PROSPECTUS
EMERGING MARKETS GROWTH FUND, INC.
Common Stock
=================================
Emerging Markets Growth Fund, Inc. (the "Fund") was established in
March, 1986 in the United States under the laws of the State of Maryland. The
Fund is a diversified, closed-end management investment company. The
investment objective of the Fund is to seek long-term capital growth through
investment in developing country equity securities. Investment in developing
country securities involves certain risks and other considerations which are
not normally involved in investment in securities of U.S. companies. See
"Investment Objective and Policies" and "RISK FACTORS AND OTHER
CONSIDERATIONS." The address of the Fund is 11100 Santa Monica Boulevard, Los
Angeles, California USA 90025. Telephone: (310) 996-6000.
The Fund's investment adviser is Capital International, Inc. (the
"Manager").
Prior to this offering there has been no public trading market for
the Shares and none is expected to develop. Accordingly, the Shares should not
be considered readily marketable. In addition, all Shareholders are required
to enter into a Shareholders Agreement which imposes certain limitations and
restrictions on the transfer of Shares. See "Shareholders Agreement and
Restrictions on Transfer."
This Prospectus sets forth concisely the information an investor
should know before investing and should be retained for future reference.
Additional information about the Fund has been filed with the U.S. Securities
and Exchange Commission ("SEC") and is available from the Fund upon written or
oral request and without charge.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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Sales Proceeds to
Price to Load (1) The Fund(3)
Public(1)
Per Share $62.09 $ N/A $62.09
Total (2) $62.09 $ N/A $1,232,674,260
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(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
19,853,024 shares previously registered by the Fund that remained unsold as of
February 28, 1997. 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 February 28, 1997 the net asset value and price per Share was $62.09.
(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 $757,350.00
The date of this Prospectus is March 31, 1997
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T A B L E O F C O N T E N T S
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Item Page No.
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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
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SUMMARY OF FUND EXPENSES
Shareholder Transaction Expenses
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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* 0.67%
Other Expenses**
0.18%
Total Annual Fund Operating Expenses*** 0.85%
</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 0.84% 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:
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One Year Three Years Five Years Ten Years
$9 $27 $47 $104
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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 the unsold portion of 38,700,000 Shares
that were previously registered (a total of 19,853,024 shares were unsold as of
February 28, 1997). 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 1,611 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. 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 is also included elsewhere in this
Prospectus. The semi-annual financials for the period ended December 31, 1996
are unaudited.
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Per-Share Data and Ratios
Six Months Years Ended June 30
Ended 1996 1995 1994 1993 1992 1991 1990
12/31/96 (1) ---- ----- ----- ----- ------ ------ ----
Net Asset Value,
Beginning of Period........... $57.57 $52.36 $58.75 $44.95 $38.64 $32.73 $32.81 $25.51
------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net investment income...... .75 1.30 .87 .53 .62 .55 .83 .83
Net realized and unrealized
gain (loss) on investments
before non-U.S. taxes.... (.88) 6.49 (.79) 15.29 7.33 8.87 3.89 10.46
Non-U.S. taxes............. .07 (.01) (.03) (.39) (.06) (.28) (.38) (.02)
------ ------ ------ ----- ----- ----- ----- -----
Total income from
investment operations... (.06) 7.78 .05 15.43 8.01 9.14 4.34 11.27
------ ------ ------ ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net
investment income....... (1.03) (1.30) (.63) (.49) (.56) (.56) (.92) (.85)
Distributions from net
realized gain........... (1.02) (1.27) (5.81) (1.14) (1.14) (2.67) (3.50) (3.12)
Total distributions... (2.05) (2.57) (6.44) (1.63) (1.70) (3.23) 4.42 (3.97)
------ ------ ------ ------ ------ ------ ----- ------
Net Asset Value, End of
Period................ $55.46 $57.57 $52.36 $58.75 $44.95 $38.64 $32.73 $32.81
====== ======= ====== ====== ====== ====== ====== ======
Total Return .............. .01% (2) 15.49% (1.22)% 34.33% 21.55% 29.73% 18.08% 45.52%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(in millions)............. $9,042 $8,451 $5,572 $4,170 $2,574 $1,561 $703 $666
Ratio of expenses to
average net assets........ .40% (2) .84% .91% 1.00% 1.01% 1.11% 1.18% 1.25%
Ratio of expenses and
non-U.S. taxes to average
net assets................ .40% (2) .85% .94% 1.04% 1.07% 1.18% 1.31% 1.25%
Ratio of net income to
average net assets........ 1.34% (2) 2.54% 1.70% .91% 1.82% 1.84% 2.78% 3.21%
Average commissions paid
per share (3)............. .12 .10 .02 .01 .02 .02 N/A N/A
Portfolio turnover rate..... 11.68% 17.78% 23.75% 18.13% 11.97% 16.03% 26.38% 28.45%
</TABLE>
(1) Unaudited.
(2) Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
(3) Brokerage commissions paid on portfolio transactions increase the cost of
securiteis purchased or reduce the proceeds of securities sold and are not
separately reflected in the Fund's statement of operations. Shares traded on a
principal basis (without commissions), such as fixed-income transactions, are
excluded. Generally, non-U.S. commissions are lower than U.S. commissions when
expressed as cents per share but higher when expressed as a percentage of
transactions because of the lower per-share prices of many non-U.S. securities.
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 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 February 28, 1997, there were 586 holders of Shares, and
182,423,536 Shares outstanding. The Fund's aggregate net assets were
approximately $11.3 billion. If all Shares offered by the Fund pursuant to
this Prospectus are sold, the Fund would have 202,276,560 Shares outstanding
and approximately $12.6 billion in aggregate net assets (assuming all Shares
had been sold at prices based on the net asset value per Share as of February
28, 1997).
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 $1.2 billion based on the price per Share as of February 28, 1997
if the 19,853,024 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 with
shares trading at a discount (See "Repurchase of Shares"). 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"),
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")(or investment companies
that invest solely in issuers described in clause (ii)). The Fund's
investments in securities of issuers described in clause (ii) 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 15% 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
has also received 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 February 28, 1997, 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
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 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 liquid assets,
or by maintenance of an appropriate offsetting position.
Consistent with rules relating to the determination of beneficial
ownership under the Securities Exchange Act of 1934, a conversion feature or
right to acquire a security shall be considered to be ownership of the
underlying security by the Fund for the purposes of investment restrictions 6
and 9. With respect to the limits described in investment restrictions 6 and 9
above, the Fund may make purchases of securities in excess of such limits
pursuant to the exercise of warrants or rights that would maintain the Fund's
pro rata interest in an issuer or a class of an issuer's securities and
provided the Manager has determined that such exercise is in the best interests
of the Fund. The Fund will dispose of the securities so acquired within a
reasonable time after acquisition (presumptively, within approximately 90
days), unless compliance with the limits otherwise has been restored.
Notwithstanding any of the above investment restrictions, the Fund
may establish wholly-owned subsidiaries or other similar vehicles for the
purpose of conducting its investment operations in qualified markets, where
such subsidiaries or vehicles are required by local laws or regulations
governing foreign investors such as the Fund. The Fund would "look through"
any such vehicle to determine compliance with its investment restrictions.
MANAGEMENT
The Board of Directors, which is elected by the Shareholders, sets
the overall investment policies and generally oversees the investment
activities and management of the Fund. The By-Laws of the Fund provide that
Shareholders are required to elect members of the Board of Directors only to
the extent required by the Act. The Fund does not intend to hold annual
shareholder meetings, although it will do so whenever it is required to under
the Act or state law or when it is otherwise deemed necessary or appropriate by
the Board. The Manager has the responsibility of implementing the policies set
by the Board and is responsible for the Fund's day-to-day operations and
investment activities. It is expected that both the Board of Directors and the
Manager will cooperate in the effort to achieve the investment objective,
policies and purposes of the Fund. The Manager and the Shareholders recognize
that the main purpose of the Fund is to invest in those companies domiciled in
developing countries which will result in a favorable financial record for the
Fund and which, at the same time, will assist in expanding the respective
securities markets and increasing their liquidity.
The Fund does not currently pay any compensation to its Directors or
Officers. In the future, however, the Fund may determine that compensation to
its Directors or Officers is warranted. The Fund pays the expenses of
attendance at Board and Committee meetings for the Directors who are not
affiliated with the Manager, and for a former Director who regularly attends
Board meetings. Five 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>
Position with Principal Occupation During
Name, Address and Age Registrant Past Five Years
- --------------------- ----------------- ---------------------------
<S> <C> <C>
DIRECTORS
Robert B. Egelston* Vice Chairman of the Board Senior Partner,
333 South Hope Street and Director Capital Group Partners,
Los Angeles, CA 90071 Limited Partnership
Age: 66
Nancy Englander* President and Director Senior Vice President,
11100 Santa Monica Blvd. Capital International, Inc.
Los Angeles, CA 90025
Age: 52
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: 57
Khalil Foulathi Director Executive Director,
P.O. Box 3600 Abu Dhabi Investment Authority
Abu Dhabi, U.A.E.
Age: 45
Beverly L. Hamilton Director President, ARCO Investment
555 Flower Street Management Company
Los Angeles, CA 90071
Age: 51
Raymond Kanner Director Senior Investment Manager,
3001 Summer Street IBM Retirement Funds (previously
Stamford, CT 06905 Manager, IBM Credit Corporation)
Age: 43
Marinus W. Keijzer Director Chief Economist & Strategist,
Kroostweg-Noord 149 Pensioenfonds PGGM
P.O. Box 117, 3700 AC Zeist
The Netherlands
Age: 58
Hugh G. Lynch Director Managing Director,
767 Fifth Avenue International Investments,
New York, NY 10153 General Motors Investment
Age: 59 Management Corporation
Helmut Mader Director Director,
Taunusanlage 12 Deutsche Bank AG
60325 Frankfurt
Germany
Age: 54
Teresa E. Martini Director Vice President,
One Oak Way International Equity,
Berkeley Heights, NJ 07922 AT&T Investment Management Corporation
Age: 40
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: 59
James K. Peterson Director Director of Investment
3001 Summer Street Management,
Stamford, CT 06905 IBM Retirement Fund
Age: 55
William Robinson Director Director, Aga Khan Fund for
Aiglemont Economic Development
60270 Gouvieux
France
Age: 58
Patricia A. Small Director Treasurer, The Regents of
300 Lakeside Drive the University of California
Oakland, CA 94612
Age: 51
Walter P. Stern* Chairman of the Board Chairman of the Board,
630 Fifth Avenue and Director Capital Group International, Inc.
New York, NY 10111
Age: 68
OTHER OFFICERS Senior Vice President Assistant General Counsel,
Roberta A. Conroy and Secretary The Capital Group Companies, Inc.
11100 Santa Monica Blvd.
Los Angeles, CA 90025
Age: 42
Michael A. Felix Treasurer Vice President,
135 S. State College Blvd. Capital International, Inc.
Brea, CA 92621
Age: 36
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: 59 International, Inc.
Steven N. Kearsley Vice President Vice President and Treasurer,
135 S. State College Blvd. Capital Research and Management Company
Brea, CA 92621
Age: 55
Peter C. Kelly Vice President Senior Vice President,
11100 Santa Monica Blvd. Capital International, Inc.
Los Angeles, CA 90025
Age: 38
Victor D. Kohn Vice President Executive Vice President,
11100 Santa Monica Blvd. Capital International, Inc.
Los Angeles, CA 90025
Age: 39
Nancy J. Kyle Vice President Senior Vice President -
630 Fifth Avenue International, Capital
New York, NY 10111 Guardian Trust Company
Age: 46
Shaw B. Wagener Executive Vice President Executive Vice President
333 South Hope Street and Director,
Los Angeles, CA 90071 Capital International, Inc.
Age: 37
</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 $153,800 in total compensation (all of which
was voluntary deferred compensation) from six funds managed by an affiliate of
Capital International, Inc. for the calendar year ended December 31, 1996.
THE MANAGER
The Fund's Manager is Capital International, Inc. ("CII"), 11100
Santa Monica Boulevard, 15th Floor, Los Angeles, California 90025. The Fund's
Manager was organized under the laws of California in 1988 and is registered
with the U.S. Securities and Exchange Commission under the Investment Advisers
Act of 1940. 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.
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 $272 billion of portfolio investments for a
wide range of domestic and international clients, including over $100 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. gather extensive
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,
1996, 1995 and 1994 the management fees amounted to $44,167,000, $34,286,000
and $26,662,000, 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.
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:
Khalil Foulathi, Marinus W. Keijzer, Helmut Mader and William Robinson. The
following officer of the Fund is a non-U.S. resident: Hartmut Giesecke.
PERSONAL INVESTING POLICY
Capital International, Inc. and its affiliated companies have adopted a
personal investing policy that is consistent with the recommendations contained
in the report dated May 9, 1994 issued by the Investment Company Institute's
Advisory Group on Personal Investing. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; blackout periods on personal investing for certain investment
personnel; ban on short-term trading profits for investment personnel;
limitations on service as a director of publicly traded companies; and
disclosure of personal securities transactions. This policy has also been
incorporated into the Fund's "code of ethics" which is available from the
Fund's Secretary upon request.
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:
MARK E. DENNING
Mr. Denning has served as a Director of the Manager since 1997 and served as a
Vice President from 1989 to 1997. 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.
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.
KOENRAAD FOULON
Mr. Foulon has served as a Director of the Manager since 1997. In addition, he
has served as a Senior Vice President for Capital International Limited, the
Manager's London-based affiliate, since 1996, and for Capital International,
S.A., the Manager's Geneva-based affiliate, since 1994. He has also served as
a Vice President for Capital Research International, an international research
affiliate of the Manager, since 1992. Mr. Foulon's primary responsibility is
portfolio management for Europe, global emerging markets and private equity.
He has served as a portfolio manager for the Fund since 1994. Mr. Foulon
joined the Capital organization in 1990.
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.
VICTOR D. KOHN
Mr. Kohn has served as a Senior Vice President and Director of the Manager
since 1997, and served as a Vice President of the Manager from 1992 to 1997.
He has also served as a Vice President of the Fund since 1996. In addition, he
has served as Executive Vice President and a Director of Capital Research
International since 1995, and as a portfolio manager for the Fund since 1994.
Mr. Kohn serves as the Emerging Markets Research Manager for the Manager, and
has research responsibilities for South American markets and companies. Mr.
Kohn joined the Capital organization in 1986.
NANCY J. KYLE
Ms. Kyle has served as a Senior Vice President - International, a Director and
an international portfolio manager of Capital Guardian Trust Company ("CGTC")
since 1992. She has served as a portfolio manager for the Fund since 1994 and
as a Vice President of the Fund since 1996. She is also responsible for the
coordination of asset allocation decisions for global balanced portfolios at
CGTC. Prior to joining the Capital organization in 1991, she was a Managing
Director at J.P. Morgan Investment Management Inc. where she was head of the
international equity business in the U.S. and chief international equity
strategist.
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 an Executive 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.
THOMAS WOLF
Mr. Wolf has served as a Vice President and a portfolio manager for the Manager
since 1995, for Capital International Limited since 1993, and for Capital
International, S.A. since 1994. He has also served as a portfolio manager for
the Fund since 1994. Prior to joining the Capital organization, Mr. Wolf
served as a vice president and portfolio manager with Pictet International Ltd.
in London from 1987 to 1993.
EXPENSES
The Fund's ratios of expenses (excluding non-U.S. taxes) to average
net assets for the fiscal years ended June 30, 1996, 1995 and 1994 were 0.84%,
0.91% and 1.00%, 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"). An increase in the
authorized capital stock from 200,000,000 to 400,000,000 shares will be
proposed for approval by a vote of a majority of the Fund's outstanding Shares
at its next Shareholders meeting. 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, modify the terms of
the Offering. See "The Offering." In addition, the Board has approved a
proposal to seek exemptive relief from the Securities and Exchange Commission
("SEC") to convert to a fund with limited redeemability. The conversion of the
Fund is conditional on both the approval of the SEC and by the holders of a
majority of the Funds shares.
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 February
28, 1997:
Beneficial Ownership
<TABLE>
<CAPTION>
Name & Address Number Percentage
of Shares of Outstanding
Common Stock
<S> <C> <C>
The Chase Manhattan Bank, N.A. 16,831,774 9.2%
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 11,140,218 6.1%
as Trustee for the
IBM Retirement Plan Trust
262 Harbor Drive
Stamford, CT 06904
Pensioenfonds PGGM 9,591,109 5.3%
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. 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 30% of the outstanding and subscribed/reserved shares as of the
prior calendar year-end for calendar years 1996 and 1997. The 90% invested and
30% maximum offering limitations may be modified at any time by the Board of
Directors of the Fund. 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. The Manager may, out of its own resources, pay compensation to
financial intermediaries or other third parties whose customers or clients
become shareholders of the Fund. Such compensation may be in the form of fees
for services provided or responsibilities assumed by such entities with respect
to the servicing of certain shareholder accounts.
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
202,276,560 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.
The Fund is unable to predict the effect that sales or resales made
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, 1996, 1995 and 1994 were 17.78%, 23.75% and 18.13%, 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, 1996, 1995 and 1994 amounted to $15,787,242,
$10,079,926 and $8,003,000, 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, 1996
(including investment portfolio as of June 30, 1996) (audited); Statement of
Operations for the fiscal year ended June 30, 1996 (audited); Statement of
Changes in Net Assets for the fiscal years ended June 30, 1996 and June 30,
1995 (audited); Notes to the Financial Statements for the fiscal year ended
June 30, 1996; Report of Independent Accountants for the fiscal year ended June
30, 1996; Per-Share Data and Ratios for the fiscal years ended June 30, 1991
through June 30, 1996 (audited); Emerging Markets Growth Fund, Inc. -Statement
of Assets and Liabilities at December 31, 1996 (including investment portfolio
at December 31, 1996) (unaudited); Statement of Operations for the six-months
ended December 31, 1996 (unaudited); Statement of Changes in Net assets for the
six-months ended December 31, 1996 (unaudited) and for the fiscal year ended
June 30, 1996; and Per Share Data and Ratios for the six-months ended December
31, 1996 (unaudited), and for the fiscal years ended June 30, 1990 through June
30, 1996; Notes to Financial Statements for the six-months ended December 31,
1996.
The Fund's net asset value per Share on February 28, 1997 was $62.09.
The total investment return, assuming dividend and capital gain distributions
were reinvested, from May 30, 1986 (the commencement of operations) through
February 28, 1997 was +1,213%.
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, 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, 1996 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, N.W., Suite
500, Washington, D.C. 20005, 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.
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, 1996:
Statement of Assets and Liabilities as of June 30, 1996 (including investment
portfolio as of June 30, 1996).
Statement of Operations for the fiscal year ended June 30, 1996.
Statement of Changes in Net Assets for the fiscal years ended June 30, 1996 and
June 30, 1995.
Per-Share Data and Ratios for the fiscal years ended June 30, 1991 through June
30, 1996.
Notes to Financial Statements for the fiscal year ended June 30, 1996.
Report of Independent Accountants dated August 12, 1996.
UNAUDITED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996:
Statement of Assets and Liabilities at December 31, 1996 (including investment
portfolio at December 31, 1996) (Unaudited).
Statement of Operations for the six-months ended December 31, 1996 (Unaudited).
Statement of Changes in Net assets for the six-months ended December 31, 1996
(Unaudited) and for the fiscal year ended June 30, 1996.
Per Share Data and Ratios for the six-months ended December 31, 1996
(Unaudited), and for the fiscal years ended June 30, 1990 through June 30,
1996.
Notes to Financial Statements for the six-months ended December 31, 1996.
