In conformity with the requirements of Form N-2, financial highlight
information is not provided for the period from the Fund's commencement of
operations prior to the effectiveness of its initial registration statement
under the Securities Act of 1933, as amended.
THE FUND
New World Investment Fund (the "Fund") is a closed-end management
investment company, organized as a business trust under the laws of the
Commonwealth of Massachusetts on March 1, 1989, and registered under the
Investment Company Act of 1940, as amended ("1940 Act"). As of the date of
this Prospectus, the Fund had outstanding 11,828,220 shares of beneficial
interest, par value $.001 per share, and its aggregate net assets were
approximately $228,166,364.
The Fund was organized to take advantage of a perceived growing
potential for foreign portfolio investment in Latin American securities
markets, primarily in Argentina, Brazil, Chile, Colombia, Mexico, Peru and
Venezuela. While there are risks as well as regulatory, financial, technical
and other barriers to investing in these markets, in the Adviser's opinion,
there are also substantial investment opportunities. For example, a number of
Latin American companies have healthy balance sheets and strong management and
are highly competitive in world markets, yet their securities frequently trade
at price/earnings and price/book value ratios that are below those of companies
traded on more developed securities markets. There also may be attractive
opportunities for equity investments made through the conversion of external
debt to local currency at favorable rates and also for certain
dollar-denominated or indexed fixed-income investments which provide high
yields in real terms. In addition, the low market capitalizations of certain
Latin American securities markets as a percentage of their countries' gross
national products compared to similar ratios in developed markets point to
long-term growth in the Latin American securities markets. Further, policy
makers in Latin America are becoming increasingly receptive to foreign
portfolio investment based on their growing appreciation of the important role
of equity capital and publicly traded debt.
The Fund is intended for investors who seek an opportunity to
participate in potential price appreciation and income opportunities of Latin
American securities. The Fund believes that it will provide an opportunity for
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 provide an opportunity for international investment
away from the better-known and more developed securities markets. See
"Investment Objectives and Policies." There can be no assurance that the
Fund's objective will be met.
In 1989, the Fund sold 6,250,000 shares of beneficial interest in a
private offering to a limited number of institutional investors. In 1991, the
Fund sold 1,154,964 shares of beneficial interest in a private offering to
three accredited investors, and in 1992, the Fund sold 459,770 shares of
beneficial interest to one accredited investor. In 1993, the Fund sold 442,167
shares of beneficial interest to seven accredited investors. In 1994, the Fund
sold 296,679 shares of beneficial interest to three accredited investors.
Otherwise, since that time, the Fund has not issued any additional shares
except for 6,246,190 shares issued pursuant to reinvestment of dividends and
capital gain distributions. The Fund has, from time to time, repurchased
shares pursuant to tender offers. Consequently, the amount of shares
outstanding does not equal the amount of shares issued.
As of the date of this Prospectus, there were nine holders of shares,
and 11,828,220 shares of the Fund outstanding. The Fund's aggregate net assets
were approximately $228,166,364. If all the 3,763,201 Shares offered by the
Fund in the Offering were sold, the Fund would have 15,591,420 shares
outstanding and approximately $300,758,492 in aggregate net assets (assuming
all Shares had been sold at prices based on the net asset value per share as of
November 30, 1995).
There are currently no outstanding warrants, rights, options or
similar instruments relating to the purchase of the Fund's shares (see
"Capitalization"). The Board of Trustees 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. Apart from the Offering, there
is no present intention to expand the Fund further through additional public or
private offerings. The Fund, however, reserves the right to make such
offerings in the future if it believes that such offerings would be in the best
interests of the Fund and its shareholders. The Fund also expects to continue
its current practice of issuing additional shares for purposes of reinvestment
of dividend and capital gain distributions.
USE OF PROCEEDS
The net proceeds of the Offering paid to the Fund (estimated to be
approximately $72,592,147 based on the price per share as of November 30, 1995,
if all 3,763,201 Shares offered by the Fund under this registration statement
are sold) will be invested in accordance with the policies set forth under
"Investment Objective and Policies." The Fund expects that substantially all
of the proceeds of the Offering 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.
SPECIAL CONSIDERATIONS AND RISK FACTORS
An investment in the Fund involves risks common to all investments in
the international financial markets as well as significant risks not normally
associated with an investment in securities which trade in more developed
securities markets. These risks include: political and social unrest; currency
instability; high rates of domestic inflation; limitations on repatriation of
capital (including the possible imposition of currency blockages); the impact
of the foreign debt burden on the domestic economies; instability and limited
liquidity and regulation of the securities markets; relatively high transaction
and other costs of investment; differences in accounting, auditing and
financial reporting standards and potential difficulties in obtaining
information about issuers and markets; imposition of foreign taxes; and
governmental intervention in the private sector, including restrictions on
foreign investors such as the Fund. These and other risks should be considered
carefully by prospective investors. There can be no assurance that the Fund
will achieve its investment objective. Potential investors in the Fund should
be able to withstand a significant loss, or even a complete loss, of their
investment in the Fund.
POLITICAL AND ECONOMIC FACTORS
While democratic institutions may be stronger in Latin America today
than at any time in the recent past, political stability in countries in that
region is very difficult to assess. Furthermore, in many Latin American
countries, institutions other than major political parties, particularly the
military and trade unions, may have more influence than comparable institutions
in other countries.
Similarly, the economies of Latin American countries differ among
themselves greatly and differ with respect to the economies of Canada, the
United States, Japan, Germany and other countries of Western Europe in terms of
such factors as rates of growth of their economies overall and within certain
sectors, rates of inflation, population growth and demographic trends, the
importance of international trade, the availability of natural resources,
capital reinvestment, balance of payments, and other factors. In particular,
the economies of Latin American countries may be more susceptible to the
negative effects of trade barriers and tariffs and to fluctuations in the
international prices of certain commodities such as oil, copper, and certain
agricultural products. Certain positive economic trends and developments
occurring in the United States, Canada, Japan, Germany or other of the leading
countries of Western Europe may have little, or no impact on the economies of
Latin American countries, while certain negative trends and developments
occurring in these other countries may have a negative impact on Latin American
countries as a result of their sensitivity to external economic forces.
In many Latin American countries, the government has exercised and
continues to exercise substantial influence over many aspects of the private
sector. In some instances, the government owns or controls many companies,
including some of the largest in the country. Consequently, in those
countries, government actions affecting economic conditions could have a
significant impact on private sector companies and, by extension, on market
conditions, prices and yields of securities in the Fund's portfolio. The
Fund's assets held in particular Latin American countries could be adversely
affected by expropriation, confiscatory taxation, nationalization, political,
economic or social instability or other developments.
A great deal of progress has been made in the past few years in
negotiations between Latin American debtors and their foreign creditors in the
context of structural reforms such as privatization, deregulation and
improvement of trade policies and tax systems in Latin American countries.
This has contributed in turn to favorable actions taken by foreign banks,
including new lending to delinquent debtors, the rescheduling of debt
repayments over longer periods, and lending at below market rates. In
addition, foreign banks have implemented larger loss provisions and provided
some debt relief. As a result, the debt "crisis" that began in 1982 has
largely been defused and Latin America is growing and borrowing again.
CURRENCY AND EXCHANGE RATE RISKS
The Fund will invest in securities that are denominated in Latin
American currencies and most of the Fund's income will be received or realized
in Latin American currencies. Because the Fund will be required to compute and
distribute its income in U.S. dollars, changes in the value of the Latin
American currencies in which the Fund's underlying portfolio securities are
denominated will result in corresponding changes in the U.S. dollar value of
the Fund's investments, and of its income and capital gains. Latin American
currencies have historically been unstable and may be subject to frequent
devaluations against the U.S. dollar. While devaluations of the underlying
currencies have tended to coincide with increased valuations of Latin American
securities, these increases may not be sufficient to compensate for the impact
of the devaluations.
Inflation is a chronic problem in Latin America. Elaborate programs
to control inflation through indexation, price controls or other mechanisms
(including the adoption of new domestic currencies) have had only limited
success. In recent years, the major countries in which the Fund intends to
invest have suffered the adverse effects of inflation and currency devaluation.
Fluctuations in exchange rates of Latin American currencies and
inflation may be affected by complex factors such as domestic fiscal policies,
the level of debt owed by Latin American countries to foreign creditors,
international trade balances, levels of foreign direct investment and capital
outflows, and international economic factors such as changes in the prices for
certain commodities in international markets and relative changes in foreign
exchange rates of countries of Western Europe, the United States, Canada and
Japan. Exchange rate fluctuations and inflation also may distort economic
information about Latin American economies and issuers and make analysis of
these issuers and their fundamental investment characteristics more difficult.
RESTRICTIONS ON FOREIGN INVESTMENT
Investment in the securities of issuers based in Latin American
countries by foreign investors such as the Fund may be subject to numerous
restrictions, including prohibitions on direct investment, the requirement of
prior governmental approval for foreign investments, percentage-of-assets
limitations on investments in certain issuers or industries, prohibitions on
investments in certain sectors of the economy, and restrictions on the exercise
of voting rights by foreign investors. The Fund may be required to seek
special approvals to invest in the securities of issuers in certain countries,
and if so, will seek these approvals. The Fund believes that it will be able
to obtain all approvals necessary for it to pursue its investment program.
Certain Latin American countries may restrict the ability of foreign
investors such as the Fund to repatriate investment income, capital and the
proceeds of securities sales by imposing minimum holding periods for such
investments. While some countries have no such restrictions, under current
law, capital invested in Chile may not be repatriated prior to one year from
the date of the investment. In some cases repatriation of capital may also
require governmental registration and/or approval. The Fund could be adversely
affected by delays in granting, or a refusal to grant, any required
governmental approvals for such repatriation, as well as by any revocations of
such approvals, either on a prospective or retroactive basis.
Whether the Fund is successful in repatriating its capital will
ultimately depend on its ability to liquidate its investments when it desires
to do so and to convert the proceeds from such sales, denominated in Latin
American currencies, into U.S. dollars. Latin American countries may restrict
or block the flow of foreign capital out of their countries or impose
restrictions on currency exchange in response to domestic fiscal or monetary
crises. In seeking to convert its holdings of Latin American currencies into
U.S. dollars, the Fund may be limited to dealing with central bank or other
national authorities whose primary interests in supporting the value of Latin
American currencies may be adverse to those of the Fund. If the Fund should be
unable to repatriate its capital due to exchange controls or other restrictions
imposed in a particular country, it may be required to accept an obligation
payable at some future date by the central bank or other governmental authority
of that country.
It is anticipated that it may take between three and six months for
the Fund to complete the investment of the proceeds of the Offering in Latin
American securities, during which time the Fund may invest in short- or
medium-term money market or debt instruments (some or all of which may be
denominated in U.S. dollars or other currencies). These temporary investments
may produce a lower rate of return than equity investments.
