SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a.12
Emerging Markets Growth Fund, Inc.
(Name of Registrant as Specified in its Charter)
Roberta A. Conroy, Esquire
Capital International Inc.
11100 Santa Monica Boulevard, 15th Floor
Los Angeles, California 90025
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check appropriate box):
[X] No filing fee required
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2) or per Investment Company Act Rule 20a-1(c)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11*/:
-------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------
*/ Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule O-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
May 20, 1997
Dear Shareholder:
Enclosed is a Proxy Statement, Proxy, and stamped return envelope in
connection with the upcoming Meeting of Shareholders of Emerging Markets Growth
Fund, Inc. to be held June 27, 1997, in Los Angeles. It is very important that
you read this material, cast your vote on the enclosed blue Proxy, and return it
to us in the enclosed envelope as soon as possible.
It would help us greatly in planning this meeting if you could give us
an indication of whether you plan to attend the meeting in person. The
Shareholders' meeting is expected to be very brief because there will be no
planned investment or other discussion apart from the administrative issues
which need to be addressed. Regardless of your decision to attend at this time,
please sign and return your voted Proxy as soon as possible. In the event you
decide to attend the meeting, you may revoke the Proxy you mailed and vote in
person instead. Please call Carita O'Connor at 310-996-6156 if you plan to
attend.
Thank you.
ROBERTA A. CONROY
Senior Vice President and Secretary
<PAGE>
EMERGING MARKETS GROWTH FUND, INC.
------------------
NOTICE OF MEETING OF SHAREHOLDERS
JUNE 27, 1997
To the Shareholders of
EMERGING MARKETS GROWTH FUND, INC.:
A Meeting of Shareholders of Emerging Markets Growth Fund, Inc. (the
"Fund") will be held at the offices of The Capital Group Companies, Inc., 333
South Hope Street, 55th Floor, Los Angeles, California, on Friday, June 27,
1997, at 8:30 a.m., local time, to consider and vote on the following proposals
described under the corresponding numbers in the accompanying Proxy Statement:
(1) To elect a board of fourteen (14) Directors;
(2) To approve a proposal to increase the authorized capital stock
of the Fund from 200 million shares to 400 million shares;
(3) To approve a proposal to convert the Fund from closed-end to
open-end, "interval fund" status;
(4) If Proposal 3 is approved, to approve a proposal amending the
Articles of Incorporation of the Fund to reflect the ability
of the Board of Directors to increase or decrease the
authorized capital stock of the Fund;
(5) If Proposal 3 is approved, to approve a proposal amending
certain provisions regarding the redeemability of the Fund's
shares in the Articles of Incorporation to reflect the
ability of the Board of Directors to set standards, from time
to time, applicable to the redemption of Fund shares;
(6) If Proposal 3 is approved, to approve a proposal to amend a
fundamental investment policy to permit the Fund to borrow
from a bank for temporary or emergency purposes in amounts
not exceeding 5% of its assets, based on current value, and
amending the By-laws of the Fund to reflect such amendment;
(7) To approve a proposal to terminate the existing shareholders'
agreement, and to amend the Articles of Incorporation by
incorporating the restrictions on the transferability of
shares currently provided under the Fund's shareholder's
agreement;
(8) To ratify the selection by the Board of Directors of the Fund
of Price Waterhouse LLP as independent public accountants of
the Fund for the fiscal year ending June 30, 1997; and
(9) To transact such other business as may properly come before
the Meeting.
1
<PAGE>
The Board of Directors has fixed the close of business on May 2, 1997,
as the record date for the determination of shareholders entitled to notice of
and to vote at the Meeting.
The proposed business cannot be conducted at the Meeting unless the
holders of a majority of the shares of the Fund outstanding on the record date
are present in person or by proxy. Therefore, PLEASE MARK, DATE, SIGN AND RETURN
THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS. THE PROXY IS
REVOCABLE, AND YOUR SIGNING WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE
EVENT THAT YOU ATTEND THE MEETING.
By Order of the Board of Directors
ROBERTA A. CONROY
Senior Vice President and Secretary
Los Angeles, California
May 20, 1997
2
<PAGE>
================================================================================
IMPORTANT
Shareholders can help the Fund avoid the necessity and expense of sending
follow-up letters to ensure a quorum by promptly returning the enclosed Proxy.
Please mark, date, sign and return the enclosed Proxy in order that the
necessary quorum may be represented at the Meeting. The enclosed envelope
requires no postage if mailed in the United States.
================================================================================
EMERGING MARKETS GROWTH FUND, INC.
(11100 Santa Monica Boulevard, Los Angeles, California 90025)
------------------
PROXY STATEMENT
MEETING OF SHAREHOLDERS
JUNE 27, 1997
The enclosed Proxy is solicited by the Board of Directors of the Fund
in connection with the Meeting of Shareholders to be held on June 27, 1997.
Every properly executed Proxy returned in time to be voted at the Meeting will,
unless such Proxy has previously been revoked, be voted at the Meeting of
Shareholders in accordance with the directions indicated on such Proxy. IF NO
DIRECTIONS ARE INDICATED, THE PROXY WILL BE VOTED "FOR" THE 14 PERSONS SET FORTH
IN PROPOSAL 1 AND "FOR" PROPOSALS 2 THROUGH 8. Anyone having submitted a Proxy
may revoke it prior to its exercise, either by filing with the Fund a written
notice of revocation, by delivering a duly executed proxy bearing a later date,
or by attending the Meeting and voting in person. This Proxy was first mailed to
shareholders on or about May 20, 1997.
At the close of business on May 2, 1997, the record date fixed by the
Board of Directors for the determination of shareholders entitled to notice of
and to vote at the Meeting, there were outstanding 185,969,913.39 shares of
capital
stock, the only authorized class of securities of the Fund. Each share is
entitled to one vote. There is no provision for cumulative voting. The following
owners of record were known by the Fund to own beneficially 5% or more of the
outstanding shares of the Fund: The Chase Manhattan Bank as Trustee for the
General Motors Employees Global Group Pension Trust, The Chase Manhattan Bank as
Trustee for the IBM Retirement Plan Trust, and Pensioenfonds PGGM.
In tallying shareholder votes, abstentions and "broker non-votes"
(i.e., shares held by brokers or nominees as to which (i) instructions have
not been received from the beneficial owners or persons entitled to vote and
(ii) the broker or nominee does not have discretionary voting power on a
particular matter) will be counted for purposes of determining whether a
quorum is present for purposes of convening the Meeting. On proposal 1, the
abstentions and broker non-votes shall have no effect; the fourteen nominees
receiving the largest number of votes will be elected. On proposals 2 through
7, abstentions and broker non-votes will be considered to be both present at
the Meeting and issued and outstanding and, as a result, will have the effect
of being counted as voting against the proposals. On proposal 8, abstentions
and broker non-votes will not be counted as "votes cast" and will have no
effect on the result of the vote.
In the event that sufficient votes are not received by the Meeting
date, a person named as proxy may propose one or more adjournments of the
Meeting. The persons named as proxies will vote all Proxies in favor of such
adjournment.
<PAGE>
1. ELECTION OF DIRECTORS
Fourteen Directors are to be elected at the Meeting, each to hold
office until his or her successor is elected and qualified. The fourteen
nominees receiving the highest number of votes shall be deemed to be elected.
Because it is not anticipated that meetings of shareholders will be held each
year, the Directors' terms will be indefinite in length. All of the nominees for
Director except Khalil Foulathi, Raymond Kanner, John G. McDonald and Shaw B.
Wagener were elected by the shareholders at their last meeting on June 21, 1994.
Mr. Foulathi was elected by Directors on June 17, 1996; Mr. Kanner was elected
by Directors on January 20, 1997; and Professor McDonald was elected by
Directors on June 21, 1994. Mr. Wagener has been nominated by the Board of
Directors and has agreed to serve as Director if elected.