AUDITED FINANCIAL STATEMENTS DATE JUNE 30, 1996
EMERGING MARKETS GROWTH FUND
Investment Portfolio - June 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Equity-Type Securities
-----------------------------------------------
INDUSTRY DIVERSIFICATION Common Preferred Convertible Percent of
- ------------------------ Stocks Stocks Bonds Bonds Net Assets
------ --------- ----------- ------ ----------
Telecommunications 10.62% 5.44% -% 0.39% 16.45%
Utilities: Electric & Gas 7.39 2.96 - 0.03 10.38
Banking 8.86 0.60 0.25 - 9.71
Beverages & Tobacco 4.51 0.91 - - 5.42
Energy Sources 4.19 0.64 - - 4.83
Building Materials & Components 2.66 0.23 0.08 - 2.97
Equity Common Trusts 2.61 0.15 - - 2.76
Other Industries 29.51 2.43 0.77 5.41 38.12
----- ----- ----- ----- -----
70.35% 13.36% 1.10% 5.83% 90.64
====== ====== ===== ===== =====
Short-Term securities 9.68
Excess of liabilities over cash and receivables (0.32)
Net Assets 100.00%
=======
</TABLE>
TEN LARGEST EQUITY HOLDINGS
<TABLE>
<CAPTION>
<S> <C> <C>
Percent of Gain/Loss
for the Year Ended
Percent of 6/30/96*
Net Assets (in U.S. Dollars)
---------- --------------------
Telecomunicacoes Brasileiras (Telebras) 3.78% 112.02%
Centrais Eletricas Brasileiras (Eletrobras) 2.42 3.64
Telefonos de Mexico 2.34 13.48
Mahanagar Telephone Nigam 1.88 37.83
Philippine Long Distance Telephone 1.36 (18.50)
Korea Electric Power 1.34 4.85
Telecomunicacoes de Sao Paulo SA-Telesp 1.32 66.86
Grupo Televisa 1.31 50.95
Telefonica de Argentina 1.13 19.40
Companhia Energetica de Minas Gerais 1.12 32.88
</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>
<S> <C> <C> <C>
Investment Portfolio - June 30, 1996
NUMBER OF
EQUITY - TYPE SECURITIES SHARES OR MARKET PERCENT
(common and preferred stocks PRINCIPAL VALUE OF NET
and convertible debentures) AMOUNT (000) ASSETS
------------ --------- -------
ARGENTINA - 5.35%
Alpargatas SA Industrial y Comercial (1) 5,333,432 $4,002 .05%
Banco Bansud SA B (1) 762,436 8,925 .10
Banco de Galicia y Buenos Aires SA, Class B
(American Depositary Receipts) 1,755,796 45,431 .69
Banco de Galicia y Buenos Aires SA,
7.00% convertible bond August 1, 2002 $12,571,000 13,262
Banco Frances del Rio de la Plata SA 644,000 6,121
Banco Frances del Rio de la Plata SA
(American Depositary Receipts) 1,951,645 56,110 .75
BI SA (acquired 10/31/93, cost: $6,130,000) 6,130 .07
Compania Naviera Perez Companc SACFIMFA, Class B 5,100,148 33,421 .40
Disco SA (American Depositary Receipts) (1) 753,000 16,660 .20
Hidroneuquen SA (acquired 11/11/93, cost: $26,649,000) (1)(2) 29,086,231.09 29,086 .34
IRSA Inversiones y Representaciones SA 26,900 90
IRSA Inversiones y Representaciones SA
(Global Depositary Receipts) 90,849 3,066 .04
Nortel Inversora SA, Class A, preferred
(American Depositary Receipts)
(acquired 11/24/92, cost:$6,835,000) (2) 893,187 10,415
Nortel Inversora SA, Class B, preferred
(American Depositary Receipts)
(acquired 2/27/92, cost: $23,049,000) (2) 1,676,260 21,791 .38
Quilmes Industrial non-voting, preferred (American Depositary 2,150,400 22,042 .26
Shares) (1)
Siderca SAIC 2,195,180 2,987 .03
Telecom Argentina STET-France Telecom SA,
Class B 6,532,272 30,716
Telecom Argentina STET-France Telecom SA,
Class B (American Depositary Shares) 645,200 30,244 .72
Telefonica de Argentina SA, Class B 4,910,000 14,540
Telefonica de Argentina SA, Class B
(American Depositary Shares) 2,741,900 81,229 1.13
YPF SA, Class D
(American Depositary Receipts) 696,800 15,678 .19
---------- ----------
451,946 5.35
BRAZIL - 13.92%
Aracruz Celulose SA, Class B, preferred nominative
(American Depositary Receipts) 449,200 4,267 .05
Banco Bradesco SA, preferred nominative 4,464,622,335 36,468 .43
Banco Itau SA, preferred nominative 34,758,700 14,126 .17
Banco Nacional SA, preferred nominative (1) 215,940,814 -
Banco Nacional SA, ordinary nominative (1) 2,500,000 - -
Brasmotor SA, preferred nominative 141,951,974 44,400 .53
Centrais Eletricas Brasileiras SA (Eletrobras), Class B,
preferred nominative
(American Depositary Receipts) 7,634,263 108,788
Centrais Eletricas Brasileiras SA (Eletrobras), ordinary nominative 16,480,000 4,432
Centrais Eletricas Brasileiras SA (Eletrobras), ordinary nominative
(American Depositary Receipts) 6,775,971 91,476 2.42
CESP-Companhia EnergEtica de SAo Paulo,
preferred nominative (1) 154,300,000 5,380
CESP-Companhia Energetica de Sao Paulo, preferred
nominative (American Depositary Receipts)
(acquired 8/30/94, cost: $53,275,000)(1)(2) 4,059,080 41,606
CESP-Companhia Energetica de Sao Paulo, ordinary
nominative (1) 400,767,854 13,174 .71
COFAP-Companhia Fabricadora de Pecas,
preferred nominative (1) 285,116 1,647 .02
Companhia Cervejaria Brahma, preferred nominative 91,622,437 54,669
Companhia Cervejaria Brahma, ordinary nominative 224,483 140 .65
Companhia Cimento Portland Itau, preferred nominative 70,137,100 19,841 .23
Companhia de Tecidos Norte de Minas-COTEMINAS,
preferred nominative 43,298,500 17,079 .20
Companhia Energetica de Minas Gerais-CEMIG,
preferred nominative (American Depositary Receipts)(1) 3,219,629 84,515
Companhia Energetica de Minas Gerais-CEMIG,
preferred nominative (American Depositary Receipts)
(acquired 9/22/94, cost: $9,698,000) (1) (2) 373,906 9,815 1.12
Companhia Siderurgica Belgo-Mineira, preferred nominative 13,001,892 829
Companhia Siderurgica Belgo-Mineira, ordinary nominative 2,086,180 150 .01
Companhia Suzano de Papel e Celulose
Class B, preferred nominative(American Depositary Receipts) (1) 316,633 3,483 .04
Companhia Vale Do Rio Doce, preferred nominative
(American Depositary Receipts) 911,734 17,551 .21
Companhia Vidrararia Santa Marina, ordinary nominative 2,133,072 8,393 .10
Dixie-TOGA, preferred nominative 1,710,000 1,652 .02
GP Capital Partners, LP
(acquired 1/28/94, cost: $23,408,000) (1) (2) (3) 27,000 26,334 .31
Industrias Klabin de Papel e Celulose SA,
preferred nominative (American Depositary Receipts) 1,259,605 15,745 .19
Iochpe-Maxion SA
(American Depositary Receipts) (1) 163,004 469 .01
Lojas Americanas SA, preferred nominative 279,219,055 5,507
Lojas Americanas SA, ordinary nominative 53,594,800 956 .08
Lojas Arapua, preferred nominative
(Global Depositary Receipts) 104,000 1,092 .01
Mecanica Pesada, preferred nominative 190,000 212
Mecanica Pesada, ordinary nominative 70,000 488 .01
Mesbla SA, preferred nominative (1) 111,674,640 612 .01
Metal Leve SAIC,
preferred nominative 157,884,489 1,557 .02
Morgan Stanley Perqs (Telebras) 6.00%, February 16, 1999 $90,000 5,411 .07
Osa, preferred nominative 90,000,000 870 .01
Petrobras Distribuidora SA-BR, preferred nominative 52,393,500 1,104 .01
Petroleo Brasileiro SA-PETROBRAS, preferred nominative 428,960,000 52,771 .62
Refrigeracao Parana SA, preferred nominative
(American Depositary Receipts) 410,000 4,971 .06
Rhodia-Ster SA (Global Depositary Receipts) 113,100 622 .01
SA White Martins, ordinary nominative 10,062,149,000 14,132 .17
Sadia Concordia SAIC, preferred nominative 1,163,000 811 .01
Souza Cruz SA, ordinary nominative 1,217,000 10,607 .12
Telecomunicacoes Brasileiras SA (Telebras), preferred 59,500,000 4,155
nominative
Telecomunicacoes Brasileiras SA (Telebras), preferred 552,090 - -
nominative,blocked
Telecomunicacoes Brasileiras (Telebras), preferred nominative
(American Depositary Receipts) 4,530,446 315,432 3.78
Telecomunicacoes de Minas Gerais SA, ordinary nominative 64,122 5 -
Telecomunicacoes de SAo Paulo SA-Telesp,
preferred nominative 405,285,091 86,798
Telecomunicacoes de SAo Paulo SA-Telesp,
ordinary nominative 140,648,944 24,798 1.32
Usinas Siderurgicas de Minas Gerais SA, preferred nominative
(American Depositary Receipts)(acquired 9/1/93; cost: $9,774,000) (2) 1,550,305 16,472 .19
---------- ----------
1,175,812 13.92
---------- ----------
CHILE - 1.81%
CAP SA 1,347,599 5,193 .06
Chilgener SA (American Depositary Receipts) 1,160,357 27,849 .33
Compania de Telecomunicaciones de Chile SA
(American Depositary Receipts) 63,700 6,251 .08
CTI Compania Tecno Industrial SA 89,965,285 3,675 .04
Empresa Nacional de Electricidad SA
(American Depositary Receipts) 1,458,009 31,348 .37
Enersis SA (American Depositary Receipts) 2,249,682 69,740 .83
Forestal Terranova 550,000 724 .01
Invercap SA 1,100,000 1,194 .01
Sociedad Quimica y Minera de Chile SA, Class A 1,277,900 6,732 .08
---------- ----------
152,706 1.81
---------- ----------
CHINA - 1.18%
China North Industries Investment Ltd.
(acquired 9/30/94, cost: $5,727,000) (1)(2) 5,500,000 3,575 .04
China Yuchai International Ltd. 1,015,500 7,743 .09
Guang Dong Electric Power Development Co. Ltd., Class B 15,275,000 9,769 .12
Harbin Power Equipment Co. Ltd Class H 44,999,000 6,744
Harbin Power Equipment Co. Ltd Class H
(American Depositary Receipts)
(acquired 11/30/94, cost: $3,336,000)(2) 99,000 1,484 .10
Huaneng Power International Inc., Class N
(American Depositary Receipts) (1) 1,393,100 24,902 .30
Maanshan Iron & Steel Co. Ltd., Class H
(acquired 10/14/93, cost: $1,279,000)(2) 4,332,000 761 .01
Shanghai Diesel Engine Co. Ltd., Class B (1) 6,085,200 2,556 .03
Shanghai Petrochemical Co. Ltd., Class H 93,828,600 26,669
Shanghai Petrochemical Co. Ltd., Class H
(American Depositary Receipts) 7,000 199 .32
Tingyi (Cayman Islands) Holding Corp. (1) 20,729,000 5,691 .07
Want Want Holdings (acquired 5/16/96; cost: $1,233,000) (1)(2) 729,000 1,961 .02
Zhenhai Refining & Chemical Co. Ltd., Class H 25,710,000 7,308 .08
---------- ----------
99,362 1.18
---------- ----------
COLOMBIA - 0.29%
Banco de Colombia SA 42,333,121 16,070
Banco de Colombia SA (Global Depositary Receipts)(1) 955,000 8,117 .29
Comunicacion Celular SA, Class B, warrants, expire November 3,000 15 -
15, 2003(1)
---------- ----------
24,202 .29
---------- ----------
REPUBLIC OF CROATIA - 0.28% ---------- ----------
Pliva (Global Depositary Receipts) (1) 604,955 24,047 .28
---------- ----------
CZECH REPUBLIC - 0.29% ---------- ----------
SPT Telecom (1) 200,400 24,486 .29
---------- ----------
ECUADOR - 0.16% ---------- ----------
La Cemento Nacional CA (Global Depositary Receipts) 76,330 13,510 .16
---------- ----------
GHANA - 0.40%
Ashanti Goldfields Co. Ltd. (Global Depositary Receipts) 946,500 18,693
Ashanti Goldfields Co. Ltd.,
5.50% exchangable note March 15, 2003 $15,970,000 14,892 .40
---------- ----------
33,585 .40
---------- ----------
GREECE - 1.09%
Aluminum of Grece SAIC 276,840 11,800 .14
Hellenic Bottling Co. SA 1,417,945 47,113 .56
Hellenic Telecommunicatons Organization (OTE) 363,000 6,023 .07
Intracom SA, preferred 20,000 212
Intracom SA, ordinary 476,620 8,449 .10
Katselis SA, ordinary 45,000 314 -
Michaniki SA, preferred 252,540 2,100
Michaniki SA, ordinary 652,220 7,581 .12
Titan Cement Co. SA, ordinary 171,522 8,481 .10
---------- ----------
92,073 1.09
---------- ----------
HONG KONG - 0.90%
China-Hongkong Photo Products Holdings Ltd. 11,996,000 6,858 .08
Consolidated Electric Power Asia Ltd. 24,349,400 40,267
Consolidated Electric Power Asia Ltd.
(American Depositary Shares)
(acquired 11/29/93, cost: $868,000) (2) 53,600 886 .49
New World Infrastructure Ltd. (1) 11,468,497 24,448 .29
Siu-Fung Ceramics Holdings Ltd. 7,869,409 1,515 .02
Tian An China Investments Co. Ltd. 13,610,700 1,846 .02
---------- ----------
75,820 .90
---------- ----------
HUNGARY - 0.43%
Graboplast Textiles Muborgyarto RT (1) 15,200 346 -
MOL Magyar Olaj Es Gazipari RT
(Global Depositary Receipts) (1) (2) 1,481,900 16,005 .19
Richter Gedeon Vegyeszeti 397,000 20,239 .24
---------- ----------
36,590 .43
---------- ----------
INDIA - 7.71%
Asian Paints (India) Ltd 564,600 7,031 .08
Bajaj Auto Ltd. 525,500 14,848 .18
Bharat Forge Co. Ltd. 3,250 17 -
Bombay Dyeing and Manufacturing Co. Ltd.
(Global Depositary Receipts) 90,000 720 .01
East India Hotels Ltd. 664,777 13,664 .16
Essar Gujarat Ltd. 3,367,000 2,691 .03
Flex Industries Ltd. 393,800 1,641
Flex Industries Ltd., units (1 unit = 1 share + 1/2 warrant) 157,520 657 .03
Grasim Industries Ltd. 545,300 8,908
Grasim Industries Ltd.
(Global Depositary Receipts) 1,160,965 21,478 .36
Hindalco Industries Ltd. 1,072,650 38,437
Hindalco Industries Ltd. (Global Depositary Receipts) (1) 579,520 22,022 .72
Hindustan Lever Ltd. 514,500 12,066 .14
Housing Development Finance Corp. Ltd. 272,800 22,880 .27
India Fund, Class B 3,306,718.13 6,214 .07
India Magnum Fund , Class B, nonvoting shares (1) 20,000 1,040 .01
Indian Aluminium Co., Ltd. 1,288,600 7,651
Indian Aluminium Co., Ltd. (Global Depositary Receipts) 1,308,771 9,161 .20
Indian Rayon & Industries, Ltd. 830,900 11,694
Indian Rayon & Industries, Ltd.
(Global Depositary Receipts) 398,000 5,871 .21
Indo Gulf Fertilisers and Chemicals Corp. Ltd. 2,155,200 3,061
Indo Gulf Fertilisers and Chemicals Corp. Ltd.
(Global Depositary Receipts) (2) 1,770,900 2,745 .07
I.T.C. Ltd. 1,214,600 10,809 .13
Madras Cement Ltd. 22,000 7,725 .09
Mahanagar Telephone Nigam Ltd. 21,971,000 159,153 1.88
Mahindra & Mahindra Ltd. 2,229,416 22,943
Mahindra & Mahindra Ltd.
(Global Depositary Receipts) 908,333 9,765 .39
Mastergain Scheme (1) 4,001,700 1,479 .02
Max India Ltd. 411,860 3,762
Max India, 12.50% nonconvertible debenture Part B, January INR82,372 588 .05
1998 (1)
Motor Industries Co. Ltd. 176,405 38,519 .46
Nicholas Piramal India Ltd. 325,000 2,009 .02
Nippon Denro Ispat Ltd., 3.00% convertible Eurobonds April 1, $1,750,000 884
2001
Nippon Denro Ispat Ltd., 3.00% convertible bond April 1, 2001
(acquired 3/1/94, cost: $6,754,000) (2) $7,000,000 3,535 .05
Ranbaxy Laboratories Ltd. 1,106,150 19,254
Ranbaxy Laboratories Ltd.
(Global Depositary Receipts) 874,525 17,928 .44
Raymond Woollen Mills Ltd. 505,800 4,891
Raymond Woollen Mills Ltd.
(Global Depositary Receipts) 758,600 15,460 .24
SCICI Ltd. 7,941,900 9,806
SCICI Ltd., 3.50% convertible Eurobonds
April 4, 2004 $3,620,000 3,679 .16
Sundaram Finance Ltd. 153,000 1,424 .02
Tata Engineering and Locomotive Co. Ltd. 816,000 12,113
Tata Engineering and Locomotive Co. Ltd.
(Global Depositary Receipts) (1) 3,415,261 61,475 .87
United Phosphorous Ltd. 1,227,800 11,251
United Phosphorous Ltd.
(Global Depositary Receipts) 423,564 4,871 .19
Videocon International Ltd. 20,100 42
Videocon International Ltd.