If the Fund should be restricted in its ability to repatriate its
income or capital gains it may be unable to qualify as a regulated investment
company under the U.S. Internal Revenue Code of 1986, as amended, and may be
subject to corporate tax at the Fund level. See "Tax Considerations." To the
knowledge of the Adviser, the Fund or investors comparable to the Fund have not
experienced substantial problems in repatriating invested capital or related
income from Latin American sources, although there can be no assurance that
this will be the case in the future.
SECURITIES MARKETS
In general, Latin American securities markets are not as extensively
regulated as are U.S. securities markets, and enforcement of existing
regulations has not been stringent. Consequently, the prices at which the Fund
may acquire investments may be affected by other market participants
anticipating the Fund's investment in particular securities, by trading by
persons in possession of material non-public information under circumstances
that would not be permitted under U.S. law and by securities transactions by
brokers in anticipation of transactions by the Fund in particular securities.
Issuers whose securities are traded in Latin American markets are
generally not subject to the same degree of regulation as those in many other
countries with respect to such matters as uniform accounting, auditing and
financial reporting standards, insider trading rules, takeover bid regulations,
shareholder proxy requirements, the timely disclosure of information and the
amount of information disclosed. Disclosure standards, moreover, tend to vary
greatly from country to country, making analysis of comparative data extremely
difficult. Because of the foregoing, any information furnished with respect to
Latin American issuers may not be as reliable as that furnished with respect to
issuers in more developed securities markets.
Trading volume on Latin American stock exchanges is substantially
less than trading volume on major international stock exchanges. Further,
individual securities of some Latin American companies tend to be less liquid
and more volatile than securities of comparable companies traded in more
developed securities markets. Fixed commissions on Latin American stock
exchanges are generally higher than negotiated commissions on U.S. exchanges,
although the Fund and the Adviser will endeavor to achieve the most favorable
net results on the Fund's portfolio transactions and may, in some cases, be
able to purchase securities directly from an issuer or on other stock exchanges
where commissions are negotiable.
To the extent permitted under applicable local laws and regulations,
the Fund may from time to time invest in Latin American countries other than
Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela, and may invest
up to 10% of its assets outside Latin America, including the Philippines and
Portugal.
The following table sets forth data regarding the stock markets of
Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela for the year
ended December 31, 1994.
<TABLE>
<CAPTION>
1994 STOCK MARKET DATA
Country Number of Listed Domestic Companies Year-End Market Capitalization (US$ mil.) Value Traded Turnover Market
Price/ Earnings Ratio Ten Largest
(US$ mil.) Ratio Stocks as %
of Market Capitalization
<S> <C> <C> <C> <C> <C> <C>
Argentina 156 36,864 11,372 28.1 17.7 41.7
Brazil 544 189,281 189,281 83.4 13.1 34.5
Chile 279 68,195 68,195 9.5 21.4 46.4
Colombia 113 14,028 2,191 17.8 19.5 61.2
Mexico 206 130,246 82,964 44.5 17.1 33.8
Peru 218 8,178 3,080 46.8 43.9 55.2
Venezuela 90 4,111 936 20.2 18.1 80.7
</TABLE>
_______________
Source: International Finance Corporation, Emerging Markets Fact Book, 1995.
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.
INFLATION
Most Latin American countries have experienced substantial, and in
some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have very
negative effects on the economies and securities markets of certain Latin
American countries. In an attempt to control inflation, wage and price
controls have been imposed at times in certain countries.
The following table sets forth data regarding inflation in Argentina,
Brazil, Chile, Colombia, Mexico, Peru and Venezuela for the periods indicated.
<TABLE>
<CAPTION>
CONSUMER PRICE INFLATION: % CHANGE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Country 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
Argentina 672.1 90.6 131.7 342.8 3,079.3 2,314.0 171.7 24.9 10.6 3.9
Brazil 226.9 145.2 229.7 682.3 1,287.0 2,937.8 440.8 1,008.7 2,146.3 1,238.0
Chile 30.7 19.5 19.9 14.7 17.0 26.0 21.8 15.6 12.6 8.9
Colombia 24.0 18.9 23.3 28.1 25.8 29.1 30.4 27.0 23.0 23.3
Mexico 57.7 86.2 131.8 114.2 20.0 26.7 22.7 15.5 9.7 7.0
Peru 163.2 78.0 86.0 666.2 3,398.5 7,458.4 739.1 73.5 48.6 15.4
Venezuela 11.4 11.5 28.1 29.5 84.5 40.8 34.2 31.4 38.1 70.9
</TABLE>
________________
Sources: International Monetary Fund, International Financial Statistics, 1995.
ILLIQUID OR RESTRICTED SECURITIES
As noted below under "Investment Objective and Policies," the Fund
may invest up to 35% of its total assets in securities that are not readily
marketable. Such restricted or illiquid securities may be subject to
significant limitations which could prevent their sale entirely, result in a
delay of any sale or reduce the amount of proceeds that might otherwise be
realized by the Fund on a sale. These restrictive factors are generally
reflected in the value of such investments. Because the Fund will be limited
in its ability to repatriate its assets invested in such restricted or illiquid
investments, such assets may remain in Latin America for a relatively longer
period of time than capital held in liquid investments. If the Fund were to
cease its operations and dissolve, the Fund's assets would be distributed in
kind pro rata to the Fund's shareholders if applicable restrictions should
prohibit the sale of the Fund's portfolio investments or if the Board of
Trustees should determine that the liquidation of the Fund's investments would
be detrimental to the Fund's shareholders.
ABSENCE OF TRADING MARKET; MARKET VALUE AND NET ASSET VALUE
There is no established public trading market for the Fund's shares.
If such a market were established, it is possible that shares of the Fund would
trade at a discount from net asset value. This characteristic of shares of a
closed-end fund is a risk separate and distinct from the risk that the Fund's
net asset value will decrease. It is not expected that the Fund's shares will
be publicly traded. The Fund cannot predict whether, if the Shares are traded,
they will trade at, below or above net asset value.
NON-DIVERSIFIED STATUS
The Fund is classified as a non-diversified investment company under
the 1940 Act. It is, therefore, not limited under that statute in the
proportion of its assets it may invest in the securities of a single issuer.
The Fund may be subject to local laws in certain Latin American countries
limiting investments in a single issuer. In addition, the Fund intends to
comply with the diversification requirements imposed by the U.S. Internal
Revenue Code of 1986, as amended, in order for it to remain qualified as a
regulated investment company thereunder. As a non-diversified investment
company, the Fund may invest a greater proportion of its assets in the
securities of a smaller number of issuers and may, consequently, be subject to
greater risk with respect to its portfolio securities.
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.
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.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The investment objective of the Fund is to seek, over the long-term,
a high level of total return by investing primarily in securities of Latin
American issuers. The Fund intends currently to limit its investments in Latin
American securities to securities issued or traded in the markets of Argentina,
Brazil, Chile, Colombia, Mexico, Peru or Venezuela, although it may invest in
additional Latin American markets in the future. Also, under normal conditions
it may invest up to 10% of its assets outside of Latin America.
An investment in the Fund involves significant risks and special
considerations not typically associated with investments in more developed
securities markets, and no assurance can be given that the Fund will achieve
its investment objective. (See "Special Considerations and Risk Factors" for a
discussion of certain of these risks and special considerations.)
In pursuing its objective of a high level of total return over the
long term, the Fund normally will concentrate its investments in equity
securities, including securities with substantial equity features, such as
convertible bonds or preferred stocks. In addition to equity securities, the
Fund also may purchase interests in bank debt which is structured to be
exchanged at a later date into debt or equity securities. Under normal market
conditions, the Fund will invest between 60% and 90% of its total assets in
equity securities of Latin American issuers. The Fund also may invest in
fixed-income securities of Latin America issuers and Brady Bonds for liquidity
management purposes and when the Adviser believes that such securities may
provide a high level of total return. The Fund intends to diversify its assets
geographically depending on the Adviser's view of investment opportunities at a
given time, but will invest in the securities of issuers in at least three
countries. Consequently, the Fund may, at times, have 25% or more of its
assets invested in securities of issuers located in one country. Nonetheless,
as a fundamental policy, the Fund may not invest more than 50% of its assets in
securities (other than securities issued or guaranteed as to principal and
interest by a government or its agency or instrumentality or by a multinational
agency) of issuers domiciled in a single country. As of November 30, 1995, the
Fund had invested approximately 34% of its assets in Brazil and 27% of its
assets in Mexico.
The Fund may purchase securities directly from the issuer, including
securities offered by private placement, and may make certain investments,
including purchases of participation interests, that may not have all the
characteristics of other equity or debt securities in which the Fund may
invest. The Fund also may purchase loan participation interests that relate to
public or private sector financing arrangements. Securities purchased in
private placements and certain investments or participations in companies may
not be readily marketable because of contractual or other restrictions on
resale ("restricted securities") or because of the absence of a secondary
market ("illiquid securities").
The Fund intends to invest primarily in securities that are listed on
bona fide securities exchanges or are actively traded in over-the-counter
("OTC") markets. These exchanges or OTC markets may be either within or
outside the issuer's domicile country (such as the Eurobond market), and the
securities may be listed or traded in the form of International Depositary
Receipts ("IDRs") or American Depositary Receipts ("ADRs"). The Fund will not
make additional investments in securities (or participation interests) that are
not readily marketable at any time when more than 35% of its total assets are
invested in such securities or participation interests.
Subject to compliance with applicable local laws, the Fund also may
invest in other investment companies or collective investment undertakings that
themselves invest in Latin American equity and/or fixed-income securities.
These may include wholly or substantially owned subsidiaries or other similar
"pass-through" vehicles established by the Fund or the Adviser for the purpose
of conducting the Fund's currency or other investment operations in Latin
America, as may be required by local regulations. Investments in other
pass-through vehicles or investment companies will result in the indirect
payment by Fund shareholders of the fees of these companies, such as
management, distribution or custodial fees, in addition to the fees paid for
these services by the Fund, except that no such additional fees will be paid to
the Adviser. Such investments also may be subject to limitations under the
1940 Act. There can be no assurance that vehicles or funds for investing in
certain Latin American countries will be available for investment. In
addition, special tax considerations may apply. (See "Tax Consideration --
Investment in Foreign Investment Companies"). The Fund does not intend to
invest in such vehicles or funds unless, in the judgment of the Adviser, the
potential benefits of such investment justify the payment of any applicable
premium or sales charge.
The Fund does not expect to trade in securities for short-term gain.
It is anticipated that the Fund's annual portfolio turnover rate will not
exceed 50%. This rate is calculated by dividing the lesser of sales or
purchases of portfolio securities for any given year by the average monthly
value of the Fund's portfolio securities for such year. For purposes of the
calculation, portfolio securities exclude debt securities having a maturity at
the date of purchase of one year or less. Portfolio turnover directly affects
the amount of transaction costs that will be borne by the Fund. In addition,
the sale of securities held by the Fund for not more than one year will give
rise to short-term capital gain or loss for U.S. federal income tax purposes.