Each of the nominees has agreed to serve as a Director if elected. If,
due to present unforeseen circumstances, any nominee should not be available for
election, the persons named as proxy will vote the signed but unmarked Proxies,
and those marked for the nominated Directors, for such other nominees as the
present Directors shall recommend. The following table sets forth certain
information regarding the nominees.
<TABLE>
<S> <C> <C> <C> <C>
Current Principal
Occupation and Shares of the
Principal Year Memberships on Boards of Fund
Name of Nominee Employment First Other Registered Investment Beneficially
(Position with Fund) During Past 5 Elected a Companies and Publicly Owned as of
and Date of Birth Years # Director Held Companies May 2, 1997
- ----------------- -------- --------- ---------------- -----------
Khalil Foulathi 3, 5 Executive Director, 1996 Thuraya Satellite -0-
(Director) Evaluation and Telecommunications Co.
05/20/51 Followup Dept., Abu
Dhabi Investment
Authority
Nancy Englander* Vice President, 1991 6,748
(President and Capital International,
Director) Inc.
08/12/44
David I. Fisher* Chairman of the 1986 EuroPacific Growth Fund 11,197
(Vice Chairman of the Board, The Capital New Perspective Fund
Board) Group Companies,
09/17/39 Inc.
Beverly L. Hamilton 2, 3 President, 1991 Connecticut Natural Gas 9,869
(Director) ARCO Investment Company
10/19/45 Management MassMutual Institutional Funds
Company United Asset Management Corp.
2
<PAGE>
Raymond Kanner 1, 3 Senior Investment 1997 -0-
(Director) Manager, IBM
05/29/53 Retirement Funds;
previously Manager,
IBM Credit
Corporation
Marinus W. Keijzer 2, 3, 5 Chief Economist & 1986 -0-
(Director) Strategist,
07/20/38 Pensioenfonds
PGGM
Hugh G. Lynch 2 Managing Director, 1988 Morgan Grenfell Investment -0-
(Director) International Trust
10/23/37 Investments, General
Motors Investment
Management
Corporation
Helmut Mader 3, 5 Director, Deutsche 1986+ -0-
(Director) Bank AG
08/05/42
Teresa E. Martini 1, 3 Vice President, Public 1991 -0-
(Director) Equity, AT&T
06/18/56 Investment
Management
Corporation
John G. McDonald 1, 3 The IBJ Professor of 1994 The American Funds Group 18,327
(Director) Finance, Graduate (Director/Trustee of 6 funds)4
05/21/37 School of Business, Scholastic Corp.
Stanford University Trinet Corp.
Varian Associates, Inc.
William Robinson 3, 5 Director, 1986 Diamond Trust Bank Kenya Ltd. -0-
(Director) Aga Khan Fund for The Jubilee Insurance Company
07/20/38 Economic Ltd. (Kenya)
Development Nation Printers & Publishers
New Jubilee Insurance Company
Ltd. (Pakistan)
TPS Holdings Ltd.
Patricia A. Small 1, 3 Treasurer, The 1991 -0-
(Director) Regents of the
12/28/45 University of
California
3
<PAGE>
Walter P. Stern* Chairman of the 1991 The American Funds Group 16,568
(Chairman of the Board, Capital Group (Director/Trustee of 7 funds)4
Board) International, Inc. Temple-Inland, Inc.
09/26/28
Shaw B. Wagener* Executive Vice -0-
(Executive Vice President and
President) Director, Capital
07/01/59 International, Inc.
</TABLE>
--------------------
# Corporate positions, in some instances, may have changed during the
past five year period.
* Is considered an "interested person" of the Fund within the meaning of
the Investment Company Act of 1940 (the "1940 Act"), on the basis of
affiliation with Capital International, Inc. (the "Manager") or the
parent company of the Manager, The Capital Group Companies, Inc.
+ Helmut Mader was one of the original founding Directors of the Fund
elected in 1986. Mr. Mader resigned as a Director in 1991 following
the sale of all shares of the Fund owned by Deutsche Bank Corporation,
the company with which Mr. Mader is affiliated. In 1992, the Board
re-elected Mr. Mader as a Director.
1 The Fund has an Audit Committee comprised of the above-designated
directors. The function of the Committee includes such specific matters
as recommending independent public accountants to the Board of
Directors, reviewing the audit plan and results of audits and
considering other matters deemed appropriate by the Board of Directors
and/or the Committee.
2 The Fund has a Nominating Committee comprised of the above-designated
Directors. The Committee's functions include selecting and recommending
to the full Board of Directors nominees for election as Directors of
the Fund. While the Committee is normally able to identify from its own
resources an ample number of qualified candidates, it will consider
shareholder suggestions of persons to be considered as nominees to fill
future vacancies on the Board. Such suggestions must be sent in writing
to the Nominating Committee of the Fund, c/o the Fund's Secretary, and
must be accompanied by complete biographical and occupational data on
the prospective nominee, along with the written consent of the
prospective nominee to consideration of his or her name by the
Committee. Under the law of the State of Maryland, where the Fund is
incorporated, the Fund is not required to hold regular meetings of
shareholders. Under the 1940 Act, a vote of shareholders is required
from time to time for particular matters but not necessarily on an
annual basis. As a result, it is not anticipated that the Fund will
hold shareholder meetings on a regular basis and any shareholder
proposal received may not be considered until such a meeting is held.
3 The Fund has a Contracts Committee which is composed of all directors
who are not considered to be "interested persons" of the Fund within
the meaning of the 1940 Act. The Contracts Committee's function is to
request, review and consider the information deemed necessary to
evaluate the terms of the Investment Advisory and Service Agreement
that the Fund proposes to enter into, renew or continue prior to voting
thereon, and to make its recommendation to the full Board of Directors
on this matter.
4
<PAGE>
4 The American Funds Group consists of 28 funds which are managed by an
affiliate of the Manager.
5 Is a foreign national living outside the United States. It may be
more difficult to obtain judgments against Directors who are foreign
nationals living outside the United States.
The Fund does not currently pay any compensation to its Directors.** In
the future, however, the Fund may determine that compensation to its Directors
is warranted. The Fund pays the expenses of attendance at Board and Committee
meetings for the Directors who are not affiliated with the Manager.
There were three Board of Directors meetings, three Audit Committee
meetings, one Contracts Committee meeting, and one Nominating Committee meeting
during the fiscal year ended June 30, 1996. All of the incumbent Directors
attended at least 75% of the total meetings of the Board and of the committees
of which they were members.
- ---------------------
** Professor McDonald received $153,800 in total compensation (all of which was
voluntary deferred compensation) from six funds managed by an affiliate of the
Manager for the calendar year ended December 31, 1996.
5
<PAGE>
<TABLE>
<CAPTION>
Other Executive Officers
<S> <C> <C>
Name Officer
(Position with Fund) Continuously
and Date of Birth Principal Occupation for Last five Years (1) Since (2)
- ----------------------- -------------------------------------------- ----------
Roberta A. Conroy Assistant General Counsel,
(Senior Vice President and The Capital Group Companies, Inc. 1991
Secretary)
08/17/54
Michael A. Felix Vice President, 1993
(Treasurer) Capital International, Inc.
02/13/61
Hartmut Giesecke Senior Vice President and Director, 1993
(Vice President) Capital International, Inc.
09/25/37
Peter C. Kelly Senior Counsel, 1996
(Vice President) The Capital Group Companies, Inc.
01/28/59 (previously associated with Latham & Watkins
for seven years)
Victor D. Kohn Executive Vice President, 1996
(Vice President) Capital Research International
09/23/57
Nancy J. Kyle Senior Vice President - International, 1996
(Vice President) Capital Guardian Trust Company
08/11/50
Steven N. Kearsley Vice President and Treasurer, 1986
(Vice President) Capital Research and Management Company
09/29/41
</TABLE>
- --------------------
(1) The occupation shown reflects the principal employment of each
individual during the past 5 years. Corporate positions, in some
instances, may have changed during this period.