(Global Depositary Receipts) 62,200 190 -
Videsh Sanchar Nigam Ltd. 250,000 9,635 .11
Zee Telefilms Ltd. 934,200 3,907 .05
---------- ----------
651,594 7.71
---------- ----------
INDONESIA - 4.47%
Asia Pacific Resources International Holdings Ltd.(1) 1,217,000 9,128 .11
PT Astra International 13,582,400 19,708 .23
PT Bakrie & Brothers 272,000 386 -
PT Bank Internasional Indonesia 1,998,000 9,878 .12
PT Fajar Surya Wiesea 630,000 291 -
PT Gudang Garam 2,940,000 12,608 .15
PT Hanjaya Mandala Sampoerna 5,695,000 64,883 .77
PT Indofood Sukses Makmur 18,875,250 85,206 1.01
PT Indo-Rama Synthetics 5,670,000 14,382 .17
PT International Nickel Indonesia 5,069,500 11,333 .13
PT Japfa Comfeed Indonesia 700,000 406 -
PT Jaya Real Property 2,768,500 8,748 .10
PT Kabelmetal Indonesia 1,200,000 542 .01
PT Kalbe Farma 284,500 636 .01
PT Lippo Bank 11,405,000 19,368
PT Lippo Bank, rights, expire July 24, 1996 (1) 5,702,500 4,536 .28
PT Mayora Indah 10,380,000 5,801 .07
PT Modern Photo Film Co. 5,049,900 21,711 .26
PT Mulia Industrindo 5,445,919 8,078 .10
PT Pabrik Kertas Tjiwi Kimia 1,355,961 1,385 .02
Perusahaan Perseroan (Persero)PT Indonesian
Satellite Corp. (American Depositary Receipts) 1,191,500 39,915 .47
PT Praxair Indonesia (1) 142,700 32 -
PT Sorini Corp 112,500 619 .01
PT Supreme Cable Manufacturing Corp. 900,500 939 .01
PT Tambang Timah 8,965,500 16,574
PT Tambang Timah, Class B (Global Depositary Receipts) (1) 836,270 15,179 .38
PT Tigaraksa Satria 2,173,140 5,606 .06
---------- ----------
377,878 4.47
---------- ----------
MALAYSIA - 4.42%
Arab Malaysian Finance Bhd. 1,805,000 7,890 .09
Commerce Asset-Holding Bhd. 1,023,000 6,236 .07
Eastern & Oriental Bhd. 4,000,000 9,465 .11
Genting Bhd. 2,669,100 20,873 .24
Genting International PLC 8,301,000 14,526 .18
Guinness Anchor Bhd. 3,302,000 6,820 .09
Hong Leong Credit Bhd. 1,593,000 7,539 .09
IJM Corp. Bhd. (MR) 8,075,714 13,991 .17
IOI Corp. Bhd. 9,846,000 13,662 .16
Leader Universal Holdings Bhd. 8,920,000 25,220 .30
Malaysian Airline System Bhd. (2) 2,144,000 6,836 .08
Malaysian International Shipping Corp. Bhd. 2,210,000 6,869 .08
Nestle (Malaysia) Sdn. Bhd. 4,765,000 38,410 .46
New Straits Times Press (Malaysia )Bhd 3,769,000 19,650 .23
O.Y.L. Industries Bhd. 1,165,437 12,152
O.Y.L. Industries Bhd., rights, expire August 6, 1996 (1) 116,543 514 .15
Renong Bhd. 23,453,000 37,435
Renong Bhd., 2.50% convertible bond January 15, 2005
(acquired 10/20/94, cost:$2,554,000) (2) $2,550,000 2,856
Renong Bhd., 2.50% convertible Eurobonds
January 15, 2005 $2,855,000 3,198
Renong Bhd., warrants, expire November 21, 2000 (1) 2,189,500 992
Renong Bhd. Iculs, 4.00% May 21, 2001 MYR3503200 1,321 .54
Resorts World Bhd. 1,267,000 7,266 .09
Sime Darby Bhd. 16,217,000 44,876 .53
Sime UEP Properties Bhd. 3,344,000 6,705 .08
Technology Resources Industries Bhd. (1) 9,073,000 31,656 .37
UMW Holdings Bhd. 7,107,359 25,368
UMW Holdings Bhd., warrants, expire January 26, 2000 (1) 736,159 909 .31
---------- ----------
373,235 4.42
---------- ----------
MAURITIUS - 0.05% ---------- ----------
State Bank of Mauritius 10,927,000 4,646 .05
---------- ----------
MEXICO - 9.78%
Apasco, SA de CV 7,542,402 41,781 .49
CEMEX, SA de CV, Class A 3,024,262 10,909
CEMEX, SA de CV, Class B 10,245,351 40,471
CEMEX, SA de CV, ordinary participation certificates 9,505,620 34,100
CEMEX, SA de CV, Class A, ordinary participation certificates
(American Depositary Receipts) (2) 1,183 8
CEMEX, SA, Class B (American Depositary Receipts) 439,792 3,353
CEMEX, SA, Class B, 4.25% convertible bond November 1, 1997
(acquired 9/28/94, cost: $2,801,000) (2) $3,000,000 2,753 1.08
Cifra, SA de CV, Class A (1) 8,694,000 12,843
Cifra, SA de CV, Class B (1) 13,790,510 19,971
Cifra, SA de CV, Class C (1) 18,706,334 26,695 .70
Corporacion Geo, SA de CV, Class B
(aquired 8/29/95,cost: $6,596,000)(1)(2) 1,751,568 7,785 .09
Gruma, SA de CV, Class B (1) 908,208 4,204 .05
Grupo Carso, SA de CV, Class A1 (1) 5,038,200 35,816 .43
Grupo Financiero Banamex Accival, SA de CV, Class B (1) 31,893,850 66,295
Grupo Financiero Banamex Accival, SA de CV, Class L (1) 12,414,067 24,560
Grupo Financiero Banamex Accival, SA de CV,
7.00% convertible bond December 15, 1999
(acquired 7/12/95, cost:$854,000) (2) $1,040,000 954
Grupo Financiero Banamex Accival, SA de CV,
7.00% convertible Eurobonds December 15, 1999 $1,674,000 1,536 1.10
Grupo Financiero Bancomer, SA de CV, Series L
34.9676% convertible subordinated debentures May 16, 2002 MXP5,750,000 792 .01
Grupo Financiero Banorte, SA de CV, Class B (1) 6,997,394 6,682 .08
Grupo Industrial Maseca, SA de CV, Class B
(American Depositary Receipts) 5,700 90 -
Grupo Televisa, SA, ordinary participation certificates (1) 481,000 7,461
Grupo Televisa, SA, ordinary participation certificates
(American Depositary Receipts) (1) 3,361,499 103,366 1.31
Kimberly-Clark de Mexico, SA de CV, Class A 2,719,100 49,670
Kimberly-Clark de Mexico, SA de CV, Class B 70,000 1,274 .60
Panamerican Beverages, Inc., Class A 2,031,400 90,905 1.08
Sigma Alimentos, SA de CV. Class B 566,100 5,040 .06
Telefonos de Mexico, SA de CV, Class A 9,137,500 15,450
Telefonos de Mexico, SA de CV, Class L 13,706,250 23,211
Telefonos de Mexico, SA de CV, Class L
(American Depositary Receipts) 4,725,475 158,303 2.34
Tubos de Acero de MExico, SA (1) 1,163,200 11,153
Tubos de Acero de MExico, SA
(American Depositary Receipts) (1) 2,024,400 19,106 .36
---------- ----------
826,537 9.78
---------- ----------
MOROCCO - 0.17%
Banque Commercial du Maroc 35,443.125 2,396 .03
Cimenterie de l'Oriental, Class A (1) 92,503 3,289 .04
ONA SA 56,000 2,569 .03
Societe des Brasserie du Maroc 20,500 3,092 .03
Wafabank, Class A 72,000 3,328 .04
---------- ----------
14,674 .17
---------- ----------
PAKISTAN - 0.91%
Chakwal Cement Co. Ltd. (Global Depository Receipts)(1) 891,111 4,010 .05
Hub Power Co. Ltd. (Global Depositary Receipts) (1) 1,871,528 45,852 .54
Pakistan Telecommunication Corp.
(Global Depositary Receipts) (1) 236,100 27,388 .32
---------- ----------
77,250 .91
---------- ----------
PERU - 1.20%
Cementos Lima SA 598,082 8,404 .10
Cementos Norte Pacasmyo SA, Class C 234,952 398 -
Compania de Minas Buenaventura SA, Class A 1,002,687 9,037
Compania de Minas Buenaventura SA, Class B (1) 111,975 1,101
Compania de Minas Buenaventura SA, Class B (American 423,500 8,417 .22
Depositary Receipts) (1)
Credicorp Ltd. (1) 2,772,389 55,101 .65
Minsur SA-T 803,700 7,194 .08
Ontario-Quinta (acquired 8/15/94, cost: $12,877,000) (2) 12,571,524 12,572 .15
---------- ----------
102,224 1.20
---------- ----------
PHILIPPINES - 6.25%
Ayala Corp., Class B 22,545,827 42,599
Ayala Corp., Class B (Global Depositary Shares) (2) 514,976 7,725 .60
Ayala Land, Inc., Class B 18,285,960 32,806 .39
Bacnotan Consolidated Industries, Inc. 459,508 2,157
Bacnotan Consolidated Industries, Inc., 5.50% convertible
bond June 21, 2004 (acquired 6/8/94, cost: $4,480,000) (2) $4,500,000 4,230 .08
Benpres Holdings Corp.
(Global Depositary Receipts) (1) 2,293,210 17,772 .21
C&P Homes Inc., (1) 22,668,100 19,685 .23
Fortune Cement Corp. 17,579,000 9,226 .11
Hi Cement Corp (1) 12,580,000 4,754
Hi Cement Corp (1) (2) 3,870,000 1,462 .07
International Container Terminal Services Inc. (1) 5,787,730 3,921
International Container Terminal Services Inc., 6.00%
convertible bond, February 19, 2000 (acquired 2/18/93, cost: $4,000,000 4,800 .10
$4,000,000) (1) (2)
JG Summit Holdings, Inc., Class B 39,516,600 14,782
JG Summit Holdings, Inc., Class B
(Global Depositary Shares) 20,000 650
JG Summit Holdings, Inc.,
3.00% convertible Eurobonds December 23, 2003 $5,400,000 4,442
JG Summit Holdings, Inc.,
3.50% convertible bond December 23, 2003
(acquired 12/9/93, cost: $9,870,000) (2) $9,870,000 8,118 .33
Keppel Philippines Holdings,Inc., Class B (1) 226,737 67 -
Manila Electric Co., Class B 1,979,590 20,780 .25
Metropolitan Bank and Trust Co. 1,824,490 51,187 .60
Petron Corp. 7,589,062 3,476
Petron Corp. (Global Depositary Receipts) 215,275 3,875 .09
Philippine Commercial International Bank, Inc. 1,066,200 13,329 .16
Philippine Long Distance Telephone Co., ordinary 86,250 5,136
Philippine Long Distance Telephone Co.
(American Depositary Receipts)(1) 1,531,305 89,007
Philippine Long Distance Telephone Co., convertible preferred,
Series II (Global Depositary Receipts) 484,000 16,214
Philippine Long Distance Telephone Co., convertible
preferred, Series III (Global Depositary Shares) 87,000 4,742 1.36
Philippine National Bank (1) 919,071 15,348 .18
Pilipino Telephone Corp. (1) 8,482,100 12,951 .15
PR Holdings Inc., subscription rights (aquired 7/8/92,
cost: $9,835,000)(1)(2) 2,236,600 9,441 .11
San Miguel Corp., Class B 23,048,048 79,619 .94
Southeast Asia Cement Holdings (1) 64,234,700 8,336 .10
Universal Robina Corp. 29,809,400 15,930 .19
---------- ----------
528,567 6.25
---------- ----------
POLAND - 0.39%
Bank Rozwoju Exportu SA 574,000 15,012 .19
Bank Rozwoju Eksportu SA 6,089,757 7,627 .09
Zaklady Piwowarskie w Zywcu SA 119,811 9,268 .11
---------- ----------
31,907 .39
---------- ----------
PORTUGAL - 0.54%
Portugal Telecom ,SA 773,000 20,242
Portugal Telecom SA (American Depositary Receipts)(1) 951,500 24,977 .54
Televisao Independente SA (1) 105,500 312 -
---------- ----------
45,531 .54
---------- ----------
RUSSIA AND FORMER REPUBLICS OF THE SOVIET UNION - 3.13%
Abacan Resource Corp. (1) C$3,000,000 12,534
Abacan Resource Corp. (1) 2,803,000 11,694 .29
Ao Torgovy Dom G (Russian Depoitary Trust Certificate) (1) 265 4,836 .06
Chernogorneft (Russian Depositary Trust Certificate) (1) 105 10,101
Chernogorneft (American Depositary Receipts) 1,130,000 11,018 .25
Gez Investment Holding Ltd.,Class A
(aquired 9/11/95,Cost: $230,000)(1)(2) 2,870 230
Gez Investment Holding Ltd.,Class B
(aquired 9/11/95,Cost: $12,623,000)(1)(2) 157,793 12,623 .15
JKX Oil & Gas PLC (1) 6,138,140 17,016 .20
Kamaz (1) 1,950,000 3,608 .04
LUKoil Holding (Russian Depositary Trust Certificate) (1) 60 3,000
LUKoil Holding (American Depositary Receipts) 1,895,000 81,011 .99
Moscow City Telephone Network (MGTS)
(Russian Depositary Trust Certificate) (1) 909 14,203 .17
Mosenergo Power Generation and Electrification
(Russian Depositary Trust Certificate) (1) 1,900 16,910
Mosenergo Power Generation and Electrification
(American Depositary Shares) 1,247,800 35,562 .62
New Century Capital Partners,L.P.
(acquired 12/7/95,cost: $18,198,000)(1)(2)(3) 18,193,350 18,193 .22
Russian Telecommunications Development Corp.
(acquired 12/22/93, cost: $3,800,000) (1) (2) 380,000 3,800
Russian Telecommunications Development Corp.,
nonvoting ordinary (acquired 12/22/93, cost:$6,200,000)(1)(2) 620,000 6,200 .12
Star Mining Corp. NL (1) 19,740,000 2,095 .02
---------- ----------
264,634 3.13
---------- ----------
SOUTH AFRICA - 3.14%
AECI Ltd. 482,700 2,622 .03
Bidvest Group Ltd. 1,252,280 7,497 .09
Gold Fields of South Africa Ltd. 200,000 6,056 .07
International Pepsi-Cola Bottling Investments
(aquired 12/18/95,cost:$10,000,000)(1)(2)(3) 100,000 10,000 .12
Iscor Ltd. 32,527,787 25,490 .30
Malbak Ltd. 6,329,400 31,457 .37
Metro Cash & Carry 7,320,800 28,346 .34
MIH Holdings (1) 1,277,600 7,265 .08
Nedcor Ltd. 83,700 1,267
Nedcor Ltd.,
(Global Depositary Receipts) 1,245,931 18,377
Nedcor Ltd., warrants, expire September 30, 1997 (1) 306,934 1,074 .25
Rembrandt Group Ltd. 1,583,000 14,893 .18
Sage Group Ltd. 1,570,000 7,549 .09
Sasol Ltd. 8,090,861 87,903 1.04
South Africa Capital Growth Fund, LP,Class A
(acquired 8/25/95,cost:$1,900,000)(1)(2)(3) 1,900 1,900
South Africa Capital Growth Fund, LP, Class D
(acquired 8/25/95,cost:$13,650,000)(1)(2)(3) 13,650 13,650 .18
---------- ----------
265,346 3.14
---------- ----------
SOUTH KOREA - 5.77%
Cheil Foods & Chemicals, Inc., ordinary 1,410 92 -
Cheil Foods & Chemicals, Inc., 3.00% convertible
Eurobonds December 31, 2006 $2,365,000 2,909 .04
Daegu Bank Ltd. 275,000 4,100 .05
Daehan Asia Trust (International Depositary Receipts) (1) 2,820 3,280 .04
Daehan Korea Trust (International Depositary Receipts) 500 413 -
Daewoo Corp. 257,738 2,501 .03
Daewood Securities Co., Ltd., nonvoting preferred 421,270 6,181
Daewood Securities Co., Ltd.,ordinary (1) 1,394,012 33,137 .47
Haitai Stores Co., Ltd. 16,747 134 -
Hanil Bank 4,052,280 45,679 .54
Hyundai Motor Co. 11,400 508
Hyundai Motor Co., nonvoting preferred
(Global Depositary Receipts) 1,169,800 14,774 .17
Korea Asia Fund Ltd.
(International Depositary Receipts) (1) 300 3,488 .04
Korea Electric Power Corp. 2,670,290 107,865
Korea Electric Power Corp.
(American Depositary Receipts) 225,000 5,456 1.34
Korea First Bank (1) 2,047,350 17,846 .21
Korea Industrial Leasing Co., Ltd. 241,000 4,101 .05
Korea Long Term Credit Bank 349,841 9,512 .11
Korea Mobile Telecommunications Corp. 23,480 28,535
Korea Mobile Telecommunications Corp.
(American Depositary Receipts) (1) 135,900 2,327 .37
Korea Pacific Trust (International Depositary Receipts) (1) 3,000 3,789 .04
Korea Zinc Co. 215,000 4,931 .06
Kyongnam Bank 733,607 9,498 .11
LG Chemical Ltd., preferred 330,000 2,604 .03
LG Electronics Inc. 34,244 752
LG Electronics Inc., nonvoting preferred 542,500 7,567
LG Electronics Inc., nonvoting preferred
(Global Depositary Receipts) 731,600 5,487
LG Electronics Inc.
(Global Depositary Receipts) (1) 15,446 152 .17
LG Securities Co. Ltd. (1) 1,185,948 21,350
LG Securities Co. Ltd., preferred (1) 590,460 5,817 .32
Pacific Chemical Industrial Co. Ltd. 165,440 3,121 .04
Pohang Iron & Steel Co., Ltd. 400,650 32,186
Pohang Iron & Steel Co., Ltd.
(American Depositary Receipts) 201,000 4,899 .44
Samsung Electronics Co., Ltd. 295,065 24,777
Samsung Electronics Co., Ltd., nonvoting preferred 87,710 3,725
Samsung Electronics Co., Ltd., nonvoting preferred, new 3/96 26,433 1,044
(1)
Samsung Electronics Co., Ltd., ordinary, new 3/96 84,736 6,739
Samsung Electronics Co., Ltd., nonvoting preferred
(Global Depositary Shares) 335,237 8,046
Samsung Electronics Co., Ltd., nonvoting preferred, new 3/96
(Global Depositary Shares) 101,033 1,818
Samsung Electronics Co., Ltd., ordinary
(Global Depositary Shares) 70,821 3,630
Samsung Electronics Co., Ltd., ordinary, new 3/96
(Global Depositary Shares) 18,610 726 .59
Seoul Asia Index Trust (International Depositary Receipts) 80 880 .01
Shinhan Bank 502,780 11,469 .14
Ssangyong Investments & Securities Co., Ltd. (1) 52,140 939
Ssangyong Investments & Securities Co., Ltd., nonvoting 61,090 566 .02
preferred (1)
SsangYong Oil Refining Co. Ltd. 298,000 6,908 .08
Yukong Ltd. 630,861 18,514
Yukong Ltd., nonvoting preferred,
(Global Depositary Receipts) 230,000 1,932
Yukong Ltd., ordinary
(Global Depositary Receipts) 27,558 364
Yukong Chf, warrants, expire June 18, 1999 (1) 10,000 936 .26
---------- ----------
488,004 5.77
---------- ----------
SRI LANKA - 0.11%
Asian Hotel Corp. (1) 12,215,000 1,763 .02
Development Finance Corp. of Ceylon 1,258,310 6,833 .08
National Development Bank of Sri Lanka 96,200 338 .01
---------- ----------
8,934 .11
---------- ----------
TAIWAN - 2.84%
Acer Inc. (1) 8,442,000 12,589
Acer Inc.(Global Depositary Receipts) (1) 999,600 7,597
Acer Inc., 4.00% convertible Eurobonds June 10, 2001 $2,380,000 6,057 .31
Advance Semiconductor Engineering, Inc. (1) 7,401,600 12,222
Advance Semiconductor Engineering, Inc.
(Global Depositary Receipts)(1) 1,824,100 15,733 .32
Asia Corporate Partners Fund, Class B
(acquired 03/12/96; cost:$15,555,000) (1)(2)(3) 31,110 15,555 .18
Chia Hsin Cement Corp.
(Global Depositary Receipts) (1) 645,700 6,247 .07
China Steel Corp. 13,700,000 14,350
China Steel Corp. (American Depositary Receipts)
(acquired 05/21/92; cost:$6,354,000) (2) 407,000 10,379
China Steel Corp .