The U.S. federal income tax requirement that the Fund derive less than 30% of
its gross income from the sale or other disposition of stock or securities held
less than three months may limit the Fund's ability to dispose of its
securities. See "Tax Considerations."
TEMPORARY INVESTMENTS
The Fund may, for temporary defensive purposes, including during
periods when the values of Latin American currencies are expected to depreciate
or when there are negative developments in the markets for Latin American
securities or in economic or political conditions in Latin America, reduce its
holdings of Latin American equity securities below 60% of its total assets and
increase its holdings of bonds or short-term debt obligations of Latin American
or other issuers and cash (some or all of which may be denominated in U.S.
dollars or other non-Latin American currencies). Diversification requirements
and restrictions on capital repatriation in certain Latin American countries
for certain types of investments may limit the Fund's ability to make defensive
investments during periods when the Adviser judges such investments to be
warranted.
The short-term instruments in which the Fund may invest include (a)
obligations of the U.S. Government, its agencies or instrumentalities
(including repurchase agreements with respect to these securities); (b) bank
obligations of U.S. banks and foreign banks denominated in any currency
(including certificates of deposit, time deposits and bankers' acceptances);
(c) floating rate securities and other instruments denominated in any currency
issued by international development agencies, banks and other financial
institutions, governments and their agencies and instrumentalities; (d)
obligations of corporations located in countries that are members of the
Organization for Economic Cooperation and Development that are denominated in
any currency and that are rated no lower than A-2 by Standard & Poor's
Corporation or P-2 by Moody's Investors Service, Inc. or the equivalent by
another rating service or, if unrated, deemed to be of equivalent quality by
the Adviser; and (e) shares of money market funds that are authorized to invest
in (a) through (d). The Fund also may invest in short- or medium-term money
market or debt instruments (some or all of which may be denominated in U.S.
dollars or other currencies) and foreign currency exchange contracts, futures
contracts or options contracts pending the Fund's investment of its assets in
Latin American securities. The Fund's ability to convert its holdings into
U.S. dollar-denominated instruments may, however, be limited by exchange
controls and/or restrictions on repatriation.
REPURCHASE AGREEMENTS
Repurchase agreements are contracts under which the buyer of a
security simultaneously buys and commits to resell the security to the seller
at an agreed-upon price and date. The Fund will enter into repurchase
agreements on U.S. Government securities with primary government securities
dealers recognized by the Federal Reserve Bank of New York and member banks of
the Federal Reserve System and on securities issued by the governments of Latin
American countries, their agencies or instrumentalities with creditworthy
parties in accordance with procedures established by the Fund's Board of
Trustees. The Fund will only enter into repurchase agreements pursuant to
which the seller is required to maintain the value of the securities subject to
the repurchase agreement at not less than their repurchase price. The Adviser
will monitor and mark to market the value of such securities daily to assure
that the value equals or exceeds the repurchase price. The Adviser will also
monitor the creditworthiness of parties to repurchase agreements under the
general supervision of the Fund's Board of Trustees. Repurchase agreements
involve risks in the event of default or insolvency of the seller, including
possible delays or restrictions upon the Fund's ability to dispose of the
underlying securities.
SHORT SALES
The Fund may sell securities short "against-the-box." A short sale
"against-the-box" is a short sale in which the Fund owns an equal amount of the
securities sold short or securities convertible into or exchangeable without
payment of further consideration for securities of the same issue as, and equal
in amount to, the securities sold short.
BRADY BONDS
In the 1980s a number of Latin American countries, under the Brady
Plan, underwent a restructuring of their debt obligations to commercial banks,
in an effort to make those debt obligations more manageable. Brady Bonds are
securities created through the exchange of existing commercial bank loans for
new bonds issued under these Brady Plan debt restructurings. Over $150 billion
in principal amount of Brady Bonds have been issued to date, the largest
proportion having been issued by Brazil and Mexico. Investors should recognize
that Brady Bonds have been issued only recently, and for that reason do not
have a long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (primarily the U.S. dollar)
and are actively traded in the OTC secondary market for Latin American debt
obligations.
U.S. dollar-denominated, collateralized Brady Bonds, which may be
fixed rate par bonds or floating rate discount bonds, are collateralized in
full as to principal by U.S. Treasury zero coupon bonds having the same
maturity as the bonds. Interest payments on these Brady Bonds generally are
collateralized by cash or securities in an amount that, in the case of fixed
rate bonds, is equal to at least one year of rolling interest payments or, in
the case of floating rate bonds, initially is equal to at least one year's
rolling interest payments based on the applicable interest rate at that time
and is adjusted at regular intervals thereafter.
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. Equity linked
notes will be considered equity securities for purposes of the Fund's
investment objective and policies.
The price of an equity linked note is derived from the value of the
underlying linked securities. The level and type of risk involved in the
purchase of an equity linked note by the Fund is similar to the risk involved
in the purchase of the underlying Latin America or other emerging market
securities. Such notes therefore may be considered to have speculative
elements. However, equity linked notes are also dependent on the individual
credit of the issuer of the note, which will generally be a trust or other
special purpose vehicle or finance subsidiary established by a major financial
institution for the limited purpose of issuing the note. Like other structured
products, equity linked notes are frequently secured by collateral consisting
of a combination of debt or related equity securities to which payments under
the notes are linked. If so secured, the Fund would look to this underlying
collateral for satisfaction of claims in the event that the issuer of an equity
linked note defaulted under the terms of the note.
Equity linked notes are often privately placed and may not be rated,
in which case the Fund will be more dependent on the ability of the Adviser to
evaluate the creditworthiness of the issuer, the underlying security, any
collateral features of the note, and the potential for loss due to market and
other factors. Ratings of issuers of equity linked notes refer only to the
creditworthiness of the issuer and strength of related collateral arrangements
or other credit supports, and do not take into account, or attempt to rate, any
potential risks of the underlying equity securities. The Fund has no
restrictions on investing in equity linked notes whose issuers are rated below
investment grade (e.g., rated below Baa by Moody's Investors Service, Inc. or
BBB by Standard & Poor's Corporation), or, if unrated, or equivalent quality.
Because rating agencies have not currently rated any issuer higher than the
rating of the country in which it is domiciled, and no Latin American country
other than Colombia is rated investment grade, equity linked notes related to
securities of issuers in such emerging market countries will be considered to
be below investment grade. Depending on the law of the jurisdiction in which
an issuer is organized and the note is issued, in the event of default, the
Fund may incur additional expenses in seeking recovery under an equity linked
note, and may have less legal recourse in attempting to do so.
As with any investment, the Fund can lose the entire amount it has
invested in an equity linked note. The secondary market for equity linked
notes may be limited. The lack of a liquid secondary market may have an
adverse effect on the ability of the Fund to accurately value the equity linked
notes in its portfolio, and may make disposal of such securities more difficult
for the Fund.
The ability of the Fund to invest in equity linked notes may be
limited by the provisions of the U.S. Commodity Exchange Act. 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 commodity exchanges is prohibited absent an
applicable exclusion or exemption. The CFTC has adopted a statutory
interpretation exempting certain so-called "hybrid instruments" from this
prohibition under certain circumstances.
FOREIGN CURRENCY TRANSACTIONS
The Fund may attempt to hedge against risks from exchange rate
fluctuations by entering into forward currency exchange contracts, or other
currency exchange-related hedging instruments such as currency options,
currency futures contracts and, to the extent permitted by applicable
regulations, options on such futures contracts. Currently the only futures or
options on Latin American foreign currencies traded on U.S. exchanges are
Mexican peso futures and Brazillian real futures and options, but such other
instruments trade on foreign exchanges. Successful use by the Fund of such
hedging instruments would be dependent on the ability of the Fund's investment
adviser to predict correctly movements in exchange rates.
Under applicable rules of the U.S. Commodity Futures Trading
Commission ("CFTC"), the Fund may enter into foreign currency futures or
futures options only for bona fide hedging or other permitted purposes. With
respect to positions in futures and related options that do not constitute bona
fide hedging positions, the Fund may not enter into a futures contract or
purchase a futures option if, immediately thereafter, the aggregate initial
margin deposits relating to such futures contracts held by the Fund, plus
premiums paid by it for all open futures option positions, less the amount by
which any such positions are "in-the-money," would exceed 5% of the Fund's
total net assets.
Use of foreign currency-related hedging instruments involves
transaction costs in addition to those associated with foreign currency
conversions. Because of the transaction costs involved and because it may be
extremely difficult to predict movements in exchange rates for Latin American
currencies, the Adviser is unlikely to use foreign currency-related hedging
instruments except in unusual or extraordinary circumstances, or in short-term
transactions in connection with the purchase or sale of portfolio securities by
the Fund or for other temporary purposes such as in connection with the
anticipated payment of dividends by the Fund to its shareholders. The Adviser
is not obligated to attempt to hedge against the Fund's foreign currency
exchange risk exposure, which will be significant.
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 be 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 may enter into futures and options
thereon that relate to indexes or other baskets of securities.
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
Transactions").
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.
The Fund intends to enter into swap agreements that 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
would 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 adviser'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 Investment Adviser. 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.
OTHER INVESTMENT TECHNIQUES
New options, futures contracts, other financial products, and various
combinations thereof, continue to be developed. The Fund may invest without
limitation in any such options, contracts and products as may be developed, to
the extent consistent with its investment objective and restrictions set forth
in this prospectus.
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, or borrow money, on a secured or unsecured basis,
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;
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 in or deal in real estate or
commodities and it may purchase and sell spot or forward currency contracts,
foreign currency futures contracts, foreign currency options, foreign currency
exchange warrants and other foreign currency exchange-related hedging
instruments for hedging purposes or to minimize currency conversion costs
arising in connection with specific securities transactions or with
administration of the Fund;
4) make investments for the purpose of exercising control or management;
5) engage in short sales or maintain a short position, although it may sell
securities "short against the box";
6) purchase any security (other than securities issued or guaranteed as to
principal and interest by a government or its agency or instrumentality or by a
multinational agency) if as a result: (i) more than 50% of its assets would be
invested in the securities of issuers domiciled in a single country, or (ii)
more than 25% of its assets would be invested in securities of issuers whose
primary business is in a single industry;
7) act as an 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;
however, the making of a loan shall not include the purchase of private or
sovereign debt for investment purposes; and
9) purchase any securities if as a result the Fund would own more than 10% of
the outstanding voting securities of any issuer; for the purposes of this
restriction, a conversion feature or right to acquire a security shall be
considered to be ownership of the underlying security.
Another restriction that is not fundamental, and thus may be changed
by the Board of Trustees without shareholder approval, is that the Fund will
limit its investment in the securities of any one issuer, except for securities
issued or guaranteed as to principal and interest by a government or one of its
agencies or instrumentalities or by a multinational agency, to 5% of its total
assets. Notwithstanding restrictions 6 and 9 above and in the preceding
sentence, 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 Fund's investment adviser has determined that such exercise is in
the best interests of the Fund. The Fund generally will dispose of the
securities so acquired within a reasonable time after acquisition, unless
compliance with the limits otherwise has been restored. The staff of the
Securities and Exchange Commission takes the position that securities issued by
a foreign government, its agencies and instrumentalities should be treated as
securities of issuers whose primary business is in a single industry.