(2) Officers are elected to hold office until their respective successors
are elected, or until they resign or are removed.
No officer, Director or employee of the Manager receives any
remuneration from the Fund. All officers and Directors as a group (21) owned
beneficially less than 1% of the shares of the Fund outstanding on May 2, 1997.
6
<PAGE>
2. APPROVAL OF A PROPOSAL TO INCREASE THE AUTHORIZED CAPITAL
STOCK OF THE FUND FROM 200 MILLION SHARES TO 400 MILLION
SHARES
The Board of Directors proposes to increase the authorized capital
stock of the Fund from Two Hundred Million (200,000,000) shares to Four Hundred
Million (400,000,000) shares. The Fund's Articles of Incorporation currently
limit the issuance of authorized capital stock of the Fund to Two Hundred
Million (200,000,000) shares. The Fund's Articles of Incorporation also empower
the Board of Directors to authorize the issuance from time to time of shares of
capital stock, subject to limitations set forth in the Fund's Articles of
Incorporation, By-laws, or in the General Corporation Law of the State of
Maryland, where the Fund is incorporated. Under Maryland law, an increase in
the Fund's capital stock requires shareholder approval.
RECOMMENDATION OF THE BOARD OF DIRECTORS
Management and the Board of Directors believes that it is advisable to
increase the authorized capital stock of the Fund in order to make available
additional shares of the Fund to meet foreseeable requirements for future sales
of shares to investors and shares purchased through the reinvestment of dividend
and capital gain distributions. Therefore, it is proposed that Article V of the
Articles of Incorporation be amended to read as follows:
"The total number of shares of capital stock of the
Corporation heretofore authorized was Two Hundred Million
(200,000,000) shares of the par value of One Cent ($.01) per
share and the aggregate par value of $2,000,000. As amended,
the total number of shares of capital stock which the
Corporation shall have authority to issue is Four Hundred
Million (400,000,000) shares of the par value of One Cent
($.01) per share and of the aggregate par value of
$4,000,000."
Approval of the proposal to increase the authorized capital stock of the Fund
requires the affirmative vote of 66-2/3% of all votes entitled to be cast.
THE BOARD OF DIRECTORS OF THE FUND UNANIMOUSLY RECOMMENDS THAT
YOU VOTE "FOR" THE PROPOSED AMENDMENT TO INCREASE THE CAPITAL
STOCK OF THE FUND.
3. APPROVAL OF A PROPOSAL TO CONVERT THE FUND FROM CLOSED-END
TO OPEN-END, "INTERVAL FUND" STATUS
At a meeting of the Board of Directors held on January 20, 1997, the
Board of Directors, including a majority of those Directors who are not
"interested persons" of the Fund, as defined in Section 2(a)(19) of the
Investment Company Act of 1940 (the "1940 Act") considered and approved the
7
<PAGE>
submission to shareholders of a proposal to convert the Fund from closed-end to
open-end "interval fund" status (the "Proposal"). Shareholders of the Fund are
now being asked to consider the Proposal and to consider related matters
approved by the Board arising in connection with the conversion. Implementation
of the Proposal and the effectiveness of the Fund's change of status under the
1940 Act are contingent both upon the approval by the shareholders of the Fund
and obtaining the necessary exemptive relief from the Securities and Exchange
Commission (the "Commission") to effectuate the Proposal. Currently, no open-
end interval fund exists. The Fund cannot operate as an open-end interval fund
until exemptive relief is granted by the Commission. There is no assurance
that the Commission will grant the requested exemptive relief.
A. BACKGROUND OF THE PROPOSAL
At the time the Fund was organized in 1986, it elected closed-end
status, principally because it was believed that the closed-end fund format was
the most appropriate for the Fund's investment program, given the relative
newness of the emerging securities markets and the anticipated illiquidity of
the Fund's investments in many emerging market securities. Because shares of
closed-end funds that trade on stock exchanges frequently trade at a discount to
net asset value, it was further determined that listing the Fund's shares on a
regular stock exchange was not appropriate for this type of institutional
investment product. A fundamental concern with the Fund's current structure has
been the lack of liquidity for shareholders with respect to their investments in
the Fund. A limited form of liquidity for Fund shares has been provided by the
Fund's ability to conduct periodic tender offers for its shares. Under the
Fund's tender offer policy these tender offers are limited in amount to no more
than 5% of the Fund's outstanding shares on a quarterly basis, subject to Board
approval. The Fund has conducted only one tender offer, in 1991.
Tender offers by closed-end funds, which are governed extensively under
the Securities Exchange Act of 1934 (the "1934 Act"), are relatively cumbersome
and costly undertakings, and impose greater restrictions and costs than are
applicable to the redemptions effected by an open-end fund. The tender offer
mechanism has been designed principally to help listed closed-end funds to
minimize the discount at which their shares often trade, a situation which is
not relevant to the Fund because the Fund's shares do not trade on an exchange
(although they are nominally listed on the Luxembourg Stock Exchage). Moreover,
tender offers generally are made for limited amounts of shares. If
more shares are tendered for repurchase than have been
authorized by the Board, i.e., 5% of outstanding shares, the Fund is only
required to accept such tenders on a pro rata basis. In addition, the discretion
granted to directors in determining whether to conduct the tender offer results
in a lack of predictability for investors as to whether a tender offer will
occur. Accordingly, tender offers by the Fund are an awkward means to achieve
limited liquidity.
Currently, tender offers cannot be made with sufficient frequency or
for a sufficiently large percentage of the Fund's shares to provide shareholder
liquidity comparable to what would be available if the Fund offered redeemable
securities. Under certain market conditions, particularly in the event that Fund
shareholders should wish to liquidate a significant portion of their holdings in
the Fund, an active secondary market in the Fund's shares could develop. The
Fund's shares could trade in any such market at a discount or premium to net
asset value. Periodic redeemability would give shareholders the assurance that
their investment can be liquidated at net asset value within a predictable time
frame.
8
<PAGE>
Since the Fund's organization and election of the closed-end format,
developments in emerging securities markets, regulatory developments suggesting
that a strict legal dichotomy between open-end and closed-end funds may not be
required to protect investors, and the desire of its significantly expanded
sophisticated shareholder base to improve overall liquidity of the Fund's shares
have led management of the Fund and the Board to conclude that a different form
of organization for the Fund would be more appropriate. The Board has therefore
determined to request exemptive relief from the Commission to permit it to
operate as an open-end interval fund.
Management of the Fund believes that the composition of its current
portfolio, the increased number of shareholders, and the evolution of the
emerging markets over the last ten years permit the Fund to provide a level of
liquidity for its shareholders that was not possible at the Fund's inception.
Under the current system for providing the Fund's shareholders with limited
liquidity for their investments in the Fund, there is no guarantee that the Fund
will make a tender offer at the time a shareholder needs or wants liquidity, or
that a shareholder will be able to liquidate all of the Fund shares it may wish
to liquidate in response to an offer. In addition, the tender offer mechanism
involves costs and delays which may influence the decision of the Board to
conduct tender offers on a regular or frequent basis. If a small number of
shares is expected to be tendered, the Board may consider that, given the fixed
costs involved in conducting a tender offer, it would be in the best interests
of the Fund to delay the tender offer, until such time as a greater number of
shares may be tendered.
In the process of discussing possible solutions to the current lack of
liquidity of shareholder interests in the Fund, over several years, various
alternatives were considered, including, but not limited to: conversion to a
traditional open-end mutual fund; retaining its status as a closed-end fund and
making regular repurchases pursuant to Rule 23c-3 under the 1940 Act; obtaining
a stock exchange listing for its shares; arranging for a market maker to match
investors wishing to purchase shares with shareholders wishing to sell shares;
converting to a "qualified purchaser" fund under Section 3(c)(7) of the 1940
Act; and conducting a tender offer for the Fund's shares. None of the possible
alternatives was considered to be as advantageous as the Proposal to convert to
an open-end interval fund.