(Global Depositary Shares) 586,000 14,943 .48
Hocheng Corp. (Global Depositary Receipts) 112,361 1,390 .02
R.O.C. Taiwan Fund (1) 26,000 296 -
Seres Capital (Cayman Islands) (acquired 03/12/96; 1.66 25
cost:$25,000) (1) (2)
Seres Capital (Cayman Islands) nonvoting
(acquired 03/12/96; cost:$125,000) (1) (2) 8.34 125 .01
Siliconware Precision Industries Co.,Ltd.(1) 3,364,800 4,907
Siliconware Precision Industries Co.,Ltd
(Global Depositary Receipts)(1) 526,996 4,150 .11
Sin-Yih Ceramics Co. Ltd. (1) 1,500,000 2,433 .03
Taiwan American Fund, nonvoting preferred (1) 600,000 6,822 .08
Taiwan Opportunities Fund Ltd., Series C (1) 251,492 2,294 .03
Taiwan Semiconductor Manufacturing Co. Ltd.(1) 40,610,800 84,929 1.00
Ton Yi Industrial Corp.(1) 6,177,640 9,864 .11
U-Ming Marine Transport Corp. 1,687,750 1,670 .02
Yangming Marine Transport Corp. 3,900,000 5,759 .07
---------- ----------
240,336 2.84
---------- ----------
THAILAND - 3.67%
Alphatec Electronics Public Co. Ltd. 791,000 9,412 .11
Ayudhya Jardine CMG Life Assurance 84,547 383 -
Bangkok Bank Public Co. Ltd. 5,877,340 79,658
Bangkok Bank Public Co.Ltd., 3.25% convertible bond
March 3, 2004 (acquired 8/4/94, cost: $966,000) (2) $1,000,000 1,137
Bangkok Bank Public Co. Ltd., 3.25% convertible
Eurobond March 3, 2004 $3,630,000 4,127 1.00
Bangkok Metropolitan Bank Public Co. Ltd. 768,181 567 .01
Bank of Ayudhya Co. Ltd. 4,224,240 23,301 .28
Charoen Pokphand Feedmill Public Co. Ltd. 1,575,600 9,001 .11
Dusit Thani Public Corp. Ltd. 990,000 1,472 .02
Electricity Generating Authority of Thailand 10,375,217 36,177
Electricity Generating Authority of Thailand,
local registered (1) 22,530 75 .43
Industrial Finance Corp. of Thailand 4,138,500 18,588 .22
MBK Properties & Development Co. Ltd. 4,000,000 4,689 .06
Nakhornthai Integrated Steels Co., Ltd. 11,213,400 6,185 .07
Post Publishing Public Co. Ltd. 505,000 1,870
Post Publishing Public Co.Ltd.,nonrenouncable rights, expire 2,020,000 6,685 .10
July 5, 1996(1)
Serm Suk PLC 210,166 6,459
Serm Suk PLC, local registered 64,960 1,505 .09
Siam City Bank Public Co. Ltd. 3,363,710 3,611 .04
Siam Commercial Bank Public Co.Ltd. 1,340,200 19,432 .23
Swedish Motors Corp. Public Co. Ltd. 1,608,100 5,702 .07
Thai Farmers Bank Public Co. Ltd. 3,691,600 40,434 .48
Thai Glass Industries Ltd. 1,272,200 6,266 .07
Thai Military Bank Public Co., Ltd. 4,243,684 16,720 .20
Wattachak Public Co. Ltd.,
3.50% convertible bond December 6, 2003 $6,400,000 6,384 .08
---------- ----------
309,840 3.67
---------- ----------
TURKEY - 1.60%
Adana Cimento Sanayii TAS, Class A 63,984,854 3,892
Adana Cimento Sanayii TAS, Class C 25,469,510 341 .05
Ege Biracilik ve Malt Sanayii AS 27,959,940 12,757 .15
Koc Holding AS, ordinary 69,121,018 16,820 .20
Migros Turk 13,529,350 11,852 .14
Netas Northern Electric Telekomunikasyon AS 32,441,400 7,697 .09
Petrol Ofisi 48,255,100 13,210 .16
Turkiye Garanti Bankasi AS 59,173,278 4,032
Turkiye Garanti Bankasi AS (American Depositary Receipts)
acquired 10/29/93; cost: $ 253,000) (1) (2) 143,136 930 .06
Turkiye Sise ve Cam Fabrikalari AS 322,957,548 25,541 .30
Yapi ve Kredi Bankasi AS 1,350,954,270 38,216 .45
---------- ----------
135,288 1.60
---------- ----------
UNITED STATES - 0.03% ---------- ----------
Freeport-McMoRan Copper & Gold Inc., Class A 90,000 2,689 .03
--------- --------
VENEZUELA - 0.13%
Compania de Inmuebles Y Valores Caracas (1) 93,149,270 - -
Fabrica Nacional de Cementos SACA 18,529,854 3,755 .04
Mavesa SA (American Depositary Receipts)
(acquired 10/7/93, cost:$4,385,000) (2) 867,661 3,254 .04
Venezolana de Cementos, SACA I 1,773,519 3,388
Venezolana de Cementos, SACA II 494,286 845 .05
---------- ----------
11,242 .13
---------- ----------
VIETNAM - 0.07%
Vietnam Frontier Fund
(acquired 7/21/94, cost: $3,000,000) (1) (2) 291,300 3,000 .03
Vietnam Investment Fund, preferred, units
(acquired 8/4/94, cost: $3,206,000) (1) (2) (3) 30 3,206
Vietnam Investment Fund, ordinary, units
(acquired 8/4/94, cost: less than $1,000) (1) (2) (3) 6 - .04
---------- ----------
6,206 .07
---------- ----------
MULTI NATIONAL - 1.54%
Armada Gold Corp., Class A 2,600,000 4,002 .05
Emerging Markets Gold Fund, preferred
(acquired 1/28/94; cost: $7,876,000) (1)(2)(3) 79,560 7,876
Emerging Markets Gold Fund, ordinary
(acquired 1/28/94; cost: $7,876,000) (1)(2)(3) 76,500 799 .11
Golden Shamrock Mines Ltd. (1) 15,550,000 13,937 .16
New Asia East Investment Fund, Class A, 293,600 2,934
(acquired 5/23/96, cost $2,936,000)(1)(2)(3)
New Asia East Investment Fund, Class B, non-voting 4,006,400 40,046 .51
(acquired 5/23/96, cost $40,064,000)(1)(2)(3)
New Europe East Investment Fund, Class B
(acquired 6/4/93, cost $54,500,000)(1)(2)(3) 436 56,668 .67
Sutton Resources Ltd., Special Warrants,
expire July 31, 1996 (1) 310,000 3,488 .04
--------- -------
129,750 1.54
MISCELLANEOUS - 0.79% ---------- ----------
Equity-type securities in initial period of acquisition(5) 66,432 .79
---------- ----------
TOTAL EQUITY-TYPE SECURITIES (cost: $5,560,824,000) ---------- ----------
7,166,883 84.81
---------- ----------
PRINCIPAL MARKET PERCENT
AMOUNT VALUE OF NET
(000) (000) ASSETS
BOND & NOTES -------------- ---------- ---------
ARGENTINA - 0.60%
Republic of Argentina
9.25% February 23, 2001 $6,000 5,775 .07
Republic of Argentina Bocon PIK
4.805% April 1, 2001(4) ARP2,000 1,423 .02
Republic of Argentina Bearer Bond Series L 6.3125%
March 31, 2005(4) $28,463 22,272 .26
Republic of Argentina Eurobond Series L
5.25% March 31, 2023 (4) 26,750 14,713 .18
Telecom Argentina
12.00% November 15, 2002 5,750 6,167 .07
---------- ----------
50,350 .60
---------- ----------
BRAZIL - 0.86%
Abril SA 12.00% October 25, 2003 250 257 -
Federal Republic of Brazil Capitalization Bond PIK
8.00% April 15, 2014 23,002 14,232 .17
Federal Republic of Brazil Debt Conversion Bond Series LI
6.5625% April 15, 2012 (4) 43,000 29,401 .34
Federal Republic of Brazil Bond Series Z
5.00% April 15, 2024 (4) 1,250 689 .01
Federal Republic of Brazil Bearer Bond Series EI-L
6.50% April 15, 2006 (4) 18,000 14,445
Federal Republic of Brazil Registered Bond Series EI-L
6.50% April 15, 2006 (4) 750 602 .18
Republic of Minas Gerais Series A
7.875% February 10, 1999 2,500 2,325 .03
Republic of Minas Gerais Series B
8.250% February 10, 2000 500 455 .01
Multicanal Particiipacoes S.A. 12.625% June 18, 2004 10,200 10,557 .12
---------- ----------
72,963 .86
---------- ----------
COLOMBIA - 0.02%
Communicacion Celular SA
0%/13.125% November 15, 2003 (1)(5) 3,000 1,785 .02
---------- ----------
ECUADOR - 0.05%
Republic of Ecuador Discount Bond
6.0625% February 28, 2005(4) 4,750 2,684 .03
Republic of Ecuador Bearer Past Due Interest Bonds
6.0625% February 27, 2015(4) 2,603 1,171 .02
---------- ----------
3,855 .05
---------- ----------
INDIA - 0.01%
Flex Industries 13.50% December 31, 2004 INR 29,929 854 .01
---------- ----------
MEXICO - 0.49%
Banco Nacional de Comercio Exterior International Finance
7.250% February 2, 2004 $2,250 1,837 .02
Mc-Cuernavaca Toll Road Trust
9.250% July 25, 2001 2,233 1,535 .02
Tubos de Acero de Mexico,
13.75% December 8, 1999 8,500 9,286 .11
United Mexican States Discount Bond Series A
6.39844% December 31, 2019(4) 1,250 984 .01
United Mexican States Discount Bond Series D
6.45313% December 31, 2019(4) 1,000 788 .01
United Mexican States Government Bond
10.8047% July 21, 1997(4) 10,500 10,946 .13
United Mexican States Government Bond
9.75% February 6, 2001(4) 16,150 16,089 .19
---------- ----------
41,465 .49
---------- ----------
PANAMA - 0.78%
Republic of Panama/Agent-Bank of America NTSA
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA)(4)(6)(7)(8) 29,346 17,405 .21
Republic of Panama/Agent-Bank of America NTSA/
Loan Participation Agreements
(Participation-Citibank, NA)(4)(6)(7)(8) 56,643 33,466 .40
Republic of Panama/Agent-Bank of America NTSA/
Loan Participation Agreements
(Participation-Chase Manhattan Bank NA (4)(6)(7)(8) 6,993 4,020 .04
Republic of Panama/Agent-Chase Manhattan Bank NA/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA)(4)(6)(7)(8) 6,660 3,947 .04
Republic of Panama/Agent-First Chicago Ltd./
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA)(4)(6)(7)(8) 1,482 873 .01
Republic of Panama/Agent-Generale Bank NV SA /
Loan Participation Agreements
(Participation-Citibank, NA)(4)(6)(7)(8) 848 502 .01
Republic of Panama/Agent-Generale Bank NV SA/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA)(4)(6)(7)(8) 3,279 1,960 .02
Republic of Panama/Agent-Lloyds Bank International Ltd./
Loan Participation Agreements
(Participation-Chase Manhattan Bank NA)(4)(6)(7)(8) 875 503 .01
Republic of Panama Interest Reduction Bond
3.50% due December, 29, 2049 (4)(6)(7)(8)(9) 5,000 2,775 .03
Republic of Panama Past Due Interest Bond
0.00% due December, 29, 2049 (4)(6)(7)(8)(9) 1,000 614 .01
---------- ----------
66,065 .78
---------- ----------
PERU - 1.06%
Republic of Peru /Agent-Bankers Trust Company/
Loan Participation Agreements
(Participation-Citibank, NA.) (1)(4)(7)(8) 11,739 5,267 .06
Republic of Peru /Agent-Chemical Bank/
Loan Participation Agreements
(Participation-Citibank, NA)(1)(4)(7)(8) 3,544 1,610 .02
Republic of Peru/Agent-Chemical Bank/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(4)(7)(8) 4,085 1,840 .02
Republic of Peru/Agent-Citibank, NA/
Loan Participation Agreements
(Participation-Salomon Brothers) (1)(4)(7)(8) 22,129 9,062 .10
Republic of Peru/Agent-Citibank, NA/
Loan Participation Agreements
(Participation-Citibank, NA) (1)(4)(7)(8) 23,554 10,120 .12
Republic of Peru/Agent-Citibank, NA/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(4)(7)(8) 44,026 19,803 .23
Republic of Peru/Agent-Morgan Guaranty Trust/NA/
Loan Participation Agreements
(Participation- Chase Manhattan Bank, NA) (1)(4)(7)(8) 491 230 -
Republic of Peru/Agent-Morgan Guaranty Trust/NA/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(4)(7)(8) 32,233 14,720 .18
Republic of Peru/Agent-Wells Fargo Bank
Loan Participation Agreements
(Participation-Citibank, NA) (1)(4)(7)(8) 21,476 9,729 .12
Republic of Peru/Agent-Wells Fargo Bank/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(4)(7)(8) 38,941 17,549 .21
---------- ----------
89,930 1.06
---------- ----------
PHILIPPINES - 0.16%
Republic of Philippines Front Loaded Interest Reduction Bond
Series B 5.00% due June 1, 2008 12,250 11,025 .13
Subic Power Corp. 9.50% December 28, 2008 2,586 2,570 .03
---------- ----------
13,595 .16
---------- ----------
POLAND - 0.15%
Republic of Poland Past Due Interest Bond (PDI) ---------- ----------
3.75% due October 27, 2014(4) 16,250 12,492 .15
---------- ----------
RUSSIA AND FORMER REPUBLICS OF THE SOVIET UNION - 0.63% ---------- ----------
VNESH Loan Participation Agreements
8.0% December 15, 2020(4) 109,250 52,987 .63
---------- ----------
SOUTH AFRICA - 0.35%
Republic of South Africa 13.00% August 31, 2010 ZAR110,500 22,562 .27
Republic of South Africa 11.5% May 30, 2000 ZAR31,000 6,604 .08
---------- ----------
29,166 .35
---------- ----------
VENEZUELA - 0.37% ---------- ----------
Republic of Venezuela Debt Conversion Bond (DCB)
6.625% due December 18, 2007(4) $44,750 31,605 .37
---------- ----------
MULTI-NATIONAL - 0.30%
Global Telesystems Group Loan with Warrants
10.0% February 1, 2001 26,673 25,725 .30
---------- ----------
TOTAL BONDS AND NOTES (cost: $389,103,000) 492,837 5.83
---------- ----------
SHORT-TERM SECURITIES
CORPORATE SHORT-TERM NOTES - 5.73%
Canadian Imperial Holdings, Inc.5.32% due 8/2-8/6/96 33,400 33,233 .39
Dailmer-Benz North America Corp. 5.36%-5.40% due 8/9-9/9/96 25,000 24,781 .29
Ford Credit Europe PLC 5.30% due 7/9/96 33,200 33,156 .39
France Telecom 5.35% due 8/20/96 6,000 5,954 .07
International Lease Finance Corp. 5.30% due 9/4/96 50,000 49,501 .59
Mobile Australia Finance Co., Inc. 5.36%-5.38% due 7/19- 37,411 37,144 .44
8/23/96
National Australia Funding (Delaware) Inc., 5.25%-5.35% due 64,800 64,569 .77
7/2-8/14/96
Sandoz Corp. 5.28%-5.39% due 7/12-8/15/96 30,900 30,771 .36
Siemens Corp. 5.27%-5.37% due 7/8-8/23/96 18,000 17,876 .21
SmithKline Beecham PLC 5.27%-5.37% due 7/11-8/22/96 94,122 93,585 1.11
Toronto Dominion Holdings Inc., Euronote 5.29% due 7/15/96 50,000 49,890 .59
Toyota Motor Credit Corp. 5.28%-5.31% due 7/1-8/5/96 30,200 30,046 .36
Xerox Corp. 5.36% due 8/21/96 14,000 13,890 .16
---------- ----------
484,396 5.73
---------- ----------
Federal Agency Discount Notes - 0.47%
Federal National Mortgage Note 8/12-8/13/96 40,100 39,844 .47
---------- ----------
Certificates of Deposit - 0.56%
Barclays Bank YNK 5.34% due 8/26/96 47,600 47,591 .56
---------- ----------
Non-U.S. Government Short-Term Obligations - 2.09%
Credit Suisse First Boston, Structured Note linked to ruble-
denominated, Russian government security interest rates due 993 149,170 1.77
8/28-1/8/97
Mesbla SA, Series 2, 13.25% convertible bond 11/1/96 R$35,460 166 -
Polish Government Treasury Bills due 4/18-7/31/96 PLZ 81,950 26,774 .32
Tubos de Acero de Mexico, SA, 7.50% convertible
Eurobonds June 12, 1997 $250 247 -
---------- ----------
176,357 2.09
Non-U.S. Currency - 0.83%
Chilean Peso CHP6,096,113 14,869 .18
New Taiwanese Dollar NT$ 1,512,095 54,995 .65
Venezuela Bolivar VEB 2,660 6 -
---------- ----------
69,870 .83
---------- ----------
TOTAL SHORT-TERM SECURITIES (cost:$804,943,000) 818,058 9.68
---------- ----------
TOTAL INVESTMENT SECURITIES (cost: $6,754,870,000) 8,477,778 100.32
Excess of liabilities over cash and receivables 27,118 .32
---------- ----------
NET ASSETS $8,450,660 100.00
========== ==========
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 June 30, 1996, the total market value and cost of such securities was $465,623,000 and
$469,869,000 respectively, and the market value
represented 5.51% of net assets. Such securities, excluding convertible bonds and American Depositary Receipts, are valued at fair
value.
3. Includes an unfunded capital commitment representing a binding commitment made by the fund which may be paid in the future.
4. Coupon rate may change periodically.
5. Respresents a zero coupon bond which will convert to a coupon-bearing security at a later date.
6. Subsequent to June 30, 1996, the fund's entire Panama Participation Agreement position was exchanged into Panama Interest
Reduction Bonds 3.5% due July 17, 2014. At the time of exchange, past due interest was given in the form of cash and Panama Past
Due Interest Bonds 6.75% due July 17, 2016. Total gain recognized on the exchange was $34,388,000.
7. Participation interests were acquired through the financial instituition indicated parenthetically.
8. Security is currently in default.
9. Represents a when-issued security.
Non-U.S. Currency Symbols:
ARP - Argentine Peso
C$ - Canadian Dollar
CHP - Chilean Peso
INR - Indian Rupee
MYR - Malaysian Ringitt
NT$ - New Taiwanese Dollar
PLZ - Polish Zloty
R$ - Brazilian Real
VEB - Venezuelan Bolivar
ZAR - South African Rand
</TABLE>
See Notes to Financial Statements
EMERGING MARKETS GROWTH FUND
<TABLE>
<CAPTION>
<S> <C>
Equity-Type Securities Added to the Equity-Type Securities Eliminated from
Portfolio Since December 31, 1995 the Portfolio Since December 31, 1995
- -------------------------------------------- ---------------------------------------------
AO Torgovy Arcelik
Armada Gold Astra-Compania Argentina de Petroleo
Asia Corporate Partners Fund Atlantic Tele-Network
Bajaj Auto Banco de Bogota
Banco Bansud Banco Osorno y La Union
Bank Inicjatyw Gospodarczych Banmedica
Banco Itau Buenos Aires Embotelladora
Bank Rozwoju Eksportu CBV Industria Mecanica
Bidvest Group Central Costanera
Cementos Lima Central Puerto
Cementos Norte Pacasmayo Companhia Siderurgica Nacional
China-Hongkong Photo Products Eczacibasi Ilac Sanayi ve Ticaret
Compania Minas Buenaventura EID Parry
Commerce Asset-Holding Embotelladores del Valle de Anahuac
Communicacion Celular Hansol Paper
Daegu Bank Kepphil Shipyard
Disco Nan Ya Plastics
Eastern & Oriental NW China Investment
Fortune Cement Polifin
Gold Fields of South Africa PT Eka Gunatama Mandiri
Golden Shamrock Mines PT Indah Kiat Pulp & Paper
Grupo Financiero Bancomer PT Semen Gresik
Guinness Anchor SCF Finance and Securities
Hellenic Telecommunications Organization (OTE) Seoul Horizon Trust
HI Cement Siam City Credit Finance and Securities
Housing Development Finance Taihan Electric Wire
IOI Venezolana de Prerreducidos Caroni
Kamaz Yizheng Chemical Fibre
Korea Industrial Leasing
Korea Zinc
Lojas Arapua
Malaysian Airline System
Metro Cash and Carry
MIH Holdings
Minsur
Morgan Stanley Perqs (Telebras)
Moscow City Telephone Network
Mosenergo-Power Generation and
Electrification Amalgamation
New Asia East Investment Fund
New Straits Times Press
Osa
Petrol Ofisi
Petzetakis
Pliva
Quilmes Industrial
Rhodia-Ster
Richter Gedeon Vegyeszeti
Sage Group
Seres Capital
Siderca
Souza Cruz
Sutton Resources
Swedish Motors
Telecomunicacoes de Minas Gerais
Thai Glass
Tingyi (Cayman Islands) Holding
Videsh Sanchar Nigam
Want Want Holdings
White Martins
Yang Ming Marine Transport
</TABLE>
******
Emerging Markets Growth Fund
Financial Statements
<TABLE>
<CAPTION>
<S> <C> <C>
Statement of Assets and Liabilities (dollars in thousands)
at June 30, 1996
Assets:
Investment securities at market $8,477,778
(cost: $6,754,870) ...............