Therefore, in implementing investment restriction 6 above, the Fund will not
invest more than 25% of its total assets in the securities of any single
foreign government, its agencies and instrumentalities.
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, cash or other liquid high-grade debt securities or by
maintenance of an appropriate offsetting position.
Notwithstanding any of the above investment restrictions, the Fund
may establish wholly or substantially owned subsidiaries or other similar
vehicles for the purpose of conducting its investment operations, where such
subsidiaries or vehicles are required by local laws or regulations governing
foreign investors such as the Fund or would otherwise be advantageous for the
Fund. If the Fund establishes any such vehicles, the policy of the Fund will
be to "look through" such vehicles to the underlying assets held by them for
purposes of applying the Fund's investment restrictions.
Each percentage limit set forth above applies at the time of
purchase, and therefore would not be violated by subsequent fluctuations in
relative values of the Fund's securities.
MANAGEMENT OF THE FUND
The Board of Trustees, which is elected by the shareholders, sets the
overall investment policies and generally oversees the investment activities
and management of the Fund. The Fund's investment adviser 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.
The Fund does not currently pay any compensation to its Trustees or
Officers. The Fund pays the expenses of attendance at Board and Committee
meetings for the Trustees who are not affiliated with the Manager. The
majority of the non-affiliated Trustees have a business affiliation with an
investor that owns shares of the Fund. Trustees 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.
The names of the Trustees and officers of the Fund, together with
their positions and principal occupations during the past five years are set
forth below.
<TABLE>
<CAPTION>
Name, Address and Age Position with Registrant Principal Occupation
===================== ======================== During Past Five Years
===============================
<S> <C> <C>
TRUSTEES
Nancy Englander* Chairman of the Board Senior Vice President,
11100 Santa Monica Blvd. and Trustee Capital International, Inc.
Los Angeles, CA 90025
Age: 51
David I. Fisher* President, Trustee and Chairman of the Board,
11100 Santa Monica Blvd. Principal Executive Officer The Capital Group Companies, Inc.
Los Angeles, CA 90025
Age: 56
Marinus W. Keijzer Trustee Chief Economist & Strategist,
Kroostweg-Noord 149 Pensioenfonds PGGM
P.O. Box 117, 3700 AC Zeist
The Netherlands
Age: 57
Hugh G. Lynch Trustee Managing Director,
767 Fifth Avenue International Investments,
New York, NY 10153 General Motors Investment
Age: 57 Management Corporation
Teresa E. Martini Trustee Vice President,
One Oak Way International Equity,
Berkeley Heights, NJ 07922 AT&T Corporation
Age: 39
James K. Peterson Trustee Director of Investment Management,
3001 Summer Street IBM Retirement Fund
Stamford, CT 06905
Age: 54
OFFICERS
Roberta A. Conroy Vice President and Assistant General Counsel,
11100 Santa Monica Blvd. Secretary The Capital Group Companies, Inc.
Los Angeles, CA 90025
Age: 41
Steven N. Kearsley Vice President and Vice President and Treasurer,
135 South State College Blvd. Treasurer Capital Research and Management
Brea, CA 92621 Company
Age: 54
Midori Aoki Vice President Vice President,
630 Fifth Avenue Capital International, Inc.
New York, NY 10111
Age: 41
Victor D. Kohn Vice President Vice President,
11100 Santa Monica Blvd. Capital International, Inc.
Los Angeles, CA 90025
Age: 37
Robert W. Lovelace Vice President Vice President,
11100 Santa Monica Blvd. Capital International, Inc.
Los Angeles, CA 90025
Age: 33
Shaw B. Wagener Vice President Director and Executive Vice
333 South Hope Street President,
Los Angeles, CA 90071 Capital International, Inc.
Age: 36
Vincent P. Corti Assistant Secretary Vice President,
333 South Hope Street Fund Business Management Group,
Los Angeles, CA 90071 Capital Research and Management
Age: 39 Company
Michael A. Felix Assistant Treasurer Vice President,
135 South State College Blvd. Capital International, Inc.
Brea, CA 92621
Age: 34
</TABLE>
*"Interested persons" of the Fund as such term is defined under the 1940 Act by
virtue of their affiliation with the Adviser.
The occupation shown reflects the principal employment of each individual
during the past five years. Corporate positions, in some instances, may have
changed during this period.
THE INVESTMENT ADVISER
The Fund's investment adviser is Capital International, Inc. (the
"Adviser"), 11100 Santa Monica Boulevard, Los Angeles, California 90025. The
Adviser is an indirect, wholly owned subsidiary of The Capital Group Companies,
Inc., 333 South Hope Street, Los Angeles, California 90071 USA and is
registered with the U.S. Securities and Exchange Commission under the
Investment Advisers Act of 1940.
The Adviser 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. These portfolios are
invested worldwide in equity and fixed-income securities, including investments
in Latin America. 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, DC, New York,
Geneva, London, Singapore, Hong Kong and Tokyo.
The Adviser manages the Emerging Markets Growth Fund, Inc., a
U.S.-registered investment company created in 1986, and Capital International
Emerging Markets Fund, a Luxembourg-based investment fund, created in 1990,
both of which invest in, among other markets, all of the largest Latin American
markets in which the Fund currently invests. In addition to the research and
investment management expertise this has provided, contacts have been developed
in banking, business and government which provide added insight and which may
be helpful in gaining access to markets where regulatory restrictions impede
investment. Further, it has given the Adviser experience with the overall
regulatory environment, trading and settlement issues and accounting procedures
in the major Latin American markets. In 1994, the Adviser (or its affiliates)
made 442 research visits in these markets. In addition, the Adviser has
established an Advisory Committee made up of individuals who are knowledgeable
about political and economic matters in Latin America.
Under the Investment Advisory and Service Agreement between the Fund
and the Adviser (the "Agreement"), the Adviser 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 Trustees. The Adviser also:
provides and pays the compensation and travel expenses of the Fund's officers
and of the Trustees of the Fund who are affiliated with the Adviser; 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
and determines the net asset value of the Fund's shares as required (to the
extent such books, records, reports, and other information are not maintained
or furnished by the Fund's custodian or other persons); and supplies the Fund
with office space. The Fund pays all its expenses of operation including,
without limitation: custodial, stock transfer and dividend disbursing fees and
expenses (including fees or taxes relating to stock exchange listings); 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 the Fund's legal representatives;
compensation, fees and expenses (including travel expenses) of Trustees of the
Fund who are not affiliated with the Adviser; 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 Adviser receives from the Fund a fee, payable
monthly in U.S. dollars, at an annual rate of 0.90% of the first $400 million
of the Fund's aggregate net assets and 0.80% of such aggregate net assets in
excess of $400 million as determined on the last business day of each week and
month. During the fiscal years ended June 30, 1993, June 30, 1994 and June 30,
1995, the advisory fees amounted to $1,838,000, $2,862,000 and $2,896,000,
respectively. Under the Agreement, the Adviser and its affiliates are
permitted to provide investment advisory services to other clients, including
clients which may invest in Latin American securities. In addition, under the
Agreement, when the Adviser 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 Adviser 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 existing Agreement was approved by shareholders on September 10,
1992, with an initial term of two years ending September 9, 1994, and was
renewed for a one year period ending September 9, 1995. An amended agreement
was approved and became effective on September 10, 1995 for a one year period
ending September 9, 1996. Under the terms of the amended agreement the
Adviser's fee was lowered from 1.00% to an annual rate of 0.90% on the first
$400 million of the Fund's aggregate net assets. It will continue in effect
from year to year thereafter if approved annually (a) by the Board of Trustees
of the Fund or by a majority vote of the outstanding shares of the Fund, and
(b) by a majority of the Trustees who are not parties to the Agreement or
"interested persons," as defined in the 1940 Act, of any such party. This
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 Fund's outstanding shares
present at a meeting at which more than 50% of the Fund's outstanding shares
are present or represented by proxy or (b) more than 50% of the Fund's
outstanding shares.
While the Fund is a Massachusetts business trust, one of its
Trustees, Marinus W. Keijzer, is not a U.S. resident and substantially all of
his assets 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 trustees
within the U.S., or to enforce judgements of courts of the U.S. predicated upon
civil liabilities of such trustees under the federal securities laws of the
U.S. In management's view, it is unlikely that foreign courts would enforce
judgements of U.S. courts predicated upon the civil liability provisions of the
federal securities laws, or, that such courts would enforce such civil
labilities against foreign trustees in original actions.
PORTFOLIO MANAGEMENT
The Adviser 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
determines how the assets in that segment will be invested (within limits
provided by the Fund's objective and policies and the Adviser's investment
committee). In addition, one segment is designated as a "research portfolio"
and is managed by a number of research professionals.
Shaw B. Wagener
Mr. Wagener has served as a Director of the Adviser since 1991 and an Executive
Vice President since 1993. He is also a Vice President of the Fund. In
addition, he has served as Vice President-Investment Division of Capital
Research and Management Company since 1986. Mr. Wagener is also a regional
portfolio manager investing in Latin American equity and fixed income
securities. He joined the Capital organization in 1981. Mr. Wagener has
served as a portfolio counselor for the Fund since 1990.
Victor D. Kohn
Mr. Kohn has served as a Vice President of the Adviser since 1992, and is
currently the Emerging Markets Research Manager of the Adviser. He is also a
Vice President of the Fund. Mr. Kohn's research responsibilities include
Argentina, Chile, and Peru. He joined the Capital organization in 1986 as an
investment research analyst, and was elected an Executive Vice President of
Capital Research International in July 1995.
Robert W. Lovelace
Mr. Lovelace has served as a Vice President of the Adviser since 1989. He is
also a Vice President of the Fund. Mr. Lovelace's research responsibilities
include Mexico and the Philippines. He joined the Capital organization in 1986
as an investment research analyst.
Carmen Guarini
Ms. Guarini has served as an investment analyst for Capital Research
International since 1994 with research responsibility for the Brazillian
market.
Messrs. Kohn and Wagener serve as portfolio counselors for the Fund. Mr.
Lovelace and Ms. Guarini manage a portion of the "research portfolio".
EXPENSES
The Fund's normal annual operating expenses, including the advisory
fee payable to the Adviser, are estimated not to exceed approximately 1.5% of
the Fund's average net assets (assuming approximately $300 million in average
net assets). The Fund's normal operating expenses may be higher than those of
other investment companies of comparable size which do not invest in the Latin
American securities markets due to the generally higher fees and expenses
charged for services required by the Fund in Latin America, and generally
higher custodial, communications and other costs associated with the Fund's
activities. The advisory and service fees payable to the Adviser generally are
higher than the fees of many other investment companies that invest primarily
in securities of U.S. issuers, due to the increased effort required in light of
the specialized nature of the Fund's investment activities. There is no
contractual or other limit on the Fund's expenses, and it is possible that such
expenses may, due to unforeseen circumstances, be significantly higher than the
above estimate.