B. THE PROPOSAL
The Fund proposes to convert its status under the 1940 Act from that
of a diversified closed-end investment company to that of a diversified open-end
management company in the form of an interval fund. The Fund proposes to
continue to sell its shares weekly and at the end of each month at the net asset
value per share next determined following receipt of the purchase order.
The net asset value will be determined on the last business day of every week
and month.
Under the proposed redemption policy, the Fund would stand ready to
redeem its shares at monthly intervals. The Fund would accept shareholders'
orders to redeem shares up to and including the first calendar day of each month
(or, if any such day is not a
9
<PAGE>
business day, then the following business day) -- the Redemption Deadline. Any
redemption requests received during the course of any calendar month would be
effective as of the next Redemption Deadline -- the first calendar day of the
next month. Redemption prices would be determined at net asset value
at the close of business on
the Redemption Pricing Date -- the last calendar day of each month (or, if any
such day is not a business day, then the immediately preceding business day).
Payment of redemptions would be made on or before the Redemption Payment Date,
which would be within seven calendar days of the Redemption Pricing Date (or, if
any such day is not a business day, then the following business day). Thus, a
redemption request would be effective the first business day of the month (on
the Redemption Deadline), and priced on the last day of the month, or the
immediately preceding business day if the last day of the month is not a
business day (the Redemption Pricing Date). Proceeds would be paid no later than
one week after the Redemption Pricing Date. The Board anticipates that
redemption proceeds generally would be paid on the business day following the
Redemption Pricing Date, under normal circumstances.
The Board would adopt a liquidity standard for the Fund's portfolio
designed to permit the Fund to meet redemption requests. The proposed liquidity
standards would enable the Fund to be more fully invested between redemption
deadlines, potentially providing greater investment returns for investors, while
at the same time ensuring that the Fund would be able to meet shareholder
expectations that any redemption request will be honored on a timely basis. In
order to provide further assurance that the Fund would be able to meet
concentrated redemption requests, if any, on a monthly basis, the Fund is
considering the possibility of establishing a committed liquidity credit
facility for the purpose of borrowing money to meet redemption payments. The
liquidity line of credit would be utilized by the Fund only if the Fund could
not reasonably meet redemption requests in any one month with available cash by
the Redemption Payment Date.
C. DIFFERENCES BETWEEN FUND OPERATIONS AS A CLOSED-END
INVESTMENT COMPANY AND AN OPEN-END INTERVAL FUND
Some of the legal and practical differences between operations of the
Fund as a closed-end investment company and an open-end interval fund are as
follows:
Redeemable Securities. Currently, the Fund is registered as a
closed-end investment company under the 1940 Act. As a closed-end investment
company, the Fund is prohibited from issuing "redeemable securities" as defined
in the 1940 Act. In contrast, open-end investment companies issue redeemable
securities. The holders of redeemable securities generally have the right to
surrender those securities to the fund each business day and obtain in return
their proportionate share of the fund's net assets, or the cash such share
represents (less any applicable redemption fee). Most mutual funds also
continuously offer new shares based on the net asset value of the fund next
determined after receipt of a purchase order. Closed-end funds typically do not
make continuous offerings of their shares, although the Fund does make
continuous offerings pursuant to the "shelf registration" rules under the
Securities Act of 1933, as amended (the "1933 Act"). Shares of most closed-end
funds trade on national securities exchanges, although some, like the Fund,
trade only in over-the-counter markets.
10
<PAGE>
Liquidity Restrictions. Closed-end funds are not subject to a liquidity
restriction under the 1940 Act. The Fund's Board of Directors currently has
authorized investment by the Fund of up to 10% of its total net assets in the
aggregate
(taken at the time of purchase) (i) in developing country securities that are
not readily marketable due to contractual and other restrictions on resale or
because of the absence of a secondary market ("illiquid securities"), and (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 securities") (or investment companies
that invest solely in issuers described in clause (ii)). The Fund's investment
in securities of such issuers is limited to 1% of the Fund's total net assets
(taken at
the time of purchase) in any one issuer and 2% of the Fund's total net assets
(taken at
the time of purchase) in the aggregate in issuers located and having their
principal places of business in any one country. As an open-end interval fund,
the Fund would adopt as a fundamental policy that at least 85% of its total
net assets
must (i) mature by the next Redemption Payment Date, or (ii) be capable of being
sold between the Redemption Deadline and the Redemption Payment Date at
approximately the price used in computing the Fund's net asset value.
Portfolio Management. Closed-end companies may keep their assets fully
invested in accordance with their investment objectives and may make investment
decisions without having to adjust for cash inflows and outflows from continuing
sales and redemptions of shares. As an open-end interval fund, the Fund would be
subject to a 15% limitation on investment in illiquid securities. The Fund will,
however, be able to be invested more fully in emerging securities markets than a
traditional open-end fund by not having to meet daily redemptions. The
irrevocability of redemption requests after the Redemption Deadline would permit
the Fund's investment adviser to make arrangements for the amount of liquidity
necessary to meet redemption requests effective that month with the least
disruption to the Fund's portfolio.
Senior Securities and Borrowing. The 1940 Act limits the ability of an
open-end fund to issue senior securities and borrow money in a more restrictive
manner than the rules applicable to closed-end funds. However, the Fund is
currently subject to a fundamental investment restriction providing that it will
not borrow money, except for temporary or emergency purposes, and in an amount
not exceeding 5% of its assets. This restriction is comparable to the borrowing
restrictions of many open-end funds. Therefore, a change to open-end status will
not affect the Fund's investment practices.
Expenses. The costs of operating an open-end fund may be greater than
those of a closed-end fund because of increased distribution, shareholder
servicing, transfer agency, custodial and compliance-related costs. Although the
Fund would remain an institutionally-oriented fund, and therefore would not
incur many of the same such expenses as open-end funds that are offered to
retail investors, conversion to open-end interval fund status may cause the Fund
to incur greater expenses due to the possible cost of borrowing (to meet
redemptions or for other permitted purposes). The Fund's adviser, Capital
International, Inc., would continue to bear any distribution-related expenses
relating to the Fund. The Proposal may also result in the Fund having fewer
assets due to redemptions. In that case, the fixed costs of operating the Fund
would be deducted from a smaller asset base and the loss of economies of scale
might result in a relative increase in other expenses, including the management
fee paid to the Fund's adviser, which features fee "breakpoints" at different
asset levels.
11
<PAGE>
Voting Rights. The voting rights of Fund shareholders will not change
if the Fund converts to open-end status.
Qualification as a Regulated Investment Company. After its conversion
to an open-end interval fund, the Fund intends to continue to qualify for
treatment as a regulated investment company under the Internal Revenue Code of
1986, as amended. Therefore, it will continue to be relieved of federal income
tax on that part of its investment company taxable income and net capital gain
that is distributed to its shareholders.
D. CONVERSION TO AN OPEN-END INTERVAL FUND
The Proposal will require for its approval the affirmative vote of the
lesser of (a) 67% or more of all shares present and entitled to vote at the
Meeting, provided the holders of more than 50% of all shares outstanding and
entitled to vote are present or represented by proxy, or (b) more than 50% of
all outstanding shares. If the Proposal is approved, the conversion would take
place only when and if the Commission grants exemptive relief to the Fund in
substantially the form requested in the Fund's Application for exemptive relief,
filed with the Commission on April 25, 1997 (SEC File No. 812-10634). Open-end
interval funds currently are not provided for under the 1940 Act or the
Commission's rules. In order to implement the Proposal, the Fund will require an
order exempting the Fund from certain provisions of the 1940 Act and certain
Commission rules thereunder. If the Commission declines to grant the requested
relief or is willing do so only on conditions or with modifications that differ
substantially from the requested relief and which are unacceptable to the Fund's
Board of Directors, the Fund will remain a closed-end fund notwithstanding a
vote in favor of the Proposal by a majority of the shareholders of the Fund.