Cash ............................... 10,376
Receivables for--
Sales of investments ............. $11,437
Sales of fund's shares 65,330
Open forward currency contracts 294
Dividends and accrued interest ... 38,097 115,158
-------------- ----------------
8,603,312
----------------
Liabilities:
Non-U.S. taxes payable 9,466
Payables for--
Purchases of investments ......... 26,762
Unfunded capital commitments 105,756
Management services .............. 4,347
Accrued expenses ................. 6,321 143,186
------------------- ----------------
152,652
----------------
Net Assets at June 30, 1996 --
Equivalent to $57.57 per share on
146,779,844 shares of $0.01 par value
capital stock outstanding (authorized
capital stock -- 200,000,000
shares)............................ $8,450,660
================
Statement of Operations (dollars in thousands)
for the Year Ended June 30, 1996
Investment Income:
Income:
Dividends ........................ $151,080
Interest ......................... 72,008 $223,088
--------------
Expenses:
Management services fee .......... 44,162
Custodian fee .................... 8,840
Registration statement and prospectus 791
Taxes other than federal
income tax ..................... 358
Auditing and legal fees .......... 210
Reports to shareholders .......... 11
Postage, stationery and supplies 1
Other expenses ................... 671 55,044
------------- ---------------
Income before non-U.S. taxes........ 168,044
Non-U.S. taxes...................... (678)
----------------
Net investment income .............. 167,366
----------------
Realized Gain and Unrealized
Appreciation on Investments:
Realized gain before non-U.S. taxes..... 54,881
Non-U.S. taxes...................... 394
--------------
Net realized gain .................. 55,275
Net increase in unrealized appreciation
on investments.....................
785,857
Net unrealized appreciation on open forward
currency contracts........................
294
--------------
Net unrealized appreciation ...... 786,151
Non-U.S. taxes.. (4,724) 781,427
-------------- ----------------
Net realized gain and unrealized 836,702
appreciation on investments ............. ----------------
Net Increase in Net Assets Resulting $1,004,068
from Operations .................... ================
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------- (dollars in thousands)
Year Ended Year Ended
June 30,1996 June 30, 1995
----------------- ----------------
Operations:
Net investment income .............. $167,366 $85,015
Net realized gain on investments ... 55,275 305,354
Net unrealized appreciation (depreciation) 781,427 (486,957)
on investments ................... ---------------- ----------------
Net increase (decrease) in net assets 1,004,068 (96,588)
resulting from operations ...... ---------------- ----------------
Dividends and Distributions Paid
to Shareholders:
Dividends from net
investment income ................ (169,255) (61,624)
Distributions from net realized ---------------- ----------------
gain on investments .............. (140,664) (456,090)
---------------- ----------------
Total dividends and (309,919) (517,714)
distributions .................. ---------------- ----------------
Capital Share Transactions:
Proceeds from shares sold:
34,530,418 and 26,840,022 shares,
respectively ...................... 1,882,259 1,502,619
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions of net
realized gain on investments:
5,829,211 and 8,593,036 shares,
respectively ...................... 302,442 513,177
---------------- ---------------
Net increase in net assets
resulting from capital share
transactions ................... 2,184,701 2,015,796
---------------- ----------------
Total Increase in Net Assets 2,878,850 1,401,494
Net Assets:
Beginning of year.................. 5,571,810 4,170,316
---------------- ----------------
End of year (including excess distributions $8,450,660 $5,571,810
over net investment income: $3,949 ================ ===============
and $2,410, respectively............
EMERGING MARKETS GROWTH FUND
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 fund's investment objective is to seek long-term
capital growth through investment in developing country equity securities. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates. 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 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.
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 $8,840,000 includes $691,000 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, 1996, net unrealized appreciation on investments, excluding
forward currency contracts, for federal income tax purposes aggregated
$1,705,604,000, net of accumulated deferred taxes totaling $8,891,000 on net
unrealized appreciation of Chilean and Indian securities, of which
$2,207,459,000 related to appreciated securities and $501,855,000 related to
depreciated securities. There was no difference between book and tax realized
gains on securities transactions for the year ended June 30, 1996. The cost of
portfolio securities, excluding forward currency contracts, for federal income
tax purposes was $6,763,283,000 at June 30, 1996.
4. The fee of $44,162,000 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, 1996, accumulated undistributed net realized gain on
investments was $24,303,000 and additional paid-in capital was $6,797,078,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $3,307,632,000 and $1,059,997,000, respectively,
during the year ended June 30, 1996.
Dividend and interest income is recorded net of non-U.S. taxes paid. For the
year ended June 30, 1996, such non-U.S. taxes were $24,362,000. Net realized
currency losses on dividends, interest, withholding taxes reclaimable, and
purchases and sales of non-U.S. equity-type securities and bonds were
$4,144,000 for the year ended June 30, 1996.
On June 21, 1996, the fund acquired all the net assets of New World Investment
Fund ("NWIF") pursuant to a plan of reorganization approved by NWIF's
shareholders on June 20, 1996. The acquisition was accomplished by a tax-free
exchange of 4,891,619 shares of the fund for 12,205,648 shares of NWIF
outstanding on June 21, 1996 and is included in the "Proceeds From Shares Sold"
in the Statement of Changes in Net Assets. NWIF's net assets at that date of
$278,920,000, which included $77,615,000 of net unrealized appreciation, were
combined with those of the fund.
The fund reclassified $350,000 from additional paid-in capital to undistributed
net investment income and $223,000 from undistributed net realized gains and
$348,000 from undistributed net currency gains, respectively, to additional
paid-in capital for the year ended June 30, 1996.
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 June 30, 1996, the fund had
outstanding forward currency contracts to sell non-U.S. currencies as follows:
NON-U.S. CURRENCY
SALE CONTRACTS
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Contract Amount U.S. Valuation at 6/30/96
--------------------------------- --------------------------------
Non-U.S. U.S. Amount Unrealized
-------------- -------------- -------------- Appreciation
(Depreciation)
--------------
French Francs FF6,195,000 $ 1,226,000 $ 1,207,000 $ 19,000
expiring 7/19-8/20/96
German Deutschemarks DM12,788,000 8,689,000 8,430,000 259,000
expiring 7/19-8/20/96
Pound Sterling L1,229,000 1,863,000 1,909,000 (46,000)
expiring 7/19-8/20/96
Swiss Francs SFR1,543,000 1,299,000 1,237,000 62,000
expiring 7/19-8/20/96 -------------
$ 294,000
=============
</TABLE>
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year ended June 30
---------------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- ------- -------
Net Asset Value, Beginning of Year $52.36 $58.75 $44.95 $38.64 $32.73
-------- -------- -------- ------- -------
Income from Investment
Operations:
Net investment income ...... 1.30 .87 .53 .62 .55
Net realized and unrealized
gains (losses) on investments
before non-U.S. taxes ..... 6.49 (.79) 15.29 7.33 8.87
Non-U.S. taxes ................ (.01) (.03) (.39) .06 (.28 )
-------- -------- -------- ------- -------
Total income from 7.78 .05 15.43 8 9
investment operations......... -------- -------- -------- .01 .14
------- -------
Less Distributions:
Dividends from net (1.30) (.63) (.49) (.56) (.56)
investment income .............
Distributions from net (1.27) (5.81) (1.14) (1.14) (2.67)
realized gain -------- -------- -------- ------- -------
Total distributions ....... (2.57) (6.44) (1.63) (1.70) (3.23)
-------- -------- -------- ------- -------
Net Asset Value, End of Year $57.57 $52.36 $58.75 $44.95 $38.64
======= ======= ======= ======= ========
Total Return .................... 15.49% (1.22)% 34.33% 21.55% 29.73%
Ratios/Supplemental Data:
Net assets, end of year $8,451 $5,572 $4,170 $2,574 $1,561
(in millions)
Ratio of expenses to average .84% .91% 1.00% 1.01% 1.11%
net assets
Ratio of expenses and non-U.S.
taxes to average net assets ...... .85% .94% 1.04% 1.07% 1.18%
Ratio of net income to average 2.54% 1.70% .91% 1.82% 1.84%
net assets ..........
Portfolio turnover rate ........... 17.78% 23.75% 18.13% 11.97% 16.03%
</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, 1996, 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 on
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, 1996 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
Los Angeles, California
August 12, 1996
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,
1996 totals $0.19729 per share.
None of the distributions paid by the fund from investment income earned in the
year ended June 30, 1996 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.
UNAUDITED FINANCIAL STATEMENTS DATED DECEMBER 31, 1996
EMERGING MARKETS GROWTH FUND
Investment Portfolio, December 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(Unaudited)
Equity-Type Securities
----------------------------------
Common Preferred Convertible Percent of
INDUSTRY DIVERSIFICATION Stocks Stocks Bonds Bonds Net Assets
- --------------------------------------------------------------------------------------------------------------
Telecommunications 10.93% 5.19% - 0.33% 16.45%
Utilities: Electric & Gas 8.38 2.06 0.03 - 10.47
Banking 7.71 0.46 0.27 - 8.44
Energy Sources 5.61 0.76 0.04 - 6.41
Beverages & Tobacco 5.43 0.76 - - 6.19
Building Materials & Components 2.45 0.27 0.04 - 2.76
Equity Common Trusts 2.57 0.14 - - 2.71
Other Industries 27.79 2.89 0.62 5.06 36.36
----- ----- ----- ----- -----
70.87% 12.53% 1.00% 5.39% 89.79%
===== ===== ==== ==== =====
Short-Term Securities 10.53
Excess of liabilities over cash and receivables (0.32)
------
Net Assets 100.00 %
=======
</TABLE>
*****
TEN LARGEST EQUITY HOLDINGS
<TABLE>
<CAPTION>
<S> <C> <C>
Percent of Gain/Loss
for the Year Ended
Percent of 12/31/96*
Net Assets (in U.S. Dollars)
- -----------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras (Telebras) 3.67% +9.87%
Centrais Eletricas Brasileiras (Eletrobras) 3.04 +30.63
Telefonos de Mexico 2.91 -1.69
Mahanagar Telephone Nigam 1.56 -11.19
Companhia Energetica de Minas Gerais-CEMIG 1.38 +29.05
Telecomunicacoes de Sao Paulo SA-Telesp 1.34 +5.91
LUKoil Holding 1.33 +9.04
Sasol 1.22 +9.25
Philippine Long Distance Telephone 1.17 -10.92
San Miguel 1.12 +27.87
</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>
<S> <C> <C> <C>
Investment Portfolio - December 31, 1996
EQUITY - TYPE SECURITIES Number of Shares Market Percent
(common and preferred stocks or Principal Value of Net
and convertible debentures) Amount (000) Assets
- ---------------------------------------------------------------- ----------------- ---------- ----------
ARGENTINA - 4.90%
Banco Bansud SA, Class B (1) 762,436 $9,136 .10
Banco de Galicia y Buenos Aires SA, Class B
(American Depositary Receipts) 2,588,318 62,767
Banco de Galicia y Buenos Aires SA, .86
7.00% convertible bond August 1, 2002 12,571,000 14,834
Banco Frances del Rio de la Plata SA 740,600 6,926
Banco Frances del Rio de la Plata SA .79
(American Depositary Receipts) 2,342,142 64,409
BI SA (acquired 10/21/93, cost: $6,130,000) (2) 6,130,000 6,130 .07
Compania Naviera Perez Companc SACFIMFA, Class B 8,774,348 61,696
Compania Naviera Perez Companc SACFIMFA, Class B .69
(American Depositary Receipts) 56,100 789
Disco SA (American Depositary Receipts) (1) 753,000 21,084 .23
Hidroneuquen SA (acquired 11/11/93, cost: $29,086,000)(1)(2) 29,086,231 29,086 .32
IRSA Inversiones y Representaciones SA 26,900 86
IRSA Inversiones y Representaciones SA .03
(Global Depositary Receipts) 90,849 2,884
Nortel Inversora SA, Class B, preferred
(American Depositary Receipts)
(acquired 11/24/92, cost:$6,180,000) (2) 893,187 11,290
Nortel Inversora SA, Class B, preferred
(American Depositary Receipts) .30
(acquired 2/27/92, cost: $23,049,000) (2) 1,676,260 15,924
Quilmes Industrial,non-voting, preferred
(American Depositary Shares) 2,150,400 19,622 .22
Sociedad Comercial del Plata SA (1) 3,638,580 9,317 .10
Telecom Argentina STET-France Telecom SA, Class B 2,800,000 11,538
Telecom Argentina STET-France Telecom SA, Class B .19
(American Depositary Shares) 136,200 5,499
Telefonica de Argentina SA, Class B 4,910,000 12,867
Telefonica de Argentina SA, Class B .80
(American Depositary Shares) 2,287,900 59,199
YPF SA, Class D (American Depositary Receipts) 701,800 17,721 .20
---------- ----------
442,804 4.90
---------- ----------
BRAZIL - 14.53%
Aracruz Celulose SA, Class B, preferred nominative
(American Depositary Receipts) 526,200 4,341 .05
Banco Bradesco SA, preferred nominative 3,497,345,005 25,349 .28
Banco Itau SA, preferred nominative 34,758,700 15,056 .17
Banco Nacional SA, preferred nominative (1) 215,940,814 -
Banco Nacional SA, ordinary nominative (1) 2,500,000 - -
Brasmotor SA, preferred nominative 141,951,974 39,420 .44
Centrais Eletricas Brasileiras SA - ELETROBRAS, preferred nominative
(American Depositary Receipts) 7,702,263 142,492
Centrais Eletricas Brasileiras SA - ELETROBRAS, ordinary nominative 16,480,000 5,901
Centrais Eletricas Brasileiras SA - ELETROBRAS, ordinary nominative
(American Depositary Receipts) 7,117,971 126,344 3.04
CESP-Companhia Energetica de Sao Paulo,
preferred nominative (1) 154,300,000 6,017
CESP-Companhia Energetica de Sao Paulo, preferred
nominative (American Depositary Receipts) (1) 3,891,976 44,271
CESP-Companhia Energetica de Sao Paulo, preferred
nominative (American Depositary Receipts) .77
(acquired 8/30/94, cost: $2,853,000) (1)(2) 167,104 1,901
CESP-Companhia Energetica de Sao Paulo, ordinary
nominative (1) 400,767,854 17,436
COFAP-Companhia Fabricadora de Pecas,
preferred nominative (1) 285,116 2,196 .03
Companhia Cervejaria Brahma, preferred nominative 89,222,437 48,781
.54
Companhia Cervejaria Brahma, ordinary nominative 224,483 130
Companhia Cimento Portland Itau, preferred nominative 70,447,100 24,748 .27
Companhia de Tecidos Norte de Minas-COTEMINAS,
preferred nominative 52,098,500 16,629 .18
Companhia Energetica de Minas Gerais-CEMIG,
preferred nominative (American Depositary Receipts) 3,299,629 111,775
Companhia Energetica de Minas Gerais-CEMIG,
preferred nominative (American Depositary Receipts) 1.38
(acquired 9/22/94, cost: $9,501,000) (2) 373,906 12,666
Companhia Siderurgica Belgo-Mineira, preferred nominative 13,001,892 839
.01
Companhia Siderurgica Belgo-Mineira, ordinary nominative 2,086,180 135
Companhia Suzano de Papel e Celulose, Class B,
preferred nominative(American Depositary Receipts) 246,633 1,850 .02
Companhia Vale do Rio Doce, preferred nominative
(American Depositary Receipts) 911,734 17,551 .19
Companhia Vidraria Santa Marina, ordinary nominative 2,133,072 6,673 .07
Consorcio Real Brasileiro de Administracao SA, Class F,
preferred nominative 679,000 1,320 .02
Copel, ordinary nominative (1) 154,286,000 1,634 .02
Dixie Toga, preferred nominative 1,710,000 1,300 .01
Eletropaulo-Eletricidade de Sao Paulo SA,
preferred nominative, Class B (1) 59,318,000 8,764 .10
GP Capital Partners, LP
(acquired 1/28/94, cost: $25,777,000) (1)(2)(3) 27,000 33,889 .38
Industrias Klabin de Papel e Celulose SA,
preferred nominative (American Depositary Receipts) 315,842 2,882 .03
Iochpe-Maxion SA, (American Depositary Receipts) 163,004 204 -
Lojas Americanas SA, preferred nominative 279,219,055 3,682
Lojas Americanas SA, ordinary nominative 53,594,800 709 .05
Lojas Arapua, preferred nominative
(Global Depositary Receipts) 104,000 1,924 .02
Mesbla SA, preferred nominative (1) 111,674,640 537 .01
Metal Leve SAIC, preferred nominative (1) 157,884,489 1,094 .01
Multicanal Participacoes SA, preferred nominative
(American Depositary Shares) (1) 930,000 11,916 .13
OSA SA-Organizacao, Sistemas e Aplicacoes,
preferred nominative 90,000,000 562 .01
Petroleo Brasileiro SA-PETROBRAS, preferred nominative 428,960,000 68,335 .76
Refrigeracao Parana SA, preferred nominative
(American Depositary Receipts) 410,000 4,561 .05
Rhodia-Ster SA (Global Depositary Receipts) 113,100 297 -
SA White Martins, ordinary nominative (1) 13,283,749,000 19,180 .21
Sadia Concordia SAIC, preferred nominative 1,163,000 896 .01
Souza Cruz SA, ordinary nominative 1,279,000 8,396 .09
Telecomunicacoes Brasileiras SA (Telebras),
preferred nominative 59,500,000 4,582
Telecomunicacoes Brasileiras SA (Telebras), preferred
nominative (American Depositary Receipts) 4,282,846 327,638
Telecomunicacoes Brasileiras SA (Telebras),
preferred nominative,blocked (1) 552,090 21 3.67
Telecomunicacoes de Minas Gerais SA,
ordinary nominative 64,122 8 -
Telecomunicacoes de Sao Paulo SA-Telesp,
preferred nominative 418,210,091 90,574
Telecomunicacoes de Sao Paulo SA-Telesp, 1.34
ordinary nominative (1) 140,648,944 30,408
Usinas Siderurgicas de Minas Gerais SA, preferred
nominative(American Depositary Receipts) (acquired
9/1/93; cost: $9,774,000) (2) 1,550,305 15,697 .17
---------- ----------
1,313,511 14.53
---------- ----------
CHILE - 1.82%
CAP SA 1,347,599 2,637 .03
Chilgener SA (American Depositary Receipts) 1,160,357 24,223 .27
Compania de Telecomunicaciones de Chile SA
(American Depositary Receipts) 348,700 35,262 .39
CTI Compania Tecno Industrial SA 89,965,285 2,037 .02
Empresa Nacional de Electricidad SA
(American Depositary Receipts) 1,458,009 22,599 .25
Enersis SA (American Depositary Receipts) 2,449,482 67,973 .75
Forestal Terranova SA 550,000 558 .01
Invercap SA 1,100,000 739 .01
Sociedad Quimica y Minera de Chile SA, Class A 1,277,900 5,936
Sociedad Quimica y Minera de Chile SA, Class B .09
(American Depositary Receipts) (1) 55,000 2,977
---------- ----------
164,941 1.82
---------- ----------
CHINA - 1.38%
China North Industries Investment Ltd.