Costs of this Offering, estimated at approximately $32,995.92 will be
paid by the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
In placing the Fund's portfolio transactions, the Adviser will seek
the "best execution" of such orders, considering all relevant factors,
including the execution capabilities required; the importance of speed,
efficiency or confidentiality; familiarity with other parties from whom or to
whom particular securities might be purchased or sold; and other factors. When
it can be done consistently with "best execution," the Adviser will place
portfolio transactions with brokers or dealers that supply market quotations to
the Fund or the Adviser for portfolio evaluation purposes, or who supply
research, market and statistical information to the Fund or the Adviser. In
consideration of these services, the Adviser, in good faith, may cause the Fund
to pay such brokers or dealers a higher commission than other brokers or
dealers may charge.
Pursuant to rules adopted by the U.S. Securities and Exchange
Commission ("SEC"), the Fund may, from time to time, effect securities
transactions through a broker, dealer or other entity that, under applicable
provisions of the 1940 Act, may be deemed an "affiliate" of the Fund or the
Adviser, or affiliates of such persons ("affiliated person"). Applicable
provisions of the 1940 Act and SEC rules prohibit principal transactions with
affiliated persons but permit the Fund to effect certain agency transactions
with such persons under specified conditions and circumstances.
Related provisions of the 1940 Act may also restrict the ability of
the Fund to purchase securities in certain underwritings or offerings in which
an affiliate of the Fund or the Adviser is a "principal underwriter," as that
term is defined in the 1940 Act. If the Fund believed that any such
restriction or prohibition were a significant impediment to its investment
program, the Fund might determine to seek exemptive relief from the SEC with
respect to that restriction. There can be no guarantee that the Fund would be
successful in any such attempt to seek exemptive relief, and therefore the Fund
may not be able to take advantage of certain opportunities which might
otherwise be available if the affiliation did not exist or if the Fund were not
registered under the 1940 Act.
Brokerage commissions paid on the Fund's portfolio transactions for
the fiscal years ended June 30,1995, 1994 and 1993 amounted to $470,723,
$398,000 and $159,000, respectively.
VALUATION
The net asset value per share of the Fund 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 Trustees may determine, in the
following manner:
1) Equity securities which are traded primarily on stock exchanges, including
ADRs and other depositary receipts, are valued at the last sale price on the
primary 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. Equity securities traded primarily in
the over-the-counter market are valued at the last reported sale price.
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
Adviser 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, corporate short-term notes and other short-term
investments with original or remaining maturities in excess of 60 days are
valued at the mean of their representative quoted bid and asked prices (or, if
not available, at such prices for comparable securities). Short-term
securities with 60 days or less to maturity are amortized to maturity based on
their cost if acquired within 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 or current net asset
values. Securities and assets for which market quotations are not readily
available (including securities that are not readily marketable) or are deemed
not to represent market value are valued at fair value as determined in good
faith by or under direction of the Board. Assets or liabilities initially
expressed in terms of currencies other than the U.S. dollar 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 proper accruals of taxes and other
expense items, are deducted from the total assets.
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 nearest
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 Trustees, may elect to invest distributions in
additional shares issued by the Fund for this purpose.
REPURCHASE OF SHARES
The Fund's Board of Trustees 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.
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 the rules designed to prevent price manipulation promulgated
by the SEC under the Securities Exchange Act of 1934, as amended (the "1934
Act"). Accordingly, the Fund has applied for and received an exemption from
such rules to permit the Fund to make tender offers for its shares while
simultaneously engaged in the continuous offering of shares. No assurance can
be given that the exemption may be maintained indefinitely. If the Board of
Trustees authorizes the Fund to make a tender offer at such time, if any, that
the Fund is unable to rely on the 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 1934 Act (or in such other manner as may be permitted
by the staff of the SEC).
Although the Board of Trustees 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 Adviser 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 Trustees 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, Capital International, Inc., 11100 Santa
Monica Boulevard, 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 Trustees in considering whether
to make a tender offer.
Even if a tender offer has been made, the Trustees' current policy
(which may be changed in the future), is that the Fund will not make a tender
offer if (i) in the judgment of the Trustees, there is insufficient liquidity
in Fund assets; (ii) such transactions, if consummated, would impair the Fund's
status as a regulated investment company under the Internal Revenue Code of
1986, as amended (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 (iii) there is, in the
judgment of the Trustees, 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.
TAX CONSIDERATIONS
The Fund 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 and is 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 Trustees 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 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 basis of
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, 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 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 exceed 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, 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 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 to shareholders and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased as compared to
a fund that did not engage in 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, generally 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, a shareholder will be required to include in gross
income (in addition to taxable dividends actually received) its pro rata share
of the foreign income and similar taxes paid by the Fund, and will be entitled
either to deduct (as an itemized deduction) its pro rata share of those taxes
in computing its taxable income or to use it as 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 within 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.
With respect to the Fund, gains from the sale of securities 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 can be used to
offset only 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
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 this 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, and 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.
CAPITALIZATION
The Fund was organized as a Massachusetts business trust under a
Declaration of Trust dated March 1, 1989 and is authorized to issue an
unlimited number of shares of beneficial interest, with a par value of $.001
per share. As of the date of this Prospectus, the Fund had 11,828,220 such
shares of beneficial interest outstanding and held no such shares for its own
account. Shares of the Fund are fully paid and non-assessable. All shares are
equal as to earnings, assets and voting privileges. The shares have no
conversion, pre-emptive or subscription rights. In the event of liquidation of
the Fund, each share of the Fund is entitled to its proportion of the Fund's
net assets. See "Special Considerations and Risk Factors" for a description of
possible restrictions on repatriation of Fund assets. Shares of the Fund are
issued in registered form, and ownership and transfer of the shares are
recorded by the Fund's transfer agent.
The Fund is not required to hold regular meetings of its
shareholders, unless required by provisions of the 1940 Act. 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 written consent in lieu of
holding a meeting.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Declaration of Trust disclaims liability of the shareholders,
Trustees or officers of the Fund for acts or obligations of the Fund, which are
binding only on the assets and property of the Fund, and requires that notice
of the disclaimer be given in each contract or obligation entered into or
executed by the Fund or the Trustees. The Declaration of Trust provides for
indemnification out of Fund property for all loss and expense of any
shareholder held personally liable for the obligations of the Fund. The risk
of a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the Fund itself would be unable to meet
its obligations and thus should be considered remote.
The Fund may sell additional shares in the future, either privately
or in one or more public offerings. 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 which 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 the offering or any subsequent offering of shares.
In addition, the Board may seek in the future to make the Fund's 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 SEC, 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 (as defined in
"Valuation," above), 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, or (ii) with the consent of the holders of a
majority of the shares, or (iii) as may be permitted by an order of the SEC.
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 1940 Act to sell shares only at a price not less than the current net asset
value per share.
THE OFFERING
The Shares are offered at a price equal to the net asset value per
share of the Fund next determined after receipt by the Fund of an order to
purchase Shares. The minimum subscription and purchase by a single investor
that is not already a shareholder is approximately 5,184 Shares. The Shares
are being offered to a limited number of accredited institutional and
individual investors. Shares will be offered on a continuous basis until all
3,763,201 Shares registered under this registration statement have been sold.
The Fund reserves the right, in its sole discretion, to accept or
reject any subscription, to accept a subscription for fewer than all of the
Shares subscribed for, to accept subscriptions in any order (not necessarily in
the order received). The Fund will notify each investor upon receipt and
acceptance of its subscription.
The terms of the Offering outlined above are qualified in their
entirety by the more detailed provisions of the Shareholders Agreement to be
entered into by all Fund shareholders (the "Shareholders Agreement"). Among
other things, the Shareholders Agreement places restrictions on the transfer of
Shares which may adversely affect the ability of a shareholder to liquidate its
investment in the Fund. The Shareholders Agreement accompanies this
Prospectus. See also "Shareholders Agreement and Restrictions on Transfer."
Shares may be purchased by notifying Abbe Shapiro, Capital
International, Inc., 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). 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 such Fund officers. Payments for Shares to be
sold by the Fund may be made in the following manner:
Wire: New World Investment Fund
c/o Wells Fargo Bank (ABA 121000248)
155 Fifth Street
San Francisco, CA 94106
For credit to the account of:
American Funds Service Company
a/c #4600-076178
New World Investment Fund
Check: New World Investment Fund
Attn: Abbe Shapiro
11100 Santa Monica Blvd., 15th Floor
Los Angeles, CA 90025-3302
In addition, at the sole discretion of the Adviser, investors may be
permitted to purchase Shares by tendering to the Fund Latin American securities
which are determined by the Adviser to be appropriate for the Fund's investment
portfolio. In determining whether particular securities are suitable for the
Fund's investment portfolio, the Adviser 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 Adviser 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.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Fund would have outstanding
15,591,420 Shares of beneficial interest (if all Shares offered hereby are
sold). The 3,763,201 Shares sold in the 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. All 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 beneficial interest 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
which is not deemed 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 in an automated
inter-dealer quotation system in the United States. Such "eligible securities"
may only be sold under Rule 144A 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 shares of beneficial
interest.
The Fund is unable to predict the effect that sales made under Rule
144 or Rule 144A, pursuant to future registration stateme nts, or otherwise,
may have on any of the prevailing market prices for the Fund's shares although
it is likely that sales of a large number of shares would depress such market
price.
SHAREHOLDERS AGREEMENT AND RESTRICTIONS ON TRANSFER
Each potential investor is required to enter into a Shareholders
Agreement. Among other things, the Shareholders Agreement provides that with
respect to transfers of shares no shareholder may transfer any shares to a
third party that is a "company" (as that term is defined in the 1940 Act)
unless (i) the prospective purchaser represents that it has total assets in
excess of US $5 million; (ii) it transfers the lesser of its entire holding of
shares or a sufficient number of shares that their current net asset value, in
the aggregate, equals or exceeds the required minimum initial investment
(currently, $100,000); (iii) the Fund receives prior written notification of
the terms of any transfer and of the nature of the proposed transferee(s), and
if requested, the Fund receives evidence of the proposed transfer's compliance
with applicable law; and (iv) the Board of Trustees has not, within up to 30
days following receipt of the required notification from a prospective selling
shareholder, determined that the proposed transfer would have a material
adverse impact on the Fund or any of its shareholders and prohibited the
transfer. If the prospective purchaser is a natural person, no shares may be
transferred unless (i) the prospective purchaser satisfies (ii), (iii) and (iv)
above, and (ii) the prospective purchaser has an individual net worth in excess
of US $1 million or an individual income in excess of US $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. All investors purchasing Shares
pursuant to the Offering are required to enter into the Shareholders Agreement.