In the event that shareholders vote to convert the Fund from closed-end
to open-end interval fund status, a number of additional actions would need to
be taken not only to effect the conversion of the Fund to an open-end investment
company but also to allow the Fund to operate effectively as an open-end fund.
The conversion of the Fund to an open-end interval fund will be accomplished by:
(i) the filing of Articles of Amendment and Restatement of the Fund with the
State Department of Assessments and Taxation of Maryland; and (ii) the filing of
an amendment to the Fund's registration with the Commission changing the Fund's
sub-classification under the 1940 Act from that of a closed-end investment
company to an open-end investment company in the form of an interval fund.
Proposals 4, 5 and 6 are being submitted to shareholders concurrently with the
Proposal to convert to an open-end interval fund. These proposals are designed
to assist in the implementation of the conversion and to facilitate the Fund's
operation as an open-end interval fund. Approval of these proposals is mutually
contingent upon shareholder approval of the Proposal to convert the Fund to an
open-end interval fund. If these proposals are approved by shareholders, the
amendments will be reflected in the Articles of Amendment and Restatement of the
Fund in the form attached hereto as Appendix B.
12
<PAGE>
E. RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Fund recommends that the shareholders
approve the Proposal to convert the Fund to an open-end management company in
the form of an interval fund. The Proposal would provide shareholders the
benefit of a fully redeemable investment, while permitting the Fund to be more
fully invested in developing country securities than would be the case if it
were required to maintain sufficient cash or liquid portfolio securities to meet
daily requests for redemption by Fund shareholders. The Fund believes that its
shareholders benefit from the Fund being substantially invested in emerging
market securities. The Fund could also increase its potential shareholder base
to include those persons who need or desire a redeemable investment. The Fund
proposes herein, however, to maintain its shareholder qualification requirements
(see proposal 7 below). The Proposal also would permit the Fund to consist of
a portfolio that is somewhat less liquid than that of a traditional open-end
fund.
The proposed redemption policy is further designed to permit the Fund to
accumulate sufficient cash in an orderly manner to meet any shareholder
redemption requests that may be made.
THE BOARD OF DIRECTORS OF THE FUND UNANIMOUSLY RECOMMENDS THAT
YOU VOTE "FOR" THE PROPOSAL TO CONVERT THE FUND FROM CLOSED-END
TO OPEN-END INTERVAL FUND STATUS.
4. APPROVAL OF A PROPOSAL TO AMEND THE ARTICLES OF
INCORPORATION TO REFLECT THE ABILITY OF THE BOARD OF
DIRECTORS TO INCREASE OR DECREASE THE AUTHORIZED CAPITAL OF
THE FUND.
In connection with the Proposal to convert to an open-end interval
fund, the Board of Directors proposes to amend the Fund's Articles of
Incorporation to reflect the ability of the Board to increase or decrease the
amount of authorized capital stock of the Fund without shareholder approval, in
accordance with Section 2-105(c) of the Maryland General Corporation Law.
Approval of this proposal is contingent upon approval of the Proposal to convert
to an open-end interval fund. If this amendment is adopted, it will be reflected
in the Articles of Amendment and Restatement of the Fund.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the shareholders approve the
proposal to amend the Articles of Incorporation to reflect the ability of the
Board of Directors to
13
<PAGE>
increase or decrease the authorized capital stock of the Fund without obtaining
the approval of the shareholders. The ability to increase or decrease the
authorized capital stock of an open-end fund is governed by Section 2-105(c) of
the Maryland General Corporation Law. Section 2-105(c) provides that the
directors of an open-end fund may increase or decrease the authorized capital
stock of the fund in their discretion and without obtaining shareholder
approval. Although Maryland law does not require inclusion of this authority in
the Articles of Incorporation, the Board of the Fund would prefer that the
Articles of Incorporation explicitly reference the Board's authority to increase
or decrease the authorized capital stock of the Fund. In the case of a decrease,
the change cannot affect outstanding shares. An increase in the authorized
capital stock of the Fund would not dilute shareholders' interests because
shares of the Fund are sold at net asset value.
Currently, as a closed-end fund, the Board of Directors must seek
shareholder approval of an amendment to the Fund's Articles of Incorporation to
increase or decrease the Fund's authorized capital stock (for example, see
proposal 2 herein). Obtaining the requisite shareholder approval is costly and
time consuming. The Board believes that the Fund should explicitly reference the
statutory provisions which allow the board of directors of an open-end fund to
increase or decrease the Fund's authorized capital without obtaining shareholder
approval. Approval of the proposal to amend the Articles of Incorporation to
reference the ability of the Board of Directors of the Fund to increase or
decrease the authorized capital stock of the Fund requires the affirmative vote
of 66-2/3% of all votes entitled to be cast.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL
TO AMEND THE ARTICLES OF INCORPORATION OF THE FUND TO REFLECT THE ABILITY OF THE
BOARD OF DIRECTORS TO INCREASE OR DECREASE THE AUTHORIZED CAPITAL STOCK OF THE
FUND.
5. APPROVAL OF A PROPOSAL TO ADOPT CERTAIN CHARTER PROVISIONS
REFLECTING THE ABILITY OF THE BOARD OF DIRECTORS TO SET
STANDARDS APPLICABLE TO REDEMPTIONS OF FUND SHARES
In connection with the Proposal to convert to an open-end interval
fund, the Board of Directors proposes to adopt certain charter provisions
permitting the Board of Directors to set standards, from time to time,
applicable to the redemption of Fund shares. Currently, the Fund's Articles of
Incorporation provide that the Fund may "redeem, purchase or otherwise acquire,
hold, dispose of, resell, transfer, reissue or cancel (all without the vote or
consent of the stockholders of the Corporation) shares of its capital stock, in
any manner and to the extent now or hereafter permitted by the General
Corporation Law of the State of Maryland and by these Articles of
Incorporation." The Board proposes to amend Article III, paragraph 4 of the
Fund's Articles of Incorporation to allow the Fund:
14
<PAGE>
[t]o redeem, purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any
manner and to the extent now or hereafter permitted by the General
Corporation Law of the State of Maryland and in accordance with duly
adopted resolutions of the Corporation's Board of Directors as adopted
from time to time.
It is common for open-end funds organized under Maryland law to refer
in their organizational documents to the authority of their boards of directors
to adopt resolutions relating to the redeemability of fund shares. Although the
Fund believes that its Articles of Incorporation currently do not restrict it
from offering redeemable securities on terms established by the Board of
Directors, the Board of the Fund would prefer that the Articles explicitly
reference the Board's authority to establish standards applicable to the
redemption of the Fund's shares. This authority would be relevant only if the
Fund converts to an open-end fund because as a closed-end fund, the Fund does
not have the power to redeem its shares. If the amendment is adopted, the Board
of Directors would have the explicit authority to change the standards on
redemptions of Fund shares, including, but not limited to, imposing redemption
fees and setting minimum amounts of redemptions. Approval of this proposal is
contingent upon shareholder approval of the Proposal to convert the Fund to an
open-end interval fund. If this amendment is adopted, it will be reflected in
the Articles of Amendment and Restatement of the Fund.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the shareholders approve the
proposal to amend the Articles of Incorporation of the Fund to reflect the
ability of the Board of Directors to set standards applicable to the redemptions
of Fund shares. Approval of this proposal requires the affirmative vote of
66-2/3% of all votes entitled to be cast.
THE BOARD OF DIRECTORS OF THE FUND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THE PROPOSAL TO ADOPT CERTAIN PROVISIONS REFLECTING THE ABILITY OF THE BOARD OF
DIRECTORS TO SET STANDARDS APPLICABLE TO REDEMPTIONS OF FUND SHARES.