(acquired 9/30/94, cost: $5,727,000) (2) 5,500,000 2,310 .03
China Yuchai International Ltd. 1,015,500 4,824 .05
Guang Dong Electric Power Development Co. Ltd., Class B 4,084,675 3,612 .04
Harbin Power Equipment Co. Ltd., Class H 41,433,000 6,750
Harbin Power Equipment Co. Ltd., Class H
(American Depositary Receipts) .09
(acquired 11/30/94, cost: $3,336,000) (2) 99,000 1,613
Huaneng Power International, Inc., Class N
(American Depositary Receipts) (1) 1,393,100 31,345 .35
Shanghai Diesel Engine Co. Ltd., Class B (1) 6,085,200 2,884 .03
Shanghai Petrochemical Co. Ltd., Class H 95,766,600 29,099
Shanghai Petrochemical Co. Ltd., Class H .32
(American Depositary Receipts) 7,000 206
Tingyi (Cayman Islands) Holding Corp. (1) 67,261,500 17,611 .19
Yizheng Chem Fibre Class H 61,366,000 14,917 .17
Zhenhai Refining & Chemical Co. Ltd., Class H (1) 25,710,000 9,474
Zhenhai Refining & Chemical Co. Ltd., Class H .11
3.0% converible bonds December 19, 2003 (1) 250,000 264
---------- ----------
124,909 1.38
---------- ----------
COLOMBIA - 0.24%
Banco de Colombia SA 52,308,556 21,576 .24
Comunicacion Celular SA, Class B, warrants, expire
November 15, 2003 (acquired 12/14/95; cost $22,000)(1)(2) 3,000 23 -
---------- ----------
21,599 .24
---------- ----------
REPUBLIC OF CROATIA - 0.59%
Pliva (Global Depositary Receipts) 1,000,555 53,029 .59
---------- ----------
53,029 .59
---------- ----------
CZECH REPUBLIC - 0.34% ---------- ----------
SPT Telecom (1) 248,400 30,963 .34
---------- ----------
ECUADOR - 0.19%
La Cemento Nacional CA (Global Depositary Receipts) 76,330 17,174 .19
---------- ----------
GHANA - 0.38%
Ashanti Goldfields Co. Ltd. (1) 691,111 8,553
Ashanti Goldfields Co. Ltd. (Global Depositary Receipts) 946,500 11,713
Ashanti Goldfields Co. Ltd., .38
5.50% exchangable note March 15, 2003 $15,970,000 13,654
---------- ----------
33,920 .38
---------- ----------
GREECE - 1.02%
Aluminum de Grece SAIC 305,840 11,410 .13
Hellenic Bottling Co. SA 1,557,645 49,960
.62
Hellenic Telecommunications Organization (OTE) 363,000 6,208
Intracom SA, preferred 9,100 139
.09
Intracom SA, ordinary 357,510 8,051
Katselis Sons SA, ordinary 45,000 244 -
Michaniki SA, preferred 252,540 1,675
.08
Michaniki SA, ordinary 652,220 5,055
Titan Cement Co. SA, ordinary 171,522 9,336 .10
---------- ----------
92,078 1.02
---------- ----------
HONG KONG - 0.65%
China-Hongkong Photo Products Holdings Ltd. 11,996,000 4,033 .04
Consolidated Electric Power Asia Ltd. 7,846,800 18,415
Consolidated Electric Power Asia Ltd.(American Depositary .22
Shares) (acquired 11/29/93, cost: $868,000) (2) 53,600 1,258
New World Infrastructure Ltd. (1) 11,468,497 33,513 .37
Siu-Fung Ceramics Holdings Ltd. 7,869,409 435
Siu-Fung Ceramics Holdings Ltd., rights, expire .01
December 2, 1996 (1) 3,147,763 -
Tian An China Investments Co. Ltd. 6,637,500 952 .01
---------- ----------
58,606 .65
---------- ----------
HUNGARY - 0.35%
Gedeon Richter Ltd. 428,000 25,028 .27
Graboplast Textiles Muborgyarto Rt. 15,200 515 .01
MOL Magyar Olaj-es Gazipari Rt.
(Global Depositary Receipts)
(acquired 11/22/95; cost: $4,618,000) (2) 570,100 6,556 .07
---------- ----------
32,099 .35
---------- ----------
INDIA - 6.55%
Asian Paints (India) Ltd. 564,600 4,548 .05
Bajaj Auto Ltd. 1,614,700 40,424
Bajaj Auto Ltd.
(Global Depositary Receipts) 36,600 1,244 .46
Bharat Forge Corp. Ltd. 3,250 8 -
Bharat Petroleum Corp. Ltd. 2,435,200 19,584 .22
Bombay Dyeing and Manufacturing Co. Ltd.
(Global Depositary Receipts) 90,000 270 -
East India Hotels Ltd. 997,165.50 11,492 .13
Essar Steel Ltd. (Formerly Essar Gujarat Ltd.) 3,367,000 1,912 .02
Flex Industries Ltd. 393,800 881
.01
Flex Industries Ltd., units (equivalent to 1 shares + 1/2 157,520 353
warrant)
Grasim Industries Ltd. 545,300 6,345
Grasim Industries Ltd. .27
(Global Depositary Receipts) 1,160,965 17,705
Hindalco Industries Ltd. 1,668,875 30,581
.57
Hindalco Industries Ltd. (Global Depositary Receipts) 869,280 21,406
Hindustan Lever Ltd. 514,500 11,369 .13
Housing Development Finance Corp. Ltd. 272,800 16,879 .19
India Fund, Class B 1,949,968 2,809 .03
Indian Aluminum Co., Ltd. 1,288,600 5,560
.13
Indian Aluminum Co., Ltd. (Global Depositary Receipts) 1,308,771 6,610
Indian Rayon and Industries Ltd. 1,019,800 8,472
Indian Rayon and Industries, Ltd. .13
(Global Depositary Receipts) 398,000 3,383
Indo Gulf Fertilisers and Chemicals Corp. Ltd. 2,155,200 1,993
Indo Gulf Fertilisers and Chemicals Corp. Ltd. .04
(Global Depositary Receipts) 1,770,900 1,594
I.T.C. Ltd. 3,586,600 33,162 .37
Madras Cements Ltd. 22,000 4,923 .05
Mahanagar Telephone Nigam Ltd. 21,971,000 141,352 1.56
Mahindra & Mahindra Ltd. 2,481,516 22,216
Mahindra & Mahindra Ltd.
(Global Depositary Receipts) 958,333 11,261
Mahindra & Mahindra Ltd.,5.0% convertible bond July 9, 2001 .44
(acquired 7/3/96; cost: $5,952,000)(2) $5,954,000 6,174
Master Gain Scheme (1) 870,500 230 -
Max India Ltd. 453,046 2,785
Max India Ltd., 12.50% nonconvertible debenture Part B,
January 4, 1998 (1) INR82,372 576
.04
Max India Ltd., 0.00% fully convertible debenture Part B, INR41,186 317
January 1997
Max India Ltd., warrants, expire January 1998 82,372 -
Motor Industries Co. Ltd. 187,355 29,872 .33
Nicholas Piramal India Ltd. 325,000 1,455 .02
Nippon Denro Ispat Ltd., 3.00% convertible Eurobonds
April 1, 2002 $1,750,000 919
Nippon Denro Ispat Ltd., 3.00% convertible bond .05
April 1, 2001,(acquired 3/1/94, cost: $6,779,000) (2) $7,000,000 3,675
Ranbaxy Laboratories Ltd. 1,216,150 19,901
Ranbaxy Laboratories Ltd. .39
(Global Depositary Receipts) 874,525 14,867
Raymond Woollen Mills Ltd. 931,800 2,971
Raymond Woollen Mills Ltd. .10
(Global Depositary Receipts) 1,083,000 6,228
SCICI Ltd. 7,941,900 5,665
SCICI Ltd., 3.50% convertible Eurobonds .11
April 1, 2004 $3,620,000 3,760
Sundaram Finance Ltd. 153,000 1,241 .01
Tata Engineering and Locomotive Co. Ltd. 1,004,400 9,552
Tata Engineering and Locomotive Co. Ltd. .51
(Global Depositary Receipts) 3,415,261 36,287
United Phospherous Ltd. 1,227,800 6,275
United Phospherous Ltd. .09
(Global Depositary Receipts) 443,264 2,216
Videocon International Ltd. 20,100 21
Videocon International Ltd.
(Global Depositary Receipts) 62,200 67 -
Videsh Sanchar Nigam Ltd. 250,000 6,643 .07
Zee Telefilms Ltd. 934,200 2,247 .03
---------- ----------
592,280 6.55
---------- ----------
INDONESIA - 4.15%
Asia Pacific Resources International Holdings Ltd. (1) 1,217,000 6,846 .08
PT Bank Internasional Indonesia 6,138,880 6,045 .07
PT Gudang Garam 1,470,000 6,351 .07
PT Hanjaya Mandala Sampoerna 12,890,000 68,790 .76
PT Indofood Sukses Makmur 38,179,500 76,003 .84
PT Indo-Rama Synthetics 23,634,000 23,023 .25
PT International Nickel Indonesia 5,069,500 11,434 .12
PT Jaya Real Property 6,857,000 9,584 .11
PT Kabelmetal Indonesia 1,200,000 534
.01
PT Kabelmetal Indonesia, rights, expire February 19, 1997 1,200,000 25
(1)
PT Kalbe Farma 569,000 651 .01
PT Lippo Bank 34,215,000 33,331 .37
PT Mayora Indah 10,380,000 4,836 .05
PT Modern Photo Film Co. 5,049,900 16,041 .18
PT Mulia Industrindo 9,138,286 9,483 .11
PT Pabrik Kertas Tjiwi Kimia 1,640,712 1,633 .02
Perusahaan Perseroan (Persero)PT Indonesian
Satellite Corp. 300,000 826
Perusahaan Perseroan (Persero)PT Indonesian .47
Satellite Corp. (American Depositary Receipts) 1,510,600 41,353
PT PP London Sumatra (1) 5,000,000 12,918 .14
PT Praxair Indonesia (1) 142,700 32 -
PT Ramayana Lestari Sentosa (1) 3,070,000 6,632 .07
PT Sorini Corp. 250 - -
PT Tambang Timah (Persero) 11,073,500 20,168
PT Tambang Timah, Class B(Global Depositary Receipts) 836,270 15,116 .39
PT Tigaraksa Satria 2,173,140 3,037 .03
---------- ----------
374,692 4.15
---------- ----------
Malaysia - 4.52%
Arab-Malaysian Finance Bhd. 1,805,000 10,081 .11
Commerce Asset-Holding Bhd. 1,023,000 7,699 .09
Easterm & Oriental Bhd. 4,000,000 7,764 .09
Genting Bhd. 2,481,500 17,104 .19
Genting International PLC 8,972,000 21,533 .24
Guinness Anchor Bhd. 3,446,000 8,463 .09
Hap Seng Consolidated Bhd. 659,000 1,501 .02
Hong Leong Credit Bhd. 1,593,000 10,033 .11
IJM Corp. Bhd. 8,075,714 19,034 .21
IOI Corp. Bhd. 11,517,000 17,701 .20
Leader Universal Holdings Bhd. 8,920,000 18,727 .21
Malayan Banking 10,000 111 -
Malaysian Airline System Bhd. 3,520,000 9,133 .10
Nestle (Malaysia) Sdn. Bhd. 4,765,000 38,316 .42
New Straits Times Press (Malaysia) Bhd 3,769,000 21,797 .24
O.Y.L. Industries Bhd. 1,281,980 13,457 .15
Renong Bhd. 26,337,000 46,738
Renong Bhd., 2.50% convertible bond January 15, 2005
(acquired 10/20/94, cost:$2,554,000) (2) $2,550,000 2,961
Renong Bhd., 2.50% convertible Eurobonds .60
January 15, 2005 $2,000,000 2,323
Renong Bhd., warrants, expire November 21, 2000 (1) 2,189,500 1,075
Renong Bhd. Iculs, 4.00% May 21, 2001 3,503,200 1,471
Resorts World Bhd. 1,267,000 5,772 .06
Sime Darby Bhd. 16,217,000 63,917 .71
Sime UEP Properties Bhd. 3,335,000 8,587 .09
Technology Resources Industries Bhd. (1) 9,195,000 18,139 .20
UMW Holdings Bhd. 7,107,359 33,221
.39
UMW Holdings Bhd., warrants, expire January 26, 2000 (1) 692,159 1,741
---------- ----------
408,399 4.52
---------- ----------
MAURITIUS - 0.06% ---------- ----------
State Bank of Mauritius 10,927,000 5,679 .06
---------- ----------
MEXICO - 9.36%
Apasco, SA de CV 7,142,402 48,970 .54
Carso Global Telecom, SA de CV 2,734,800 6,493 .07
Cemex, SA de CV, Class A 2,956,762 10,587
Cemex, SA de CV, Class B 9,242,251 36,378
Cemex, SA de CV, ordinary participation certificates 9,505,620 34,216
Cemex, SA, Class A, ordinary participation certificates .96
(American Depositary Receipts)(acquired 6/14/93, cost: 1,183 8
$8,000) (2)
Cemex, SA de CV, Class B (American Depositary Receipts) 755,792 5,857
Cifra, SA de CV, Class A (1) 8,694,000 11,039
Cifra, SA de CV, Class B (1) 13,790,510 16,879
.64
Cifra, SA de CV, Class B (American Depositary Receipts) (1) 6,125,000 7,350
Cifra, SA de CV, Class C (1) 18,706,334 22,801
Corporacion Geo,SA de CV, Class B
(acquired 8/29/95; cost:$215,000) (1)(2) 60,568 298 -
Grupo Carso, SA de CV, Class A (1) 2,645,000 14,004 .16
Grupo Embotellador de Mexico, SA de CV, ordinary
participation certificates (Global Depositary Receipts) (1) 858,400 7,189 .08
Grupo Financiero Banamex Accival, SA de CV, Class B (1) 31,893,850 67,303
Grupo Financiero Banamex Accival, SA de CV, Class L (1) 12,656,067 24,907
Grupo Financiero Banamex Accival, SA de CV,
11.00% convertible bond July 15, 2003
(acquired 7/12/96; cost:$4,063,000) (1)(2) $4,175,000 4,264
Grupo Financiero Banamex Accival, SA de CV, 1.07
7.00% convertible Eurobonds December 15, 1999 $103,000 97
Grupo Financiero Bancomer, SA de CV., Series L
33.08% convertible subordinated debentures May 16, 2002 MXN5,750,000 770 .01
Grupo Industrial Maseca, SA de CV, Class B
(American Depositary Receipts) 5,700 109 -
Grupo Televisa, SA, ordinary participation certificates (1) 481,000 6,168
Grupo Televisa, SA, ordinary participation certificates 1.02
(American Depositary Receipts) (1) 3,361,499 86,138
Kimberly-Clark de Mexico, SA de CV, Class A 2,287,000 45,154
.52
Kimberly-Clark de Mexico, SA de CV, Class B 70,000 1,381
Panamerican Beverages Inc., Class A 2,031,400 95,222 1.05
Sigma Alimentos, SA de CV, Class B 566,100 5,053 .06
Telefonos de Mexico, SA de CV, Class A 9,137,500 15,105
Telefonos de Mexico, SA de CV, Class L 13,706,250 22,589
Telefonos de Mexico, SA de CV, Class L 2.91
(American Depositary Receipts) 6,843,575 225,838
Tubos de Acero de Mexico, SA (1) 595,600 9,415
Tubos de Acero de Mexico, SA .27
(American Depositary Receipts) (1) 904,300 14,356
---------- ----------
845,938 9.36
---------- ----------
MOROCCO - 0.20%
Banque Commerciale du Maroc 35,443 2,819 .03
Cimenterie de l'Oriental, Class A (1) 92,503 4,255 .04
ONA SA 56,000 3,339 .04
Societe des Brasseries du Maroc 20,500 3,284 .04
Wafabank, Class A 72,000 4,548 .05
---------- ----------
18,245 .20
---------- ----------
PAKISTAN - 0.50%
Chakwal Cement Co. Ltd. (Global Depositary Receipts) (1) 891,111 891 .01
Engro Chemical Pakistan Ltd. 1,145,900 3,845 .04
Hub Power Co. Ltd. (Global Depositary Receipts) (1) 1,596,528 31,532 .35
Pakistan Telecommunication Corp.
(Global Depositary Receipts) 150,900 9,054 .10
---------- ----------
45,322 .50
---------- ----------
PERU - 1.92%
Cementos Lima SA 1,087,555 15,924 .18
Compania de Minas Buenaventura SA, Class A 1,462,584 10,651
Compania de Minas Buenaventura SA, Class B 111,975 925
Compania de Minas Buenaventura SA, Class B .21
(American Depositary Receipts) (1) 423,500 7,146
Credicorp Ltd. (1) 3,513,889 65,007 .72
Minsur SA-Trabajo 1,973,451 6,845 .08
Ontario-Quinta (acquired 8/15/94, cost: $12,900,000) (2) 12,571,524 15,904 .17
Telefonica del Peru, Class B (American Depositary Receipts) 2,711,000 51,170 .56
---------- ----------
173,572 1.92
---------- ----------
PHILIPPINES - 6.26%
Ayala Corp., Class B 33,818,740 36,704
.49
Ayala Corp., Class B (Global Depositary Shares) 772,464 7,338
Ayala Land, Inc., Class B 27,428,940 31,335 .35
Bacnotan Consolidated Industries, Inc. 493,131 1,615
Bacnotan Consolidated Industries, Inc., 5.50% convertible .06
bond June 21, 2004 (acquired 6/8/94, cost: $4,481,000) (2) $4,500,000 3,870
Bank of the Philippine Islands 2,306,300 13,964 .15
Benpres Holdings Corp.
(Global Depositary Receipts) (1) 2,293,210 16,626 .18
C&P Homes, Inc. 38,993,850 20,047 .22
Fil-Estate Land, Inc. 9,000,000 7,883 .09
Fortune Cement Corp. 22,579,000 11,393 .13
HI Cement Corp. 24,600,000 8,150 .09
International Container Terminal Services, Inc. 8,681,595 4,546
International Container Terminal Services, Inc., 6.00%
convertible bond February 19, 2000 (acquired 2/18/93, cost: .11
$4,000,000) (1)(2) $4,000,000 5,200
JG Summit Holdings, Inc., Class B 39,516,600 11,136
JG Summit Holdings, Inc., Class B
(Global Depositary Shares) 20,000 530
JG Summit Holdings, Inc., 3.50% convertible
Eurobonds December 23, 2003 $5,400,000 4,050
JG Summit Holdings, Inc.,
3.50% convertible bond December 23, 2003 .26
(acquired 12/9/93, cost: $9,870,000) (2) $9,870,000 7,402
Keppel Philippines Holdings, Inc., Class B (1) 272,084 31 -
Manila Electric Co., Class B 2,850,467 23,338 .26
Metropolitan Bank and Trust Co. 2,280,612 56,451 .62
Petron Corp. 7,589,062 2,572
Petron Corp. (Global Depositary Receipts) 309,543 4,334 .08
Philippine Airlines Inc. (1) 30,934,106 5,890 .07
Philippine Commercial International Bank, Inc. 1,066,200 14,008 .15
Philippine Long Distance Telephone Co., ordinary 86,250 4,746
Philippine Long Distance Telephone Co.