In light of the risks involved in an investment in the Fund and the
unlikelihood that a secondary market will develop 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.
REPORTS TO SHAREHOLDERS
Financial statements of the Fund are sent to its shareholders at
least semiannually. At least one of these reports annually will be audited.
CUSTODIAN, DIVIDEND PAYING AGENT, TRANSFER AGENT AND REGISTRAR
The Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New
York, New York 10036, 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 Boulevard,
Brea, California 92621, acts as the Fund's dividend paying agent, transfer
agent and registrar for its shares.
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL
The accounting firm of Price Waterhouse LLP, 400 South Hope Street,
Los Angeles, California 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 Dechert Price & Rhoads, 1500 K Street, NW,
Washington, DC 20005, acts as legal counsel to the Fund.
OFFICIAL DOCUMENTS
The tabular and statistical information contained in this Prospectus
is, unless otherwise indicated, derived from or based upon official documents
or information from international agencies or from governments of various Latin
American countries, government ministries or departments, central banks,
principal stock exchanges or official statistical agencies in those countries.
SUPPLEMENTAL INFORMATION
A person affiliated with the International Finance Corporation
("IFC") serves as an Advisor to the Fund's Board of Trustees. IFC is an
international organization affiliated largely through 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 165member 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 Adviser or Board of
Trustees or officers of the Fund.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Fund's shares of beneficial interest of those of
its shareholders that owned more than 5% of the outstanding shares of the Fund
as of November 30, 1995:
Name and Address Percentage of Shares
Beneficially Owned ----------------
- ---------------------------------------
The Chase Manhattan Bank, N.A.
as Trustee for the
AT&T Master Pension Trust
One Oak Way - Room 4EC 117
Berkeley Heights, NJ 07922 26.2%
GM U.S. Pension Plans
General Motors Corporation
767 Fifth Avenue
New York, NY 10153 43.7%
The Chase Manhattan Bank, N.A.
as Trustee for the
IBM Retirement Plan Trust
262 Harbor Drive
Stamford, CT 06904 18.9%
AT&T Pension Plan and GM U.S. Pension Plans are deemed to be
"control persons" as that term is defined in the 1940 Act by virtue of their
beneficial ownership of more than 25% of the outstanding shares of the Fund.
As of November 30, 1995, the Fund's Trustees and officers owned in the
aggregate none of the Fund's shares of beneficial interest.
FINANCIAL STATEMENTS
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, 1990 through June
30, 1995.
Notes to Financial Statements for the fiscal year ended June 30, 1995.
Report of Independent Accountants dated August 10, 1995.
NEW WORLD INVESTMENT FUND
Investment Portfolio - June 30, 1995
<TABLE>
<CAPTION>
Equity Type Securities
----------- ---------- ------------
Common Preferred Convertible Percent of
INDUSTRY DIVERSIFICATION Stocks Stocks Stocks Bonds
Net Assets
<S> <C> <C> <C> <C> <C> <C>
Telecommunications 11.70% 6.85% -% -% 18.55%
Utilities: Electric & Gas 7.53 3.14 - 0.19 10.86
Building Materials & Components 6.44 1.11 1.12 8.67
-
Banking 5.62 0.10 1.48 7.20
-
Beverages & Tobacco 4.12 1.95 - 6.07
-
Merchandising 3.65 1.27 0.25 5.17
-
Forest Products & Paper 2.71 1.41 - - 4.12
Appliances and Household 0.29 3.15 - 3.44
Durables -
Metals: Steel 1.63 1.65 0.06 - 3.34
Financial Services 2.09 0.39 0.37 2.85
-
Equity Common Trusts 2.49 - - 2.49
-
Industrial Components 0.53 0.95 - 0.69 2.17
Business & Public Services 0.44 1.62 - 2.06
-
Multi-Industry 1.51 - 1.51
- -
Chemicals 1.40 - 1.40
- -
Broadcasting & Publishing 1.05 - 1.05
- -
Energy Sources 1.03 - - 1.03
-
Food & Household Products 0.39 0.45 - 0.84
-
Real Estate 0.80 0.80
- - -
Textiles & Apparel - 0.75 - - 0.75
Machinery & Engineering 0.21 0.34 - 0.55
-
Construction & Housing 0.50 - 0.50
- -
Electrical & Electronics - 0.25 - 0.25
-
Transportation - 0.24 0.24
- -
Health & Personal Care 0.15 - 0.15
- -
Miscellaneous - - - 4.21 4.21
------ ------ ----- ----- ------
56.28% 24.99% 3.30% 1.49% 90.27
Short-Term Securities ====== ====== ===== ===== 9.05
Excess of cash and receivables 0.68
-------
Net Assets 100.00%
</TABLE>
**********
**********
<TABLE>
<CAPTION>
Market Value
Acquisition of Holdings
Percent of Cost 6/30/95
TEN LARGEST EQUITY HOLDINGS Net Assets (in thousands) (in thousands)
---------- -------------- --------------
<S> <C> <C> <C>
Telecomunicacoes Brasileiras 6.06% $2,065 $14,702
Chilgener 4.33 9,091 10,489
Telefonica de Argentina 3.71 9,413 8,992
Telefonos de Mexico 3.61 5,828 8,761
Brasmoter 3.15 3,048 7,627
Panamerican Beverage 2.77 6,302 6,723
CEMEX 2.71 5,155 6,577
Cifra 2.64 869 6,395
Kimberly Clark de Mexico 2.27 1,943 5,503
Banco de Credito Del Peru 2.01 3,232 4,876
------ ------- -------
33.26% $46,946 $80,645
====== ======== ========
</TABLE>
**********
NEW WORLD INVESTMENT FUND
Investment Portfolio - June 30, 1995
- ------------------------------------------------------------------------------
- -----------------
<TABLE>
<CAPTION>
Number
of Shares
or Market Percent
EQUITY-TYPE SECURITIES Principal Value of Net
(common and preferred stocks and convertible debentures) Amount (000) Assets
- -------------------------------------------------------- --------- ------- --------
<S> <C> <C> <C>
ARGENTINA - 12.48%
Astra Compania Argentina de Petroleo SA 1,386,000 $ 2,080 .86
Banco de Galicia y Buenos Aires SA, Class B
(American Depositary Receipts) 4,200 66
Banco de Galicia y Buenos Aires SA, .66
7.00% convertible bond August 1, 2002 $2,200,000 1,540
Banco Frances del Rio de la Plata SA
(American Depositary Receipts) 228,000 4,104 1.69
BISA-Bemberg Industrial SA
(acquired 10/31/94, cost: $3,000,000) (1) 3,000,000 3,000 1.24
Hidroneuquen SA (acquired 11/12/93, cost: $2,437,000) (1) (2) 2,353,874 2,437 1.01
IRSA Inversiones y Representaciones SA
(Global Depositary Receipts) (2) 41,650 968 .40
Nortel Inversora SA, Class A, preferred (American Depositary
Receipts)
(acquired 11/24/92, cost: $1,503,000) (1) 211,560 2,097 .87
Sociedad Comercial del Plata SA 133,000 330
SOCIEDAD COMERCIAL DEL PLATA SA (AMERICAN DEPOSITARY .20
RECEIPTS) (ACQUIRED 4/28/95, COST: $147,000) (1)(2) 6,700 166
Telecom Argentina STET-France Telecom SA, Class B 741,000 3,373
Telecom Argentina STET-France Telecom SA, Class B 1.67
(American Depositary Shares) 15,000 683
Telefonica de Argentina SA, Class B 910,000 2,285
Telefonica de Argentina SA, Class B (American Depositary 271,000 6,707 3.71
Shares)
YPF SA, Class D (American Depositary Receipts) 22,400 423 .17
--------- -------
30,259 12.48
--------- -------
-
BRAZIL-29.73%
Aracruz Celulose SA, Class B, preferred nominative 8,799 21
Aracruz Celulose SA (American Depositary Receipts) 34,000 400 .17
Banco Bradesco SA, preferred nominative 29,856,111 253
Banco Bradesco SA, preferred nominative, rights, expire .11
July 13, 1995
539,142 1
Brasmotor SA, preferred nominative 41,276,787 7,627 3.15
Centrais Electricas Brasileiras SA, Class B, preferred 2,989,976 796
nominative
Centrais Electricas Brasileiras SA, ordinary nominative 2,910,967 759 .64
CESP-Companhia Energetica de Sao Paulo, preferred 71,903,400 2,845
nominative (2)
CESP-Companhia Energetica de Sao Paulo, ordinary nominative 3,000,000 98
(2)
CESP-Companhia Energetica de Sao Paulo, preferred nominative 1.41
(American Depositary Receipts) (acquired 8/30/94, 42,112 468
cost: $711,000) (1) (2)
COFAP-Companhia Fabricadora de Pecas, preferred nominative 133,020 1,139 .47
Companhia Cervejaria Brahma, preferred nominative 14,394,421 4,725 1.95
Companhia Cimento Portland Itau, preferred nominative 7,610,000 2,233 .92
Companhia Energetica de Minas Gerais-CEMIG, preferred 117,586,476 2,301
nominative
Companhia Energetica de Minas Gerais-CEMIG, preferred
nominative
(American Depositary Receipts) (acquired 9/22/94,
cost: $1,616,000) (1) (2) 63,583 1,224 1.45
Companhia Metalurgica Barbara, preferred nominative (2) 689,195,763 472 .20
Companhia Siderurgica Belgo-Mineira, preferred nominative 15,391,518 1,363 .56
Companhia Vale do Rio Doce, preferred nominative 17,516,720 2,647
Companhia Vale do Rio Doce, ordinary nominative 885,000 250 1.20
COTEMINAS-Companhia de Tecidos Norte de Minas, preferred 5,835,000 1,839 .76
nominative
Ericsson do Brazil Comercio e Industria SA,
preferred nominative 143,182,500 607 .25
GP Capital Partners, LP (aquired 1/28/94, cost: $3,000,000) 3,000 3,000 1.24
(1) (2) (3)
Industrias Klabin de Papel e Celulose SA, preferred 2,383,084 3,367 1.39
nominative
Lojas Americanas SA, preferred nominative 51,798,049 1,154
Lojas Americanas SA, ordinary nominative 95,125,600 2,166
Lojas Americanas SA, preferred nominative, 1.49
warrants, expire May 3, 1996 (2) 531,552 284
Mecanica Pesada, preferred nominative 190,000 826 .55
Mecanica Pesada, ordinary nominative 70,000 517
Mesbla SA, preferred nominative (2) 32,349,795 1,934 1.05
Mesbla SA, Series 2, 13.25% covertible bond, November 1, 1996 CR$10,270,0 608
00
OSA, PREFERRED NOMINATIVE 90,000,000 1,174 .48
PETROBRAS DISTRIBUIDORA SA-BR, PREFERRED NOMINATIVE 113,693,000 3,930 1.62