15
<PAGE>
6. APPROVAL OF A PROPOSAL TO AMEND A FUNDAMENTAL INVESTMENT POLICY
TO PERMIT THE FUND TO BORROW FROM A BANK FOR TEMPORARY OR
EMERGENCY PURPOSES IN AMOUNTS NOT EXCEEDING 5% OF ITS ASSETS,
BASED ON CURRENT VALUE, AND TO AMEND THE BY-LAWS OF THE FUND TO
REFLECT SUCH AMENDMENTS
In connection with its Proposal to convert the Fund to an open-end
interval fund, the Board of Directors proposes to amend a fundamental investment
policy to permit the Fund to borrow from a bank for temporary or emergency
purposes in amounts not exceeding 5% of its assets, based on current value.
Approval of this proposal is contingent upon shareholder approval of the
Proposal to convert the Fund to an open-end fund.
The 1940 Act requires a registered investment company such as the Fund
to have certain specific investment polices which can be changed only by a
shareholder vote. Funds may also elect to designate additional policies which
may be changed only by a shareholder vote. Both types of policies, for purposes
of this discussion, will be referred to as "investment restrictions." In the
past, the Fund adopted certain investment restrictions, which are not required
by the 1940 Act, to reflect regulatory, business or industry conditions. The
Fund is presently subject to an investment restriction which permits the Fund to
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 to pledge its assets to secure such
borrowings.
To date, the Fund has not borrowed in connection with its investment
program. In the event that the Fund converts to a open-end interval fund,
management and the Board of Directors believe that a credit facility would
reduce portfolio liquidity concerns. The credit line could be called upon to
meet redemption requests which, due to settlement or other delays, could not be
met with portfolio sale proceeds by the payment date.
16
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
Management and the Board of Directors believe that the 5% limit on the
amount of the permitted borrowing should be applied to the current value of the
Fund, as opposed to the current language requiring that the 5% limit be applied
to the lower of cost or current value of the Fund. In order to effectuate the
proposed change, it is proposed that Section 2 of the Investment Restrictions as
contained in the Fund's current prospectus be amended to read as follows:
[a]s a matter of fundamental policy the Fund will not . . . issue
senior securities (except warrants issued to the Fund's shareholders
and except as may arise in connection with certain security purchases,
all subject to limits imposed by the Investment Company Act of 1940),
borrow money (except that the Fund may borrow (a) in connection with
hedging a particular currency exposure and (b) from banks for temporary
or emergency purposes, such borrowings not to exceed 5% of the value of
its total assets (excluding the amount borrowed)), and pledge its
assets (except to secure such borrowings);
In addition, it is proposed that Article XIV, Section 1, paragraph (b)2
of the Fund's By-laws be amended to read as follows:
[a]s a matter of fundamental policy, the Corporation will not . . .
issue senior securities, except as may arise in connection with certain
security purchases and subject to limits imposed by the 1940 Act,
pledge its assets, borrow money, secured or unsecured, except that the
Corporation may borrow in connection with hedging a particular currency
exposure and except that the Corporation may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% of the
value of its total assets (excluding the amount borrowed) and pledge
its assets to secure such borrowings, and except that the Corporation
may issue warrants to its shareholders;
17
<PAGE>
Approval of the proposal to amend a fundamental investment policy
requires the affirmative vote of (a) 67% or more of all shares present and
entitled to vote at the Meeting, provided the holders of more than 50% of all
shares outstanding and entitled to vote are present or represented by proxy, or
(b) more than 50% of all outstanding shares.
THE BOARD OF DIRECTORS OF THE FUND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THE PROPOSAL TO AMEND A FUNDAMENTAL INVESTMENT POLICY TO PERMIT THE FUND TO
BORROW FROM A BANK FOR TEMPORARY OR EMERGENCY PURPOSES IN AMOUNTS NOT EXCEEDING
5% OF ITS ASSETS, BASED ON CURRENT VALUE AND TO AMEND THE BY-LAWS OF THE FUND TO
REFLECT SUCH AMENDMENT.
7. APPROVAL OF A PROPOSAL TO TERMINATE THE EXISTING SHAREHOLDERS'
AGREEMENT AND TO INCORPORATE CERTAIN RESTRICTIONS ON SHARE
TRANSFERABILITY IN THE ARTICLES OF INCORPORATION OF THE FUND
The Board of Directors proposes to terminate the existing shareholders'
agreement and to incorporate certain restrictions on the transferability of Fund
shares, which are currently provided for in the shareholders' agreement, in the
Articles of Incorporation of the Fund. If this amendment is adopted, the
restrictions on transferability will be reflected in the Articles of Amendment
and Restatement of the Fund. This proposal is unrelated to the Proposal to
convert to an open-end interval fund. Approval of the termination of the
shareholders' agreement requires, by its terms, the written consent of the
holders of at least 66-2/3% of the issued and outstanding shares of the Fund.
Accordingly, approval of the proposal to terminate the shareholders' agreement
and to retain certain provisions regarding transferability of the Fund's shares
requires the affirmative vote of 66-2/3% of all votes entitled to be cast. A
vote in favor of this proposal shall constitute the shareholder's written
consent to the termination of the shareholders' agreement.
18
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the shareholders approve the
proposal to terminate the current shareholders' agreement and to incorporate the
restrictions on transferability in the Articles of Incorporation of the Fund.
The shareholders' agreement prohibits the transfer of shares of the Fund unless
certain conditions are met: the transfer must be at least $100,000 worth of
shares, and the transferee and its affiliates must not own more than 15% of the
Fund's shares after giving effect to the transfer. Given the Fund's current
size, the Board does not feel that the 15% limitation serves any practical
purpose. In addition, the minimum transfer amount of $100,000 limits
shareholders' ability to transfer or liquidate smaller amounts of shares. If the
Fund converts to an open-end interval fund, as proposed herein, the Fund does
not expect to impose a minimum redemption amount.
Under the shareholders' agreement, transferees must also meet the net
worth requirements imposed on purchasers of shares of the Fund. The Board has
found that the current shareholders' agreement has inhibited investment by
certain entities, primarily public employee funds and supranational
organizations that either under governing state law or because of internal
policy cannot, or will not, agree to certain provisions of the shareholders'
agreement. The provision most often found problematic is one providing for
payment of legal fees of non-defaulting parties in the event of default by the
shareholder. Termination of the shareholders' agreement also would eliminate the
existing prohibition against the pledge of shares found in the shareholders'
agreement. The Board believes that the shareholders' agreement is useful
primarily for limiting the transfer of Fund shares to shareholders who meet
the Fund's self-imposed net worth requirements. For initial purchases, the
Fund is able to exercise this control by selling only to shareholders who meet
the stated criteria.
The Board believes that it is in the best interests of the Fund to
continue to limit the transfer of Fund shares to those investors who satisfy the
Fund's self- imposed eligibility requirements. The Fund's current investor
suitability requirements provide that each prospective investor that is a
"company" (as defined in the 1940 Act) must have total assets in excess of $5
million, and that each prospective investor that is a natural person must be an
"accredited investor" within the meaning of Regulation D under the 1933 Act. The
minimum initial purchase required for both companies and natural persons is
$100,000, with a $25,000 minimum for additional investments.
THE BOARD OF DIRECTORS OF THE FUND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THE PROPOSAL TO TERMINATE THE EXISTING SHAREHOLDERS' AGREEMENT AND TO
INCORPORATE CERTAIN RESTRICTIONS ON SHARE TRANSFERABILITY IN THE ARTICLES OF
INCORPORATION OF THE FUND.