(American Depositary Receipts) 1,591,305 81,156
Philippine Long Distance Telephone Co., convertible preferred, 1.17
Series II (Global Depositary Receipts) 484,000 15,246
Philippine Long Distance Telephone Co., convertible
preferred, Series III (Global Depositary Shares) 87,000 4,437
Philippine National Bank (1) 919,071 10,937 .12
Pilipino Telephone Corp. (1) 3,095,100 2,622 .03
PR Holdings, Inc., subscription rights (aquired 7/8/92,
cost: $9,835,000) (1)(2) 2,236,600 2,822 .03
San Miguel Corp., Class B 23,048,048 101,812 1.12
SM Prime Holdings, Inc. 74,867,000 19,387 .21
Southeast Asia Cement Holdings, Inc. (1) 68,088,782 7,908 .09
Universal Robina Corp. 29,809,400 16,742 .18
---------- ----------
566,228 6.26
---------- ----------
POLAND - 0.49%
Bank Inicjatyw Gospodarczych BIG SA 5,237,365 7,314 .08
Bank Rozwoju Eksportu SA 574,000 17,235 .20
Kety SA (Zaklady Metali Lekkich)(1) 26,670 1,955 .02
Polifarb Wroclaw 1,294,778 7,324 .08
Zaklady Piwowarskie w Zywcu SA 217,611 10,105 .11
---------- ----------
43,933 .49
---------- ----------
PORTUGAL - 0.65%
Portugal Telecom ,SA 913,000 26,035
Portugal Telecom, SA (American Depositary Receipts) 951,500 26,880 .59
TELECEL - Comunicacoes Pessoais, SA (1) 87,800 5,608 .06
TVI-Televisao Independente, SA (1) 105,500 238 -
---------- ----------
58,761 .65
---------- ----------
RUSSIA AND FORMER REPUBLICS OF THE SOVIET UNION - 4.23%
Ao Torgovy Dom Gum (Russian Depoitary Trust Certificate) 280 7,840 .09
Gez Investments Holding Ltd.,Class A
(aquired 9/11/95,cost: $230,000) (1)(2) 2,870 390
Gez Investments Holding Ltd.,Class B .24
(aquired 9/11/95,Cost: $12,623,000) (1)(2) 157,793 21,420
Global Tele-Systems Ltd., warrants, expire February 2, 2001
(acquired 2/2/96, cost:$0) (1)(2) 1,944,444 8,944 .10
Irkutskenergo (Russian Depositary Trust Certificate) (1) 40 1,140 .01
JKX Oil & Gas PLC (1) 6,138,140 12,106
JKX Oil & Gas PLC 7.00% convertible bond June 30, 2001 .16
(acquired 6/6/96; cost: $2,000,000) (1)(2) 2,000,000 2,000
Kamaz (1) 3,615,000 4,392 .05
LUKoil Holding (Russian Depositary Trust Certificate) 60 3,488
1.33
LUKoil Holding (American Depositary Receipts) 2,519,900 117,175
Moscow City Telephone Network (MGTS) (Russian
Depositary Trust Certificate) 961 33,635 .37
Mosenergo Power Generation and Electrification
Amalgamation (Russian Depositary Trust Certificate) 1,900 19,190
Mosenergo Power Generation and Electrification .86
Amalgamation (American Depositary Shares) 1,921,900 58,618
New Century Capital Partners, LP
(acquired 12/7/95,cost: $13,243,000) (1)(2)(3) 13,125,000 13,243 .15
Nizhny-Non Svyaz (Russian Depositary Trust Certificate) 70 3,885 .04
Ramco Energy PLC 810,000 14,239 .16
RAO Gazprom (American Depositary Receipts)
(acquired 10/21/96, cost:$32,037,000) (1)(2) 1,909,800 33,899 .37
Russian Telecommunications Development Corp.
(acquired 12/22/93, cost: $3,800,000) (1)(2) 380,000 3,800
Russian Telecommunications Development Corp., .11
nonvoting ordinary(acquired 12/22/93, cost: $6,200,000)(1)(2) 620,000 6,200
St. Petersburg Telephone Network 12,913,020 13,559 .15
Star Mining Corp. NL (1) 19,740,000 1,646 .02
Xavier Corp. (1) 1,350,000 2,110 .02
---------- ----------
382,919 4.23
---------- ----------
SOUTH AFRICA - 4.13%
African Oxygen Ltd. 2,286,743 7,825 .08
Bidvest Group Ltd. 1,252,280 6,494 .07
Gold Fields of South Africa Ltd. 200,000 5,518 .06
Hudaco Industries 682,000 2,735 .03
International Pepsi-Cola Bottler Investments
(aquired 12/18/95,cost:$10,000,000) (1)(2)(3) 100,000 10,000 .11
Iscor Ltd. 33,949,251 24,249 .27
JD Group 2,083,078 9,801 .11
Malbak Ltd. 9,109,400 39,937 .44
Metro Cash and Carry Ltd. 7,320,800 24,267 .27
MIH Holdings Ltd. (1) 1,852,000 7,921 .09
Nasionale Pers Beperk, Class N 930,000 8,602 .10
Nedcor Ltd. 83,700 1,146
Nedcor Ltd. (Global Depositary Receipts) 1,245,931.84 17,053
Nedcor Ltd., warrants, expire September 30, 1997 (1) 306,934 767 .21
Rembrandt Group Ltd. 1,927,000 17,205 .19
Sage Group Ltd. 1,570,000 6,379 .07
Sasol Ltd. 9,323,576 110,663 1.22
South Africa Capital Growth Fund, LP, Class A
(acquired 8/25/95,cost:$1,900,000) (1)(2)(3) 1,900 1,900
South Africa Capital Growth Fund, LP, Class D .17
(acquired 8/25/95,cost:$13,650,000) (1)(2)(3) 13,650 13,650
South African Breweries Ltd. 2,270,528 57,540 .64
---------- ----------
373,652 4.13
---------- ----------
SOUTH KOREA - 4.75%
Anam Industrial Co., Ltd. 270,213 3,464 .04
Daegu Bank, Ltd. 275,000 3,261 .04
Daehan Asia Trust (International Depositary Receipts) 2,820 2,820 .03
Daehan Korea Trust (International Depositary Receipts) 500 288 -
Daewoo Corp. 257,738 1,973 .02
Daewood Securities Co., Ltd., nonvoting preferred 421,270 3,050
.32
Daewood Securities Co., Ltd.,ordinary (1) 2,023,742 26,183
Haitai Stores Co., Ltd. 16,747 128 -
Hanil Bank 4,983,280 34,306 .38
Housing & Commercial Bank New 13,610 212 -
Hyundai Motor Co. 278,340 7,268
Hyundai Motor Co., nonvoting preferred .18
(Global Depositary Receipts) 1,169,800 8,715
Kookmin Bank 901,600 14,649 .16
Korea Electric Power Corp. 2,974,790 86,860
Korea Electric Power Corp.
(American Depositary Receipts) 54,500 1,117
Korea Electric Power Corp., 1.01
5.0% convertible bond August 1, 2001 (1) $3,000,000 3,026
Korea First Bank (1) 1,852,680 9,412 .10
Korea Industrial Leasing Co., Ltd. 241,000 2,317 .03
Korea Long Term Credit Bank 349,841 6,141 .07
Korea Mobile Telecommunications Corp. 31,374 32,264 .36
Korea Pacific Trust (International Depositary Receipts) (1) 3,000 3,225 .04
Korea Zinc Co. Ltd. 279,000 5,299 .06
Kyongnam Bank 733,607 7,837 .09
LG Chemical Ltd., preferred 330,000 2,096 .02
LG Electronics Inc., nonvoting preferred 442,500 3,099
LG Electronics Inc. 34,244 435
LG Electronics Inc., non-voting preferred .07
(Global Depositary Receipts) 731,600 2,469
LG Electronics Inc.
(Global Depositary Receipts) 13,488 77
LG Securities Ltd., preferred (1) 590,460 3,329
.20
LG Securities Co., Ltd. (1) 1,441,648 14,716
Pacific Chemical Industrial Co. Ltd. 165,440 3,279 .04
Pohang Iron & Steel Co., Ltd. 564,710 32,294
Pohang Iron & Steel Co., Ltd. .37
(American Depositary Receipts) 71,000 1,438
Samsung Electronics Co., Ltd., nonvoting preferred 115,193 3,113
Samsung Electronics Co., Ltd. 673,841 40,160
Samsung Electronics Co., Ltd., nonvoting preferred .63
(Global Depositary Shares) 631,768 10,765
Samsung Electronics Co., Ltd.,
(Global Depositary Shares) 89,820 3,420
Seoul Asia Index Trust (International Depositary Receipts) 80 660 .01
Shinhan Bank 926,120 14,790 .16
Ssangyong Investment & Securities, Co., Ltd., nonvoting preferred (1) 61,090 333 -
SsangYong Oil Refining Co. Ltd. 135,000 2,964 .03
Yukong Ltd. 1,333,764 25,330
Yukong Chf, warrants, expire June 18, 1999 (1) 10,000 538 .29
---------- ----------
429,120 4.75
---------- ----------
SRI LANKA - 0.09%
Asian Hotel Corp. (1) 12,215,000 2,154 .03
Development Finance Corp. of Ceylon 1,258,310 5,770 .06
National Development Bank of Sri Lanka 96,200 333 -
---------- ----------
8,257 .09
---------- ----------
TAIWAN - 3.50%
Acer Computer International Ltd. 1,639,500 2,820 .03
Acer Inc. (1) 17,418,065 32,009
Acer Inc. .54
(Global Depositary Receipts) 1,799,000 16,731
Acer Peripherals 8,916,100 17,034 .19
Advance Semiconductor Engineering, Inc. (1) 19,407,600 37,431
Advance Semiconductor Engineering, Inc. .61
(Global Depositary Receipts) 1,798,300 17,488
Asia Corporate Partners Fund, Class B
(acquired 3/12/96; cost: $20,027,000) (1)(2)(3) 40,000 20,000 .22
China Steel Corp. 13,700,000 12,863
China Steel Corp. (American Depositary Receipts) .23
(acquired 5/21/92; cost: $6,354,000) (2) 407,000 8,166
INVENTEC (1) 2,195,000 13,339 .15
PRIMAX ELECTRONICS 5,467,985 12,038 .13
Seres Capital (Cayman Islands)
(acquired 3/12/96; cost:$25,000) (1)(2) 1.66 25
Seres Capital (Cayman Islands), nonvoting -
(acquired 3/12/96; cost: $125,000) (1)(2) 8.34 125
Siliconware Precision Industries Co., Ltd. (1) 6,483,800 13,685
Siliconware Precision Industries Co., Ltd. .22
(Global Depositary Receipts) (1) 547,840 6,081
Taiwan American Fund, nonvoting preferred (1) 600,000 8,400 .09
Taiwan Opportunities Fund Ltd., Series C (1) 200,092 2,226 .02
Taiwan Semiconductor Manufacturing Co. Ltd. (1) 32,344,800 66,502 .74
Ton Yi Industrial Corp. (1) 7,166,062 8,918 .10
U-Ming Marine Transport Corp. 1,687,750 1,640 .02
Unicap Electronics (1) 230,000 460 -
Wus Printed Circuit Co., Ltd. 4,089,000 7,812 .09
Yangming Marine Transport Corp. 8,346,000 11,055 .12
---------- ----------
316,848 3.50
---------- ----------
THAILAND - 2.09%
Alphatec Electronics PCL 791,000 6,077 .07
Ayudhya Jardine CMG Life Assurance 84,547 310 -
Bangkok Bank PCL 4,898,660 47,376
Bangkok Bank PCL, 3.25% convertible bond
March 3, 2004 (acquired 8/4/94, cost: $968,000) (2) $1,000,000 975
Bangkok Bank PCL, 3.25% convertible
Eurobonds March 3, 2004 3,630,000 3,539 .57
Bank of Ayudhya Public Co. Ltd. 4,667,300 11,012 .12
Charoen Pokphand Feedmill Public Co. Ltd. 1,575,600 5,714 .06
Dusit Thani PCL 990,000 1,081 .01
Electricity Generating Authority of Thailand 10,397,747 28,384 .31
Industrial Finance Corp. of Thailand 4,996,000 13,541 .15
KR Precision 1,299,100 8,866 .10
Nakhornthai Integrated Steels Co., Ltd. 11,213,400 4,920 .06
Post Publishing PCL 2,525,000 5,416 .06
Serm Suk PLC 210,166 4,098
.06
Serm Suk PLC, local registered 64,960 942
Siam City Bank PCL 1,681,855 1,574 .02
Siam Commercial Bank Public Co.Ltd. 832,100 6,036 .07
Swedish Motors Corp. Public Co. Ltd. 1,608,100 2,947 .03
Thai Farmers Bank PCL 2,683,610 16,744
.19
Thai Farmers Bank PCL, warrants, expire September 15, 2002 (1) 461,450 436
Thai Glass Industries PCL 1,272,200 4,366 .05
Thai Military Bank PCL 4,243,684 8,357 .09
Wattachak Public Co. Ltd.,
3.50% convertible bond December 6, 2003 $6,400,000 6,528 .07
---------- ----------
189,239 2.09
---------- ----------
TURKEY - 2.00%
Adana Cimento Sanayii TAS, Class A 63,984,854 3,427
.04
Adana Cimento Sanayii, TAS Class C 25,469,510 306
Brisa 3,227,000 1,445 .02
Ege Biracilik ve Malt Sanayii AS 37,745,919 8,103 .09
Is Bankasi AS 55,377,300 8,565 .10
Koc Holding AS, ordinary 121,496,692 21,315 .24
Migros Turk TAS 22,412,650 27,421 .30
Netas Northern Electric Telekomunikasyon AS 33,819,300 7,651 .08
Petrol Ofisi AS 51,000,000 13,656 .15
Trakya Cam Sanayii AS 345,570,525 17,551 .19
Turkiye Garanti Bankasi AS 39,871,618 1,802
Turkiye Garanti Bankasi AS (American Depositary Receipts)
(acquired 10/29/93; cost: $526,000)(2) 322,056 1,482 .04
Turkiye Sise ve Cam Fabrikalari AS 322,957,548 34,294 .38
Yapi ve Kredi Bankasi AS 1,350,954,270 33,680 .37
---------- ----------
180,698 2.00
---------- ----------
UNITED STATES - 0.03%
Freeport-McMoRan Copper & Gold Inc., Class A 90,000 2,531 .03
VIETNAM - 0.07%
Vietnam Frontier Fund
(acquired 7/21/94, cost: $3,000,000) (1)(2) 291,300 3,000 .03
Vietnam Investment Fund, preferred, units
(acquired 8/4/94, cost: $3,206,000) (1)(2)(3) 30 3,206
Vietnam Investment Fund, ordinary, units .04
(acquired 8/4/94, cost: less than $1,000) (1)(2)(3) 6 -
---------- ----------
6,206 .07
---------- ----------
MULTI NATIONAL - 1.95%
Abacan Resource Corp. (1) 5,170,000 44,718 .49
Armada Gold Corp., Class A (1) 2,600,000 2,391
Armada Gold Corp., warrants, expire February 18, 1997 .06
(acquired 10/21/96, cost:$2,750,000)(1)(2) 2,000,000 2,700
Co Financiere pour l'Europe Centrale SA (Global Depositary 54,495 1,313 .01
Receipts)
Diamondworks Ltd.,warrants, expire April 4, 1997
(acquired 12/5/96, cost:$2,209,000)(1)(2) 1,500,000 2,189 .02
Dragon Oil Placement (1) 203,600,000 4,365 .06
Emerging Markets Gold Fund, preferred
(acquired 1/28/94; cost: $7,876,000) (2)(3) 79,560 7,876
Emerging Markets Gold Fund, ordinary .12
(acquired 1/28/94; cost $96,000) (1)(2)(3) 76,500 3,193
New Asia East Investment Fund, Class A (1)(2)(3)
(acquired 5/23/96, cost:$2,936,000) (1)(2)(3) 293,600 2,929
New Asia East Investment Fund, Class B, non-voting (1)(2)(3) .47
(acquired 5/23/96, cost:$40,064,000)(1)(2)(3) 4,006,400 39,972
New Europe East Investment Fund, Class B
(acquired 6/4/93, cost $54,500,000) (1)(2) 436 60,796 .67
Sutton Resources Ltd (1) 345,900 4,154
Sutton Resources Ltd., warrants, expire September 30,1998 .05
(acquired 3/21/96, cost:$0) (1)(2) 155,000 311
Timbuktu Gold (1) 148,380 206 -
--------- -------
177,113 1.95
MISCELLANEOUS - 0.51% ---------- ----------
Equity-type securities in initial period of acquisition 105,131,361 45,945 .51
---------- ----------
TOTAL EQUITY-TYPE SECURITIES (cost: $6,303,318,000) ---------- ----------
7,631,210 84.40
---------- ----------
Principal Market Percent
Amount Value of Net
BOND & NOTES (000) (000) Assets
- ---------------------------------------------------------------- -------------- ---------- ----------
ARGENTINA - 0.96%
Republic of Argentina
9.25% February 23, 2001 6,000 6,105 .07
Republic of Argentina
11.00% October 9, 2006 31,500 33,012 .36
Republic of Argentina Bocon PIK
4.674% April 1, 2001 (4) ARP2,000 1,629 .02
Republic of Argentina Bocon PIK
4.674% April 1, 2007 (4) ARP41,550 24,688 .27
Republic of Argentina Bearer Bond Series L 6.625%
March 31, 2005 (4) $14,945 13,025 .15
Republic of Argentina Eurobonds Series L
5.25% March 31, 2023 (4) 12,250 7,767 .09
---------- ----------
86,226 .96
---------- ----------
BRAZIL - 0.67%
Comtel Brasileira Ltda. 10.75% September 26, 2004
(acquired 9/18/96, cost:$2,400,000)(2) 2,400 2,481 .03
Federal Republic of Brazil Capitalization Bond PIK
8.00% April 15, 2014 13,217 9,780 .11
Federal Republic of Brazil Bond Series EI-L
6.50% April 15, 2006 (4) 1,750 1,529 .03
Federal Republic of Brazil Debt Conversion Bond Series L
Frn .65625% April 15, 2012 1,750 1,330 .01
Federal Republic of Brazil Debt Conversion Bond Series LI
6.5625% April 15, 2012 24,000 18,240 .20
Multicanal Participacoes SA Class B
12.625% June 18, 2004 10,300 11,111 .12
MYDFA Trust 6.6875% September 15, 2007
(acquired 10/2/96, cost:$14,443,000)(2) 17,000 14,569 .16
Tevecap SA 12.625% November 26, 2004
(acquired 11/21/96, cost:$1,500,000)(2) 1,500 1,536 .01
---------- ----------
60,576 .67
---------- ----------
BULGARIA - 0.44%
Republic of Bulgaria Interest Arrears Bond
6.6875% July 28, 2011 17,600 9,064 .10
Republic of Bulgaria Front Loaded Interest Reduction Bond
Series A 2.25% July 28, 2012 80,550 30,911 .34
---------- ----------
39,975 .44
---------- ----------
COLUMBIA - 0.02%
Comunicacion Cellular SA
0%/13.125% November 15, 2003 (1)(5) 3,000 1,995 .02
---------- ----------
ECUADOR - 0.18%
Republic of Ecuador Discount Bond
6.50% February 28, 2005 (4) 3,250 2,259 .03
Republic of Ecuador Past Due Interest Bonds
6.50% February 27, 2015 (4) 22,470 13,819 .15
---------- ----------
16,078 .18
---------- ----------
INDIA - 0.01%
Flex Industries Ltd. 13.50% December 31, 2004 INR 29,929 837 .01
---------- ----------
MEXICO - 0.53%
Grupo Televisa, SA
0%/13.25% May 15, 2008 (1)(5) $3,000 1,995 .02
Tubos de Acero de Mexico, SA
13.75% December 8, 1999
(acquired 11/23/94, cost: $3,707,000)(2) 3,750 4,275 .05
United Mexican States Discount Bonds Series A
UNIT 6.45313% December 31, 2019 1,750 1,509 .02
United Mexican States Discount Bonds Series B
UNIT 6.375% December 31, 2019(4) 1,750 1,509 .02
United Mexican States Discount Bonds Series C
UNIT 6.375% December 31, 2019(4) 3,750 3,234 .03
United Mexican States Discount Bond Series D
6.35156% December 31, 2019 1,000 863 .01
United Mexican States Government Bond
7.5625% August 6, 2001 (acquired 7/29/96,
cost: $4,977,000) (2)(4) 5,000 5,011 .05
United Mexican States Government Bond
11.375% September 15, 2016 12,045 12,599 .14
United Mexican States Government Bond
11.50% May 15, 2026 3,330 3,520 .04
United Mexican States Government Bond
9.75% February 6, 2001 13,250 13,714 .15
---------- ----------
48,229 .53
---------- ----------
PANAMA - 0.28%
Republic of Panama Interest Reduction Bond 3.50% due
July 17, 2014 (acquired 11/8/95, cost: $14,742,000)(2)(4) 26,114 18,149 .20
Republic of Panama Past Due Interest Bond 6.75% due
July 17, 2016 (acquired 6/21/96, cost:$6,371,000)(2)(4) 9,693 7,585 .08
---------- ----------
25,734 .28
---------- ----------
PERU - 1.29%
Republic of Peru /Agent-Bankers Trust Company/
Loan Participation Agreements
(Participation-Citibank, NA.) (1)(4)(6)(7) 11,739 6,813
Republic of Peru /Agent-Chemical Bank/
Loan Participation Agreements
(Participation-Citibank, NA)(1)(4)(6)(7) 3,544 2,082
Republic of Peru/Agent-Chemical Bank/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(4)(6)(7) 4,085 2,380
Republic of Peru/Agent-Citibank, NA/
Loan Participation Agreements
(Participation-Citibank, NA)(1)(4)(6)(7) 23,554 13,090
Republic of Peru/Agent-Citibank, NA/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(4)(6)(7) 44,026 25,615
Republic of Peru/Agent-Citibank, NA/
Loan Participation Agreements
(Participation-Salomon Brothers) (1)(4)(6)(7) 22,129 11,722
Republic of Peru/Agent-Morgan Guaranty Trust NA/
Loan Participation Agreements
(Participation-Chase Manhattan Bank, NA) (1)(4)(6)(7) 491 297
Republic of Peru/Agent-Morgan Guaranty Trust/NA/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(4)(6)(7) 32,233 19,041
Republic of Peru/Agent-Wells Fargo Bank
Loan Participation Agreements
(Participation-Citibank, NA) (1)(4)(6)(7) 21,476 12,584
Republic of Peru/Agent-Wells Fargo Bank/
Loan Participation Agreements
(Participation-Morgan Guaranty Trust, NA) (1)(4)(6)(7) 38,941 22,699 1.29
---------- ----------
116,323 1.29
---------- ----------
PHILIPPINES - 0.13%
Republic of Philippines Front Loaded Interest Reduction
Bond Series B 5.00% due June 1, 2008 12,250 11,576 .13
---------- ----------
11,576 #REF!