RHODIA-STER SA (GLOBAL DEPOSITARY RECEIPTS) 113,100 1,555 .64
SADIA CONCORDIA SA INDUSTRIA E COMERCIO, PREFERRED NOMINATIVE 1,163,000 1,087 .45
TELECOMUNICACOES BRASILEIRAS SA, PREFERRED NOMINATIVE 446,389,313 14,702 6.06
TELECOMUNICACOES DE MINAS GERAIS,ORDINARY NOMINATIVE 4,478,000 181 .07
TELECOMUNICACOES DE SAO PAULO SA-TELESP, PREFERRED NOMINATIVE 15,447,114 1,914
TELECOMUNICACOES DE SAO PAULO SA-TELESP, ORDINARY NOMINATIVE 2,554,000 325 .92
VIDRARARIA SANTA MARINA, ORDINARY NOMINATIVE 308,700 1,275 .53
--------- -------
72,067 29.73
--------- -------
CHILE - 10.66%
BANMEDICA SA 2,362,500 1,076 .44
CAP SA 360,599 2,270 .93
CHILGENER SA (AMERICAN DEPOSITARY RECEIPTS) 331,678 10,489 4.33
COMPANIA CERVECERIAS UNIDAS SA (AMERICAN DEPOSITARY SHARES) 110,000 2,929 1.21
COMPANIA DE TELECOMUNICACIONES DE CHILE SA
(AMERICAN DEPOSITARY RECEIPTS) 18,000 1,465 .60
COMPANIA TECNO INDUSTRIAL SA 9,720,000 703 .29
EMPRESA NACIONAL DE ELECTRICIDAD SA (AMERICAN DEPOSITARY 135,409 3,588 1.48
RECEIPTS)
FORESTAL TERRANOVA 360,599 691 .29
INVERCAP SA 360,599 792 .33
SOCIEDAD QUIMICA Y MINERA DE CHILE SA, CLASS A 386,600 1,833 .76
------- --------
25,836 10.66
------- --------
COLOMBIA - 2.58%
BANCO DE COLOMBIA SA (GLOBAL DEPOSITARY RECEIPTS)
(ACQUIRED 5/26/94, COST: $825,000) (1) 65,000 488
BANCO DE COLOMBIA SA 5.20% CONVERTIBLE BOND FEBRUARY 1, 1999 .73
(ACQUIRED 1/27/94, COST: $1,975,000) (1) $1,700,000 1,275
CEMENTOS DIAMANTE, SA 141,731 978 .40
CEMENTOS PAZ DEL RIO (AMERICAN DEPOSITARY RECEIPTS)
(ACQUIRED 9/21/94, COST: $941,000) (1) (2) 42,000 693 .28
CORPORACION FINANCIERA DEL VALLE SA, CLASS B
(AMERICAN DEPOSITARY RECEIPTS) (ACQUIRED 2/4/93,
COST: $2,010,000) (1) 168,209 2,818 1.17
------- --------
6,252 2.58
------- --------
ECUADOR - 0.70%
LA CEMENTO NACIONAL CA (GLOBAL DEPOSITARY RECEIPTS)
(ACQUIRED 6/21/94, COST: $1,151,000) (1) 7,424 1,708 .70
------- --------
MEXICO - 22.92%
APASCO, SA DE CV, CLASS A 1,025,976 4,078 1.68
BCA QUADRUM, SA, ORDINARY PARTICIPATION CERTIFICATES
(AMERICAN DEPOSITARY RECEIPTS) (2) 180,000 1,170 .48
Bufete Industrial, SA, ordinary participation certificates
(American Depositary Receipts) 74,000 1,203 .50
CEMEX, SA, Class A 67,500 234
CEMEX, SA, Class B 1,003,100 3,625
CEMEX, SA, Class B, 4.25% convertible bond, November 1, 1997 $3,600,000 2,718 2.71
(aquired 9/28/94, cost: $3,626,000) (1)
Cifra, SA de CV, Class B 3,028,930 4,174
Cifra, SA de CV, Class C 1,682,142 2,221 2.64
Embotelladores del Valle de Anahuac, SA de CV, Class B 349,100 330 .14
Gruma, SA de CV, Class B 69,360 198 .08
Grupo Carso, SA de CV, Class A1 467,300 2,561 1.06
Grupo Casa Autrey, SA de CV (American Depositary Receipts) 24,500 364 .15
Grupo Financiero Banamex Accival, SA de CV, Class B 1,355,500 2,085
Grupo Financiero Banamex Accival, SA de CV, Class L 111,560 170
Grupo Financiero Banamex Accival, SA de CV,
7.00% convertible debentures December 15, 1999 $1,030,000 742 1.24
Grupo Financerio Bancomer, SA de CV, Class L
51.00% convertible debentures May 16, 2002 MXP5750000 935 .38
Grupo Financiero Banorte, SA de CV, Classs C 219,500 285 .12
Grupo Televisa, SA, ordinary participation certificates 106,000 1,087
Grupo Televisa, SA, ordinary participation certificates 1.04
(American Depositary Receipts) 71,000 1,447
Internacional de Ceramica, SA de CV, Class B (2) 55,200 91
Internacional de Ceramica, SA de CV .59
(American Depositary Receipts) (2) 170,400 1,342
Kimberly-Clark de Mexico, SA de CV, Class A 410,000 4,718
Kimberly-Clark de Mexico, SA de CV, Class B 70,000 785 2.27
Panamerican Beverages, Inc., Class A 224,100 6,723 2.77
Sigma Alimentos, SA de CV, Class B 110,000 749 .31
Telefonos de Mexico, SA de CV, Class A 1,650,000 2,438
Telefonos de Mexico, SA de CV, Class L 2,475,000 3,657
Telefonos de Mexico, SA de CV, Class L 3.61
(American Depositary Receipts) 90,000 2,666
Tolmex, SA de CV, Class B2 295,700 1,156 .48
Tubos de Acero de Mexico, SA (2) 151,000 738
Tubos de Acero de Mexico, SA
(American Depositary Receipts) (2) 141,200 697
Tubos de Acero de Mexico, SA
7.50% convertible Eurobond, June 12, 1997 $250,000 193 .67
------- --------
55,580 22.92
-------- --------
PERU - 2.80%
Banco de Credito del Peru 2,778,213 4,876 2.01
Cemento Norte Pacasmayo, Class C 400,000 1,044 .43
Ontario-Quinta A.V.V. (acquired 8/15/94, cost: $900,000) (1) 877,083 877 .36
(2)
--------- --------
6,797 2.80
------- --------
PHILIPPINES - 0.91%
Ayala Land, Inc., Class B 843,750 976 .40
Philippine Long Distance Telephone Co.
(Global Depositary Receipts) 30,000 1,223 .51
Philippine National Bank 281 3 -
------- --------
2,202 .91
------- --------
PORTUGAL - 0.65%
Corticeira Amorim-Sociedade Gestora de Participacoes
Socais, SA 40,700 612 .25
Portugal Telecom (American Depository Receipts) (2) 50,500 960 .40
------- --------
1,572 .65
UNITED STATES - 0.12%
Atlantic Tele-Network, Inc. (2) 36,700 298 .12
------- --------
URUGUAY - 0.75%
Banco Comercial Portugues, SA
(Global Depositary Receipts) 115,000 1,811 .75
------- --------
VENEZUELA - 0.27%
Compania de Inmuebles y Valores Caracas (2) 20,494,000 - -
Fabrica Nacional de Cementos SACA 4,098,800 398 .16
Venezolana de Cementos, SACA, Class A 163,800 231
Venezolana de Cementos, SACA, Class B 23,094 30 .11
-------- --------
659 .27
-------- --------
MISCELLANEOUS - 0.00%
Stocks in initial period of acquisition 1,700,000 3 -
-------- --------
TOTAL EQUITY-TYPE SECURITIES (cost: $164,248,000) 205,044 84.57
-------- --------
Principal
Amount
BONDS AND NOTES (000)
ARGENTINA - 1.34%
Republic of Argentina Bocon PIK 7.268% April 1,2001 (4) $3,750 2,054
Republic of Argentina Bocon PIK 5.861% April 1, 2001 (4) ARP2,250 735 1.15
Bridas Corporation SR 12.50% November 15, 1999 250 230 .09
Central Puerto SA 10.75% convertible Eurobond,
November 2, 1997 250 240 .10
-------- --------
3,259 1.34
-------- --------
BRAZIL - 1.03%
Aracruz Celulose SA Eurobond 9.00% July 22, 1998 150 147 .06
Federal Republic of Brazil Capitalization Bond PIK
8.00% April 15, 2014 780 383 .16
Federal Republic of Brazil Debt Conversion Bond 7.3125%
April 15, 2012 (4) 2,250 1,170 .48
Republic of Minas Gerias Series A 7.875%
Feburary 10, 1999 1,000 790 .33
------- --------
2,490 1.03
------- --------
MEXICO - 1.22%
Banco Nacional de Comercio Exterior S.N.C. Trust convertible 500 362 .15
Eurobond 8.00% August 5, 2003
Ispat Mexicana, SA de CV 10.375%
Senior Notes due March 15, 2001 (1) 500 430 .18
Mc-Cuernavaca Toll Road Trust 9.25% July 25, 2001 799 575 .24
Tubos de Acero de Mexico 13.75% December 8, 1999
(acquired 11/23/94, cost: $1,233,000) (1) 1,250 1,105 .45
United Mexican States MYRA (multi-year restructuring
agreement)/Agent-Citibank, N.A./Loan Participation
Agreements (Participation-Salomon Brothers Inc.)(2,4,5,6) 300 208
United Mexican States MYRA (multi-year restructuring
agreement)/Agent-International Mexican Bank Ltd./ Loan .20
Participation Agreements (Participation-Morgan Guaranty
Trust) (2,4,5,6) 400 278
-------- --------
2,958 1.22
------- --------
PANAMA - 0.35%
Republic of Panama 7.125% May 10, 2002 (4) 400 306
Republic of Panama/Agent-Citibank, N.A./Loan Participation
Agreements (Participation- Citibank, N.A.) (2,4,5,6) 1,784 541 .35
-------- --------
847 .35
-------- --------
PERU - 1.54%
Republic of Peru/Agent-Bankers Trust Company/
Loan Participation Agreements
(Participation-Citibank, N.A.) (2,4,5,6) 975 273 .11
Republic of Peru/Agent-Citibank, N.A./Loan Participation
Agreements (Participation-Citibank, N.A.) (2,4,5,6) 2,583 769 .32
Republic of Peru/Agent-Citibank, N.A./Loan Participation
Agreements (Participation-Morgan Guaranty Trust) (2,4,5,6) 2,661 800 .33
Republic of Peru/Agent-Citibank, N.A./Loan Participation
Agreements (Participation-Salomon Brothers Inc.) (2,4,5,6) 1,851 553 .23
Republic of Peru/Agent-Wells Fargo Bank/Loan Participation
Agreements (Participation-Citibank, N.A.) (2,4,5,6) 820 230 .09
Republic of Peru/Agent-Wells Fargo Bank/Loan Participation
Agreements (Participation-Morgan Guaranty Trust) (2,4,5,6) 3,407 963 .40
Republic of Peru/Agent-Wells Fargo Bank, N.A./Loan
Participation Agreements (Participation-J.P. Morgan) (2,4
5,6) 506 144 .06
-------- --------
3,732 1.54
-------- --------
VENEZUELA - 0.22%
Venezolana de Cementos, SACA
Eurobond 9.25% November 22, 1996 600 528 0.22
TOTAL BONDS AND NOTES (cost: $13,806,000) -------- --------
13,814 5.70
------- --------
SHORT-TERM SECURITIES
Corporate Short-Term Notes - 4.20%
ABN Amro North America Finance, Inc. 5.92% due 7/11/95 6,100 6,089 2.51
Deutsche Bank Financial Inc. 5.88% due 7/6/95 2,000 1,998 .82
UBS Finance (Delaware), Inc. 6.20% due 7/3/95 2,100 2,099 .87
------- --------
10,186 4.20
NON-U.S. CURRENCY - 4.85%
Chilean peso CHP4,386,70 11,751 4.85
3
-------- --------
TOTAL SHORT-TERM SECURITIES (cost: $21,201,000) 21,937 9.05
-------- --------
TOTAL INVESTMENT SECURITIES (cost: $199,255,000) 240,795 99.32
Excess of cash and receivables over liabilities 1,649 .68
-------- --------
NET ASSETS 242,444 100.00
======== ========
</TABLE>
(1) Purchased in a private placement transaction; resale to the
public may require registration and no right to demand
registration under U.S. law exsists. As of June 30, 1995,
the total market value and cost of such securities was
$24,074,000 and $25,439,000 respectively, and the market
value represented 9.93% of net assets.