19
<PAGE>
8. RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR 1996-97
Shareholders are requested to ratify the selection by the Board of
Directors (including a majority of Directors who are not "interested persons" of
the Fund, as that term is defined in the 1940 Act) of the firm of Price
Waterhouse LLP as independent public accountants for the Fund for the fiscal
year ended June 30, 1997. In addition to the normal audit services, Price
Waterhouse LLP provides services in connection with the preparation and review
of federal and state tax returns for the Fund. Price Waterhouse LLP has served
as the Fund's independent public accountants since inception in 1986, and has
advised the Fund that it has no material direct or indirect financial interest
in the Fund or its affiliates. No representative of the firm of Price Waterhouse
LLP is expected to attend the Meeting of shareholders The vote of a majority of
the shares of the Fund represented at the Meeting, provided at least a quorum (a
majority of the outstanding shares) is represented in person or by proxy, is
sufficient for the ratification of the selection of Price Waterhouse LLP as
independent public accountants for the current fiscal year.
THE BOARD OF DIRECTORS OF THE FUND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THE SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT PUBLIC ACCOUNTANT FOR THE
CURRENT FISCAL YEAR.
SHAREHOLDER PROPOSALS
Any shareholder proposals for inclusion in proxy solicitation material
for a shareholders' meeting should be submitted to the Secretary of the Fund, at
the Fund's principal executive offices, 11100 Santa Monica Boulevard, 15th
Floor, Los Angeles, California 90025. Any such proposals must comply with the
requirements of Rule 14a-8 under the Securities Exchange Act of 1934 and must be
sent sufficiently far in advance of the meeting so that it is received by the
Fund within a reasonable time before a solicitation is made.
Under the law of Maryland where the Fund is incorporated, the Fund is
not required to hold regular meetings of shareholders. Under the 1940 Act, a
vote of shareholders is required from time to time for particular matters but
not necessarily on an annual basis. As a result, it is not anticipated that the
Fund will hold shareholders' meetings on a regular basis and any shareholder
proposal received may not be considered until such a meeting is held.
20
<PAGE>
MISCELLANEOUS
The solicitation of the enclosed Proxy is made by and on behalf of the
Board of Directors of the Fund. The cost of soliciting proxies, consisting of
printing, handling and mailing of the Proxies and related materials, will be
paid by the Fund. In addition to solicitation by mail, certain officers and
directors of the Fund, who will receive no extra compensation for their
services, may solicit by telephone, telegram or personally. All shareholders are
urged to mark, date, sign, and return the Proxy (blue sheet) in the enclosed
envelope, which requires no postage if mailed in the United States.
Neither the persons named in the enclosed Proxy nor the Board of
Directors are aware of any matters that will be presented for action at the
Meeting other than the matters set forth herein. Should any other matters
requiring a vote of shareholders arise, the proxies in the accompanying form
will confer upon the person or persons entitled to vote the shares represented
by such Proxy a discretionary authority to vote the shares in respect to any
such other matters in accordance with their best judgment in the interest of the
Fund.
The Manager is located at 11100 Santa Monica Boulevard, Los Angeles,
California 90025 and 135 South State College Boulevard, Brea, California 92621.
A copy of the Fund's most recent annual report and semi-annual report
may be obtained, without charge, by writing to the Secretary of the Fund at
11100 Santa Monica Boulevard, 15th Floor, Los Angeles, California 90025, or by
telephoning 800/421-0180 Ext. 6245. These requests will be honored within three
business days
of receipt.
By Order of the Board of Directors
ROBERTA A. CONROY
Senior Vice President and Secretary
May 20, 1997
<PAGE>
APPENDIX A
PROXY
<PAGE>
EMERGING MARKETS GROWTH FUND, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE FUND
FOR THE MEETING OF SHAREHOLDERS TO BE HELD JUNE 27, 1997
PROXY
The undersigned hereby appoints Roberta A. Conroy, Nancy Englander, David I.
Fisher and Peter C. Kelly, and each of them, his/her true and lawful agents and
proxies with full power of substitution in each to represent the undersigned at
the aforesaid Meeting of Shareholders to be held at the Offices of The Capital
Group Companies, Inc., 333 South Hope Street, 55th Floor, Los Angeles,
California on Friday, June 27, 1997, at 8:30 a.m., on all matters coming before
said meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" THE NOMINEES IN ITEM 1 AND "FOR" ITEMS 2 through 8.
Please sign exactly as your name or names appear hereon. Joint owners should
each sign individually. Corporate proxies should be signed in full corporate
name by an authorized officer. Fiduciaries should give full titles as such.
1. ELECTION OF DIRECTORS |_| For all |_| Against all
Nancy Englander Marinus W. Keijzer William Robinson
David I. Fisher Hugh G. Lynch Patricia A. Small
Khalil Foulathi Helmut Mader Walter P. Stern
Beverly L. Hamilton Teresa E. Martini Shaw B. Wagener
Raymond Kanner John G. McDonald
|_| Check if shareholder wishes to withhold authority to vote for
the following nominee(s):
--------------------------------------------------------------
2. To approve a proposal to increase the authorized capital stock of the
Fund from 200 million shares to 400 million shares
|_| For |_| Against |_| Abstain
3. To approve a proposal to convert the Fund from closed-end to open-end,
"interval fund" status
|_| For |_| Against |_| Abstain
4. If Proposal 3 is approved, to approve a proposal amending the Articles
of Incorporation of the Fund to reflect the ability of the Board of
Directors to increase or decrease the authorized capital stock of the
Fund
|_| For |_| Against |_| Abstain
5. If Proposal 3 is approved, to approve a proposal to adopt certain
charter provisions reflecting the ability of the Board of Directors to
set standards applicable to redemptions of Fund shares
|_| For |_| Against |_| Abstain
6. If Proposal 3 is approved, to approve a proposal to amend a fundamental
investment policy to permit the Fund to borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% of its
assets, based on current value, and amending the By-laws of the Fund to
reflect such amendments
|_| For |_| Against |_| Abstain
7. To approve a proposal to terminate the existing shareholders'
agreement and to amend the Articles of Incorporation by incorporating
the restrictions on the transferability of Fund shares currently
provided under the shareholders' agreement
|_| For |_| Against |_| Abstain
<PAGE>
8. To ratify the selection of independent accountants
|_| For |_| Against |_| Abstain
9. In their discretion, upon other matters as may properly come before the
meeting.
By: ___________________________________
shareholder~ Authorized Person
# of shares~ Shares
By: ___________________________________
Authorized Person
<PAGE>
APPENDIX B
ARTICLES OF AMENDMENT AND RESTATEMENT
<PAGE>
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
EMERGING MARKETS GROWTH FUND, INC.
Emerging Markets Growth Fund, Inc., a Maryland corporation (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Corporation desires to amend and restate its charter as
currently in effect and as hereinafter amended.
SECOND: The following provisions are all the provisions of the charter
currently in effect and as hereinafter amended:
ARTICLE I
Michael L. Sapir, whose post office address is 1120 Connecticut Avenue,
N.W., Washington, D.C. 20036, acted as the incorporator of this Corporation,
under and by virtue of the General Corporation Laws of the State of Maryland
authorizing the formation of corporations and with the intention of forming a
corporation. The initial Articles of Incorporation of the Corporation were filed
with the State Department of Assessments and Taxation of Maryland on March 10,
1986.
ARTICLE II
NAME
The name of the Corporation is EMERGING MARKETS GROWTH FUND, INC.
<PAGE>
ARTICLE III
PURPOSE AND POWERS
The purpose or purposes for which the Corporation is formed and the
business or objects to be transacted, carried on and promoted by it are as
follows:
(1) To conduct and carry on the business of an investment company of
the management type.
(2) To hold, invest and reinvest its assets in securities, and in
connection therewith to hold part or all of its assets in cash.
(3) To issue and sell shares of its own capital stock in such amounts
and on such terms and conditions, for such purposes and for such amount or kind
of consideration now or hereafter permitted by the General Corporation Law of
the State of Maryland and by these Articles of Amendment and Restatement, as its
Board of Directors may determine.