---------- ----------
RUSSIAN FEDERATION - 0.06%
Vneshekonombank/A 8.00%
December 15, 2020 (1) DEM10,000 5,429 .06
---------- ----------
10,000 5,429 .06
VENEZUELA - 0.54%
Republic of Venezuela (Front Loaded Interest Reduction
Bond) Series A Eurobonds 6.625% March 31, 2007 (4) $2,750 2,458 .03
Republic of Venezuela (Front Loaded Interest Reduction
Bond) Series B Eurobonds 6.4375% March 31, 2007 (4) 750 670 .01
Republic of Venezuela Debt Conversion Bond
6.50% December 18, 2007 (4) 51,500 45,449 .50
---------- ----------
48,577 .54
MULTI NATIONAL - 0.28%
Global Telesystems Group Loan 10.00% February 1, 2001
(acquired 2/2/96, cost; $25,820,000)(2) 27,985 25,725 .28
---------- ----------
TOTAL BONDS AND NOTES (cost: $417,472,000) 487,280 5.39
---------- ----------
SHORT-TERM SECURITIES
CORPORATE SHORT-TERM NOTES - 9.37%
ABN AMRO North America Finance Inc. 5.29% due 1/21/97 50,000 49,846 .55
Barclays U.S. Funding Corp.5.28% due 1/22/97 54,100 53,924 .60
Canada Bills CP 5.23% - 5.36% due 1/22-2/14/97 35,200 34,977 .39
Canadian Wheat Board 5.30%-5.40% due 2/19-3/13/97 22,900 22,664 .25
Commonwealth BK CP 5.295% due 1/8/97 30,000 29,965 .33
Commonwealth Bank of Australia 5.34% due 2/12/97 15,000 14,904 .16
Daimler-Benz North America Corp. 5.30%-5.53% due 1/27-3/6/97 39,100 38,804 .43
Elec De France CP 5.28%-5.29% due 1/28-2/6/97 64,100 63,822 .71
France Telecom 5.31% due 1/14/97 14,423 14,393 .16
Glaxo Wellcome PLC 5.30%-5.31% due 1/21-2/11/97 26,500 26,387 .29
Halifax Building Society 5.40%-5.45% due 1/3-1/10/97 71,200 71,130 .79
Heinz (H.J.) Co. 5.30%-5.40% due 1/9-1/28/97 33,100 33,011 .36
International Lease Finance Corp. 5.29%-5.45% due 1/29-2/7/97 43,300 43,065 .48
Mobile Australia Finance Co. 5.30% due 2/28/97 62,200 61,634 .68
National Australia Funding (Delaware) Inc., 5.28%-5.41% due 103,400 103,293 1.14
1/2-1/9/97
RTZ America Inc.5.30%-5.40% due 2/10-3/19/97 35,300 35,042 .39
SmithKline Beecham PLC 5.27% due 1/24-1/28/97 16,500 16,436 .18
Societe Generale N.A. Inc. 5.29% due 1/15/97 8,900 8,880 .10
Sony Capital Corp. 5.31% -5.47% due 1/13-2/12/97 65,300 65,095 .72
Svenska Handelsbanken Group 5.30%-5.33% due 1/17-3/17/97 27,000 26,753 .29
Toyota Motor Credit Corp. 5.30%-5.32% due 2/3-2/14/97 33,700 33,501 .37
---------- ----------
847,526 9.37
---------- ----------
NON-U.S. GOVERNMENT SHORT -TERM OBLIGATIONS - 0.50%
Certificados de la Tesoreria due 7/31-9/4/97 MXN 6,071,657 6,574 .07
Credit Suisse First Boston, Structured Note linked to ruble-
denominated, Russian government security interest rates
due 2/12/97 $38,774 6,675 .07
Mesbla SA Series 2
13.25% convertible bond February 1, 1997 (1) R$ 35,460,000 138 -
Polish Government Treasury Bills due 1/15-5/21/97 PLZ 62,100,000 21,216 .23
United Mexican States Government Bond
10.8047% July 21, 1997 (4) $10,500 10,758 .13
---------- ----------
45,361 .50
NON-U.S. CURRENCY - 0.66%
Chilean Peso CHP4,770,671,371 11,249 .12
New Taiwanese Dollar NT$ 1,330,699,484 48,424 .54
---------- ----------
59,673 .66
---------- ----------
TOTAL SHORT-TERM SECURITIES (cost:$953,905,000) 952,560 10.53
---------- ----------
TOTAL INVESTMENT SECURITIES (cost: $7,674,695,000) 9,071,050 100.32
Excess of liabilities over cash and receivables 28,851 .32
---------- ----------
NET ASSETS $9,042,199 100.00
========== ==========
</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, 1996, the total market value and cost of such
securities was $536,087,000 and $497,671,000, respectively, and the market
value represented 5.93% of net assets. Such securities, excluding convertible
bonds and American Depositary Receipts, are valued at fair value.
3. Includes an unfunded capital commitment representing a binding commitment
made by the fund which may be paid in the future.
4. Coupon rate may change periodically.
5. Represents a zero coupon bond which will convert to a coupon-bearing
security at a later date.
6. Participation interests were acquired through the financial instituition
indicated parenthetically.
7. Security is currently in default.
NON-U.S. CURRENCY SYMBOLS:
ARP - Argentine Peso
CHP - Chilean Peso
DEM- German Deutsche Mark
INR - Indian Rupee
MXN -Mexican Peso
MYR - Malaysian Dollar
NT$ - New Taiwanese Dollar
PLZ - Polish Zloty
R$ - Brazilian Real
See Notes to Financial Statements
EMERGING MARKETS GROWTH FUND
<TABLE>
<CAPTION>
<S> <C>
EQUITY-TYPE SECURITIES ADDED TO THE EQUITY-TYPE SECURITIES ELIMINATED FROM THE
PORTFOLIO SINCE JUNE 30, 1996 PORTFOLIO SINCE JUNE 30, 1996
- ------------------------------------------------------------------------------------------
Acer Computer International AECI
Acer Peripherals Alpargatas
African Oxygen Bangkok Metropolitan Bank
Anam Industry Cementos Norte Pacasmayo
Bank of the Philippine Islands Cheil Foods & Chemicals
Bharat Petroleum Chernogorneft
Brisa Chia Hsin Cement
Carso Global Telecom Compania de Inmuebles y Valores Caracas
Cie Financiere pour l'Europe Centrale Fabrica Nacional de Cementos
Consorcio Real Brasileiro de Administracao Golden Shamrock Mines
Copel Gruma
Diamondworks Grupo Financiero Banorte
Dragon Oil Placement Hocheng
Eletropaulo-Electricidade de Sao Paulo India Magnum Fund
Engro Chemical Pakistan Korea Asia Fund
Fil-Estate Land Maanshan Iron & Steel
Global Tele-Systems Malaysian International Shipping
Grupo Embotellador de Mexico Mavesa
Hap Seng Consolidated MBK Properties & Development
Housing & Commercial Bank Mecanica Pesada
Hudaco Industries Morgan Stanley Perqs (Telebras)
Inventec Petrobras Distribuidora
Irkutskenergo PT Astra International
Is Bankasi PT Bakrie & Brothers
JD Group PT Fajar Surya Wisesa
Kety SA (Zaklady Metali Lekkich) PT Japfa Comfeed Indonesia
Kookmin Bank PT Supreme Cable Manufacturing
KR Precision R.O.C Taiwan Fund
Malayan Banking Siderca
Multicanal Participacoes Sin-Yih Ceramic
Nasionale Pers Beperk Venezolana de Cementos
Nizhny-Non Svyaz Want Want Holdings
Philippine Airlines
Polifarb Wroclaw
PT PP London Sumatra
Primax Electronics
PT Ramayana Lestari Sentosa
Ramco Energy
RAO Gazprom
SM Prime Holdings
Sociedad Comercial del Plata
South African Breweries
St. Petersburg Telephone Network
TELECEL - Comunicacoes Pessoais
Telefonica del Peru
Timbuktu Gold
Trakya Cam Sanayii
Unicap Electronics
Wus Printed Circuit
Xavier
Yizheng Chemical Fibre
</TABLE>
***
EMERGING MARKETS GROWTH FUND
<TABLE>
<CAPTION>
<S> <C> <C>
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
at December 31, 1996 (dollars in thousands)(Unaudited)
ASSETS:
Investment securities at market
(cost: $7,674,695) $9,071,050
Cash 3,559
Receivables for--
Sales of investments $13,625
Sales of fund's shares 15,312
Open forward currency contracts 99
Dividends and accrued interest 46,281 75,317
----------------- ------------------
9,149,926
------------------
Liabilities:
Non-U.S. taxes payable 767
Payables for--
Purchases of investments 15,800
Unfunded capital commitments 80,770
Management services 4,863
Accrued expenses 5,527 106,960
----------------- ------------------
107,727
------------------
Net Assets at December 31, 1996 --
Equivalent to $55.46 per share on
163,038,108 shares of $0.01 par value
capital stock outstanding (authorized
capital stock -- 200,000,000 shares) $9,042,199
==============
STATEMENT OF OPERATIONS
at December 31, 1996 (dollars in thousands)(Unaudited)
Investment Income:
Income:
Dividends $56,059
Interest 93,642 $149,701
-----------------
Expenses:
Management services fee 28,261
Custodian fee 4,870
Registration statement and prospectus 541
Auditing and legal fees 150
Reports to shareholders 4
Other expenses 505 34,331
----------------- ------------------
Income before non-U.S. taxes 115,370
Non-U.S. taxes (271)
------------------
Net investment income 115,099
------------------
Realized Gain and Unrealized
Depreciation on Investments:
Realized gain before non-U.S. taxes 217,883
Non-U.S. taxes (251)
-----------------
Net realized gain 217,632
Net change in unrealized appreciation
on investments (326,460)
Net unrealized depreciation on open forward
currency contracts (195)
-----------------
Net unrealized depreciation (326,655)
Non-U.S. taxes 8,746 (317,909)
----------------- ------------------
Net realized gain and unrealized
depreciation on investments (100,277)
------------------
Net Increase in Net Assets Resulting
from Operations $14,822
==============
Statement of Changes in Net Assets (dollars in thousands)
Six Months Ended Year Ended
December 31, 1996/1/ June 30, 1996
-------------------- ------------------
Operations:
Net investment income $115,099 $167,366
Net realized gain on investments 217,632 55,275
Net unrealized appreciation (depreciation)
on investments (317,909) 781,427
------------------ ------------------
Net increase in net assets
resulting from operations 14,822 1,004,068
------------------ ------------------
Dividends and Distributions Paid
to Shareholders:
Dividends from net
investment income (161,634) (169,255)
Distributions from net realized
gain on investments (160,065) (140,664)
------------------ ------------------
Total dividends and
distributions (321,699) (309,919)
------------------ ------------------
Capital Share Transactions:
Proceeds from shares sold:
10,444,995 and 34,530,418 shares, respectively 586,185 1,882,259
Proceeds from shares issued in
reinvestment of net investment
income dividends and
distributions of net realized
gain on investments:
5,813,269 and 5,829,211 shares,
respectively 312,231 302,442
------------------ ------------------
Net increase in net assets
resulting from capital share
transactions 898,416 2,184,701
------------------ ------------------
Total Increase in Net Assets 591,539 2,878,850
Net Assets:
Beginning of period 8,450,660 5,571,810
------------------ ------------------
End of period (including excess distributions
over net investment income: $50,484 and $3,949,
respectively $9,042,199 $8,450,660
================== ===============
</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 fund's investment objective is to seek long-term
capital growth through investment in developing country equity securities. The
preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates. 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. 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. 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.
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
and premiums on securities purchased are amortized over the life of the
respective securities. 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 $4,870,000 includes $86,000 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%. Dividend and interest income of the fund derived in
Pakistan is subject to non-U.S. taxes at a rate of 43%. 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, 1996, net unrealized appreciation on investments,
excluding forward currency contracts, for federal income tax purposes
aggregated $1,361,135,000, net of accumulated deferred taxes totaling $145,000
on net unrealized appreciation of Chilean securities, of which $2,136,593,000
related to appreciated securities and $775,458,000 related to depreciated
securities. During the six months ended December 31, 1996, the fund realized,
on a tax basis, a net capital gain of $219,808,000 on securities transactions.
The cost of portfolio securities, excluding forward currency contracts, for
federal income tax purposes was $7,709,770,000 at December 31, 1996.
4. The fee of $28,261,000 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, 1996, accumulated undistributed net realized gain on
investments was $88,625,000 and additional paid-in capital was $7,617,609,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,583,344,000 and $903,940,000, respectively, during
the six months ended December 31, 1996.
Dividend and interest income is recorded net of non-U.S. taxes paid. For
the six months ended December 31, 1996, such non-U.S. taxes were $6,978,000.
Net realized currency losses on dividends, interest, withholding taxes
reclaimable, and purchases and sales of non-U.S. equity-type securities and
bonds were $6,755,000 for the six months ended December 31, 1996.
The fund may enter into forward currency contracts, which represent
agreements to exchange currencies of different countries at specified future
dates at specified rates. The fund purchased forward currency contracts to
hedge the foreign exchange exposure in certain securities held by the fund
which are pegged to or denominated in various non-U.S. currencies. 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, 1996, the fund had outstanding forward currency
contracts to sell non-U.S. currencies as follows:
NON-U.S. CURRENCY SALE CONTRACTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Contract Amount U.S. Valuationat 12/31/96
--------------------------------- ------------------------------------
Non-U.S. U.S. Amount (Depreciation)
- ---------------------- -------------- -------------- ---------------- -------------
French francs
expiring 1/15/97 FF4,862,000 $ 949,000 $ 939,000 $ 10,000
German deutschemarks
expiring 1/15-3/10/97 DEM15,265,000 10,096,000 9,943,000 153,000
Pound sterling
expiring 1/15/97 Pound964,000 1,515,000 1,653,000 (138,000)
Swiss francs
expiring 1/15/97 SFR1,209,000 979,000 905,000 74,000
--------------
$ 99,000
==============
</TABLE>
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Year
Six Months ended
Ended June 30
12/31/96 /1/ 1996 1995 1994 1993 1992
Net Asset Value, Beginning of
Period $57.57 $52.36 $58.75 $44.95 $38.64 $32.73
-------- -------- -------- -------- ------- -------
Income from Investment
Operations:
Net investment income .75 1.30 .87 .53 .62 .55
Net realized and unrealized
gain (loss) on investments
before non-U.S. taxes (.88) 6.49 (.79) 15.29 7.33 8.87
Non-U.S. taxes .07 (.01) (.03) (.39) .06 (.28)
-------- -------- -------- -------- ------- -------
Total income (loss) from
investment operations (.06) 7.78 .05 15.43 8.01 9.14
-------- -------- -------- -------- ------- -------
Less Distributions:
Dividends from net
investment income (1.03) (1.30) (.63) (.49) (.56) (.56)
Distributions from net
realized gains (1.02) (1.27) (5.81) (1.14) (1.14) (2.67)
-------- -------- -------- -------- ------- -------
Total distributions (2.05) (2.57) (6.44) (1.63) (1.70) (3.23)
-------- -------- -------- -------- ------- -------
Net Asset Value, End of Period $55.46 $57.57 $52.36 $58.75 $44.95 $38.64
======= ======= ======= ======= ======= =======
Total Return 0.01% /2/ 15.49% (1.22)% 34.33% 21.55% 29.73%
Ratios/Supplemental Data:
Net assets, end of period
(in millions) $9,042 $8,451 $5,572 $4,170 $2,574 $1,561
Ratio of expenses to average
net assets .40% /2/ .84% .91% 1.00% 1.01% 1.11%
Ratio of expenses and non-U.S.
taxes to average net assets .40% /2/ .85% .94% 1.04% 1.07% 1.18%
Ratio of net income to average
net assets 1.34% /2/ 2.54% 1.70% .91% 1.82% 1.84%
Average commissions paid per share /3/ $0.12 $0.10 $0.02 $0.01 $0.02 $0.02
Portfolio turnover rate 11.68% /2/ 17.78% 23.75% 18.13% 11.97% 16.03%
</TABLE>
1 Unaudited
2 Based on operations for the period shown and, accordingly, not representative
of a full year's operations.
3 Brokerage commissions paid on portfolio transactions increase the cost of
securities purchased or reduce the proceeds of securities sold and are not
separately reflected in the fund's statement of operations. Shares traded on a
principal basis (without commissions), such as fixed-income transactions, are
excluded. Generally, non-U.S. commissions are lower than U.S. commissions when
expressed as cents per share but higher when expressed as a percentage of
transactions because of the lower per-share prices of many non-U.S. securities.