(2) Non-income-producing securities.
(3) Unfunded capital commitments represent binding
commitments made by the fund which may be paid in the
future. Payment is made when a capital call is requested.
Capital calls can only be made when certain requirements
have been fulfilled; such as the timing of such capital
calls can not be readily determined.
(4) Coupon rate may change periodically.
(5) Security is currently in default.
(6) Participation interests were acquired through the financial
institution indicated parenthetically.
Non-U.S. currency symbols:
ARP - Argentine peso
R$ - Brazilian real
CHP - Chilean peso
MXP - Mexican peso
See Notes to Financial Statements
The description of companies shown in the portfolio, which are obtained from
published reports and other sources believed to be reliable, are supplemental
and are not covered by the Independent Auditor's Report.
Equity-type securities added to the
portfolio since December 31, 1994
- ----------------------------------------------
Bufete Industrial
CEMENTO NORTE PACASMAYO
COMPANIA DE INMUEBLAS Y VALORES CARACAS
COTEMINAS-COMPANHIA DE TECIDOS NORTE DE MINES
GRUPO FINANCERIO BANORTE
OSA
PORTUGAL TELECOM
SADIA CONCORDIA
SIGMA ALIMENTOS
SOCIEDAD COMERCIAL DEL PLATA
TELECOMUNICACOES DE MINAS GERAIS
EQUITY - TYPE SECURITIES ELIMINATED FROM THE
PORTFOLIO SINCE DECEMBER 31, 1994
- ----------------------------------------------
BANCO O'HIGGINS
COCA-COLA FEMSA
FOMENTO ECONOMICO MEXICANO
GRUPO EMBOTELLADOR DE MEXICO
GRUPO FINANCIERO SERFIN
GRUPO INDUSTRIAL DURANGO
HYLSAMEX
MANNESMANN
RIPASA SA CELULOSE E PAPEL
NEW WORLD INVESTMENT FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AT JUNE 30, 1995 (dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Assets:
Investment securities at market
(cost: $199,255) 240,795
Cash 582
Receivables for--
Sales of investments 2,732
Dividends and accrued interest 2,209 4,941
-------- --------
246,318
--------
Liabilities:
Non-U.S. taxes payable 261
Payables for--
Purchases of investments 1,432
Unfunded Capital commitments 1,924
Management services 197
Accrued expenses 60 3,613
-------- --------
3,874
--------
Net Assets at June 30, 1995 --
Equivalent to $19.26 per share on
12,588,493 shares of beneficial
interest issued and outstanding,
par value $0.001 per share;
unlimited shares authorized 242,444
========
Statement of Operations for the Year Ended
June 30, 1995 (dollars in thousands)
Investment Income:
Income:
Dividends 4,402
Interest 4,209 8,611
---------
Expenses:
Management services fee 2,896
Custodian fee 569
Auditing and legal fees 88
Reports to shareholders 6
Registration statement and prospectus 3
Taxes other than federal
income tax 13
Other expenses 105 3,680
--------- ---------
Income before non-U.S. taxes 4,931
Non-U.S. taxes (365)
---------
Net investment income 4,566
---------
Realized Gain and Unrealized
Depreciation on Investments:
Realized gain before non-U.S. taxes 53,957
Non-U.S. taxes (5,368)
---------
Net realized gain 48,589
Net change in unrealized
appreciation (depreciation):
Beginning of year 139,418
End of year 41,534
---------
Net unrealized depreciation (97,884)
Non-U.S. taxes.. 3,649 (94,235)
--------- ---------
Net realized gain and unrealized
depreciation on investments.. (45,646)
---------
Net Decrease in Net Assets Resulting
from Operations (41,080)
========
Statement of Changes in Net Assets
(dollars in thousands)
1995 1994
--------- ---------
Operations:
Net investment income 4,566 4,056
Net realized gain on investments 48,589 45,168
Net unrealized appreciation (depreciation)
on investments (94,235) 26,003
--------- ---------
Net increase (decrease) in net assets
resulting from operations (41,080) 75,227
--------- ---------
Dividends and Distributions Paid
to Shareholders:
Dividends from net
investment income (366) (1,837)
Distributions from net realized
gain on investments (89,986) (19,590)
--------- ---------
Total dividends and
distributions (90,352) (21,427)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
738,845 shares - 23,572
Proceeds from shares issued in
reinvestment of net investment
income dividends and
distributions of net realized
gain on investments:
3,415,584 and 671,062 shares,
respectively 90,342 19,991
Cost of shares repurchased:
595,821 and 144,495
shares, respectively (21,892) (3,613)
--------- ---------
Net increase in net assets
resulting from capital share
transactions 68,450 39,950
--------- ---------
Total Increase (Decrease) in Net Assets (62,982) 93,750
Net Assets:
Beginning of year 305,426 211,676
--------- ---------
End of year (including
excess of distributions over net investment
income: $3,784 and $2,448,
respectively) 242,444 305,426
========= =========
</TABLE>
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. New World Investment Fund (the "fund") is registered under the Investment
Company Act of 1940 as a closed-end, non-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 Trustees 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
Trustees.
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 on 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 $569,000 includes $46,000 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 gains, and net
unrealized gains of the fund derived in Chile are subject to certain non-U.S.
taxes at rates of 20% and 35%, respectively. The fund provides for such
non-U.S. taxes on investment income, net realized gains, and net unrealized
gains.
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 book
and federal income tax purposes aggregated $40,195,000, net of accumulated
deferred taxes totaling $1,345,000 on net unrealized appreciation of Chilean
securities, of which $71,143,000 related to appreciated securities and
$29,603,000 related to depreciated securities. There was no difference between
book and tax realized gains on securities transactions for year ended June 30,
1995. The cost of portfolio securities for book and federal income tax
purposes was $199,255,000 at June 30, 1995.
4. The fee of $2,896,000 for management services was paid pursuant to an
agreement with Capital International, Inc. (CII), with which certain officers
and Trustees of the fund are affiliated. The Investment Advisory and Service
Agreement provides for monthly fees, accrued weekly, based on an annual rate of
1.00% on the first $400 million of the fund's net assets, plus 0.80% of such
assets in excess of $400 million. 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 $5,137,000 and additional paid-in capital was $200,889,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $117,574,000 and $124,542,000, 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 $417,000. Net
realized currency losses on dividends, interest, withholding taxes reclaimable,
and sales of non-U.S. bonds and notes were $75,000 for the year ended June
30,1995.
In accordance with SOP 93-2, the fund reclassified $5,461,000 from
undistributed net investment income to additional paid-in capital, and from
additional paid-in capital to undistributed net realized gains, respectively,
for the year ended June 30, 1995.
Per-Share Data and Ratios
<TABLE>
<CAPTION>
Year ended June 30
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year 31.27 24.89 20.98 17.79 12.02
------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income .43 .50 .37 .41 .61
Net realized and unrealized
gains (losses) on investments
before non-U.S. taxes (2.49) 8.83 5.59 4.38 6.45
Non-U.S. taxes (.10) (.50) (.01) (.20) (.40)
------- ------- ------- ------- -------
Total income (loss) from investment
operations (2.16) 8.83 5.95 4.59 6.66
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment
income (.04) (.21) - (.46) (.52)
Distributions from net
realized gains (9.81) (2.24) (2.04) (.94) (.37)
------- ------- ------- ------- -------
Total distributions (9.85) (2.45) (2.04) (1.40) (.89)
------- ------- ------- ------- -------
Net Asset Value, End of Year 19.26 31.27 24.89 20.98 17.79
======= ======= ======= ======= =======
Total Return (15.47%) 35.97% 31.28% 26.57% 58.82%
Ratios/Supplemental Data:
Net assets, end of year
(in millions) $242 $305 $212 $180 $129
Ratio of expenses to average
net assets 1.27% 1.36% 1.40% 1.53% 1.67%
Ratio of expenses and non-U.S.
taxes to average net assets 1.40% 1.50% 1.62% 1.71% 1.87%
Ratio of net income to average
net assets 1.58% 1.43% 1.70% 1.92% 4.59%
Portfolio turnover rate 44.19% 21.47% 17.23% 21.66% 23.25%
</TABLE>
**********
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of New World Investment Fund
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the per-share data and ratios present fairly, in all
material respects, the financial position of New World Investment Fund (the
"Fund") at June 30, 1995, the results of its operations, the changes in its net
assets, and the per-share data and ratios for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and per-share data and ratios (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based
upon our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1995 by correspondence with the
custodian and brokers and application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for
the opinion expressed above.
/s/ Price Waterhouse LLP
Los Angeles, California
August 10, 1995
TAX INFORMATION (UNAUDITED)
The fund makes an election under Internal Revenue Code Section 853 to pass
through foreign taxes paid by the fund to its shareholders. The total amount
of foreign taxes passed through to shareholders for the year ended June 30,
1995 totals $0.80528 per share.
None of the distributions paid by the fund from investment income earned in
the year ended June 30, 1995, qualified for the corporate dividends-received
deduction nor were derived from interest on direct U.S. Treasury obligations.
This information is given to meet certain requirements of the Internal Revenue
Code and should not be used by shareholders for preparing their income tax
returns. For tax return preparation purposes, please refer to the annual
information on the taxability of distributions supplied by the fund.