(4) To redeem, purchase, or otherwise acquire, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any manner and
to the extent now or hereafter permitted by the General Corporation Law of the
State of Maryland and in accordance with duly adopted resolutions of the
Corporation's Board of Directors as adopted from time to time.
(5) To do any and all such further acts or things and to exercise any
and all such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of any of the foregoing purposes or objects.
The Corporation shall be authorized to exercise and enjoy all the
powers, rights and privileges granted to, or conferred upon, corporations by the
General Corporation Law of the State of Maryland now or hereafter in force, and
the enumeration of the foregoing shall not be deemed to exclude any powers,
rights or privileges so granted or conferred.
<PAGE>
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in
the State of Maryland is c/o The Prentice-Hall Corporation System, Maryland, 929
North Howard Street, Baltimore, Maryland 21201. The name of the resident agent
of the Corporation in the State of Maryland is the Prentice-Hall Corporation
System, Maryland, a corporation of the State of Maryland, and the post office
address of the resident agent is 929 North Howard Street, Baltimore, Maryland
21201.
ARTICLE V
CAPITAL STOCK
The total number of shares of capital stock of the Corporation
heretofore authorized was Two Hundred Million (200,000,000) shares of the par
value of One Cent ($.01) per share and the aggregate par value of $2,000,000. As
amended, the total number of shares of capital stock which the Corporation shall
have authority to issue is 400,000,000 shares of the par value of One Cent
($.01) per share and of the aggregate par value of $4,000,000. All shares shall
be issued on a fully-paid and non-assessable basis.
In the event that the Corporation is registered as an open-end company
under the Investment Company Act of 1940, the Board of Directors of the
Corporation may increase or decrease the aggregate number of shares of stock or
the number of shares of stock of any class that the Corporation has authority to
issue, from time to time as the Board of Directors shall determine, subject to
any limits required by then applicable law.
Shares of capital stock of the Corporation shall have the following
powers, preferences and rights, and qualifications, restrictions, and
limitations thereof:
(a) The holder of each share of stock of the Corporation shall
be entitled to one vote for each full share, and a fractional vote for each
fractional share of stock, then standing in his name on the books of the
Corporation.
(b) The shares of capital stock, when issued, will be fully
paid and non-assessable and have no preference, preemptive, conversion,
exchange, or similar rights.
(c) The Board of Directors may from time to time declare and
pay dividends or distributions, in stock or in cash, on any or all classes of
stock, the amount of such dividends and distributions and the payment of them
being wholly in the discretion of the Board of Directors. Dividends or
distributions on shares or any class of stock shall be paid only out of earned
surplus or other lawfully available assets belonging to such class.
(d) No holder of shares of the Corporation's capital stock
shall Transfer such shares or any interest therein to any person that does not
meet the suitability standards as set forth by resolution of the Board of
Directors from time to time. "Transfer" includes any sale, assignment, transfer,
encumbrance, hypothecation, pledge or other disposition of any nature, voluntary
or involuntary, by operation of law or otherwise, of any shares or of any
interest therein.
<PAGE>
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING AND REGULATING
CERTAIN POWERS OF THE CORPORATION AND OF
THE DIRECTORS AND STOCKHOLDERS
(1) The number of Directors of the Corporation shall be one (1), which
number may be, from time to time, increased or decreased by the Board of
Directors by resolution. The names of those Directors who are currently in
office at the date of these Articles of Amendment and Restatement are: Robert B.
Egelston, Nancy Englander, David I. Fisher, Khalil Foulathi, Beverly L.
Hamilton, Raymond Kanner, Marinus W. Keijzer, Hugh G. Lynch, Helmut Mader,
Teresa E. Martini, John G. McDonald, William Robinson, Patricia A. Small and
Walter P. Stern.
(2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, whether now
or hereinafter authorized, for such consideration as the Board of Directors may
deem advisable, subject to such limitations as may be set forth in these
Articles of Incorporation or in the by-laws of the Corporation or in the General
Corporation Law of the State of Maryland.
(3) No holder of stock of the Corporation shall, as such holder, have
any right to purchase or subscribe for any shares of the capital stock of the
Corporation or any other security of the Corporation which it may issue or sell
(whether out of the number of shares authorized by these Articles of
Incorporation, or out of any shares of the capital stock of the Corporation
acquired by it after the issue thereof or otherwise).
(4) Each Director and each officer of the Corporation shall be
indemnified by the Corporation to the full extent permitted by the General Laws
of the State of Maryland.
(5) The Board of Directors of the Corporation may make, alter or repeal
from time to time any of the by-laws of the Corporation except any particular
by-law which is specified as not subject to alteration or repeal by the Board of
Directors, subject to the requirements of applicable federal and state law.
<PAGE>
ARTICLE VII
DETERMINATION BINDING
Any determination made in good faith, so far as accounting matters are
involved, in accordance with accepted accounting practice by or pursuant to the
direction of the Board of Directors, as to the amount of assets, obligations or
liabilities of the Corporation, as to the amount of net income of the
Corporation from dividends, interest and capital gains for any period or amounts
at any time legally available for the payment of dividends, as to the amount of
any reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating reserves or as to the use, alteration or cancellation of
any reserves or charges (whether or not any obligation or liability for which
such reserves or charges shall have been created or shall have been paid or
discharged or shall be then or thereafter required to be paid or discharged), as
to the price of any security owned by the Corporation or as to any other matters
relating to the issuance, sale, redemption or other acquisition or disposition
of securities or shares of capital stock of the Corporation, and any reasonable
determination made in good faith by the Board of Directors as to whether any
transaction constitutes a purchase of securities on "margin," a sale of
securities "short," or an underwriting of the sale of, or a participation in any
underwriting or selling group in connection with the public distribution of, any
securities, shall be final and conclusive, and shall be binding upon the
Corporation and all holders of its capital stock, past, present and future, and
shares of the capital stock of the Corporation are issued and sold on the
condition and understanding, evidenced by the purchase of shares of capital
stock or acceptance of share certificates, that any and all such determinations
shall be binding as aforesaid. No provisions of these Articles of Incorporation
shall be effective to (a) require a waiver of compliance with any provision of
the Securities Act of 1933, as amended, or any other provision of law including,
if applicable to the Corporation, the Investment Company Act of 1940, as
amended, or of any valid rule, regulation or order of the Securities and
Exchange Commission thereunder, or (b) protect or purport to protect any
Director or officer of the Corporation against any liability to the Corporation
or its security holders 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.
ARTICLE VIII
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
<PAGE>
ARTICLE IX
AMENDMENT
The Corporation reserves the right from time to time to make any
amendment of its charter, now or hereafter authorized by law, including any
amendment which alters the contract rights, as expressly set forth in its
charter, of any outstanding stock.
THIRD: The amendment to and restatement of the Articles of
Incorporation of the Corporation as hereinabove set forth has been duly advised
by the Board of Directors and approved by the shareholders of the Corporation as
required by law.
FOURTH: The current address of the principal office of the Corporation
is as set forth in Article IV of the foregoing amendment and restatement of the
Articles of Incorporation.
FIFTH: The name and address of the Corporation's current resident
agent is as set forth in Article IV of the foregoing amendment and restatement
of the Articles of Incorporation.
SIXTH: The number of Directors of the Corporation and the names of
those currently in office are as set forth in Article VI of the foregoing
amendment and restatement of the Articles of Incorporation.
SEVENTH: The undersigned President acknowledges these Articles of
Amendment and Restatement to be the corporate act of the Corporation and as to
all matters of fact required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment and Restatement to be signed in its name and on its behalf by its
President and attested to by its Secretary on this ____day of __________, 1997.
ATTEST: EMERGING MARKETS
GROWTH FUND, INC.
_______________________ By: _________________________
Secretary President
