EMERGING MARKETS
GROWTH FUND
[cover: globe]
Semi-Annual Report
For the Six Months Ended December 31, 1998
Seeks Long-Term Growth Of Capital by Investing in Companies
Operating in Developing Countries Around the World
FELLOW SHAREHOLDERS:
The first half of our 1999 fiscal year--the six months ended December 31--was
another rocky period for emerging markets. Prices took a hard tumble after
Russia devalued the ruble and defaulted on several debt issues. In August
alone, the unmanaged Morgan Stanley Capital International Emerging Markets Free
(EMF) Index plunged 28.9%.* This was the largest one-month drop in the index's
11-year history and greatly exceeded the 18.9% decline for the final six months
of the prior fiscal year.
* All percentage gain/loss figures are in U.S. dollars and include reinvestment
of distributions unless otherwise indicated.
After the August selloff, stock prices recovered in a number of markets. As a
result, during the months of September, October and November, the EMF Index
gained just over 27%. It finished the fiscal period down a comparatively modest
8%. (After the period ended, many markets, especially those in Latin America,
bounced around on news that the Brazilian real was being devalued.)
Emerging Markets Growth Fund (EMGF) tracked the index in the early part of the
fiscal half year. In the gut-wrenching month of August, its share value also
fell 28.9%. The fund trailed the index slightly during the subsequent rally,
however, and finished the period with an 11.9% decline.
Looking back over the past 12 months, EMGF and the EMF Index each went down
about 25%. However, as you can see from the table at the right, the fund held
its ground much better than the index for the three- and five-year periods
ended December 31. The 10-year comparison remains highly favorable, with EMGF
recording a total return more than double the return for the index.
STRUCTURAL CHANGES IN INDEX
The EMF Index has undergone major changes affecting comparisons with the fund's
results. At the beginning of September, the index's Korean component doubled in
size after the balance of its market capitalization was added to the EMF
calculation (South Korea had been 50% weighted instead of 100% since 1996
because of foreign ownership limitations). This change took place just before a
huge rally that drove the South Korean market up 116% between mid-September and
the end of December. The upturn was fueled mainly by an enthusiastic response
to the easing of restrictions governing foreign ownership of local financial
institutions. During those months, South Korea became the third-largest
component in the index. The fund finished the half year significantly
underweighted in that market.
Other structural changes in the EMF Index were related to Brazil, which became
a smaller component, and Malaysia, once the index's largest component. Malaysia
was removed entirely because of currency controls imposed by its government. It
is worth recalling that the composition of the index has undergone similar
alterations in prior years, often with considerable impact on comparisons with
EMGF's results. We estimate that the changes in the first half of fiscal 1999
accounted for about a third of the difference between our results and those
recorded by the index.
EMGF Total Returns vs. Morgan Stanley Capital
International Emerging Markets Free (EMF) Index
for periods ended 12/31/98 (with distributions reinvested)
<TABLE>
<CAPTION>
Emerging MSCI
Markets Emerging
Growth Fund Markets
(EMGF) Annualized Free Index Annualized
<S> <C> <C> <C> <C>
6 Months -11.94% -- -7.98% --
12 Months -24.88 -- -25.34 --
3 Years -4.13 -1.40% -30.01 -11.21%
5 Years -12.37 -2.61 -38.51 -9.27
10 Years +390.63 +17.24 +182.61 +10.95
</TABLE>
SOUND LONG-TERM INVESTMENTS
Emerging Markets Growth Fund held a number of stocks that hurt the fund's
performance for the latest six-month period as well as several which made a
strongly positive contribution to our results. While we were underweighted
relative to the EMF Index in South Korea, we were helped by our substantial
investment in Samsung Electronics, the fund's second-largest holding (see page
9). For the six months, Samsung rose 123.8%. EMGF's largest single investment,
Telefonos de Mexico (Telmex), held its ground quite well, recording an increase
of 1.5% for the six months while the Mexican market as a whole was falling
14.5%.
Percent Change in Key Markets/1/
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended 12/31/98
Expressed in Expressed in
U.S. Dollars Local Currency
Argentina -9.4% -9.5%
Brazil -28.2 -25.0
Chile -9.2 -8.7
China (Free)/2/ -11.0 -11.0
Colombia -17.4 -6.0
Czech Republic -6.2 -13.7
Greece 22.9 13.1
Hungary -8.1 -9.5
India -6.4 -6.2
Indonesia(Free)/2/ 62.5 -12.7
Israel -12.3 -2.6
Jordan 3.5 3.6
Malaysia(Free)/2/3/ -1.1 29.5
Mexico (Free)/2/ -14.5 -5.6
Pakistan 3.8 10.4
Peru -33.6 -29.3
Philippines (Free)/2/ 18.3 10.3
Poland -19.2 -18.6
Russia -58.2 --/4/
South Africa -15.6 -15.7
South Korea 128.4 100.0
Sri Lanka 4.3 9.1
Taiwan -5.0 -10.9
Thailand (Free)/2/ 64.2 41.0
Turkey -44.6 -34.4
Venezuela -6.3 -4.4
Emerging Markets
Growth Fund -11.9
</TABLE>
/1/ Including reinvestment. All indexes are compiled by Morgan Stanley Capital
International and are unmanaged.
/2/ The fund is invested in the "free" Chinese, Indonesian, Malaysian,
Mexican, Philippine and Thai stock markets, which consist of securities that
can be purchased by investors other than resident nationals.
/3/ Malaysia was removed from the Emerging Markets Free Index as of 11/30/98.
/4/ Index is quoted in U.S. dollars only.
The fund's results benefited, too, from our cash position in U.S. dollars
(about 8% of net assets throughout most of the half year, including cash
equivalents) and from our holdings of local currency deposits and short-term
financial instruments. Our sizable position in emerging markets debt (8% of net
assets on December 31) was, on the whole, a positive influence on results.
Although our small position in Russian bonds fared poorly, many of our
investments in government and corporate issues in Latin America and elsewhere
did well.
The fund's comparative results were hurt by our large exposure in Brazil, where
the stock market felt the full effects of the Asian contagion and the
repercussions from the events in Russia. Our Russian equity holdings were also
hit hard. The largest--Unified Energy System--dropped 76.4% for the six months.
We were hurt, too, by our fairly heavy concentration in Turkish stocks,
including three banks that make up only 1% of the index but account for a
little more than 2% of the fund's net assets. They are Yapi ve Kredi Bankasi
(-54.7%), Turkiye Is Bankasi (-35.6%), and Turkiye Garanti Bankasi (-32.8%).
The Turkish market, which has a history of sharp moves up and down, fell 44.6%,
chiefly because of the spillover effect from the Russian crisis. It is worth
noting that a number of our holdings in these countries have helped our results
in the past, and we are confident that, by and large, they represent sound
long-term investments in well-managed companies.
AN ATTRACTIVE OPPORTUNITY
We should remind ourselves that the rocky fiscal half year we have just
completed was a continuation of the bear market that began in 1994. The nadir
may have been reached this past September, when the EMF Index, on a total
return basis, reached a level 55% below its 1994 high. It is not absolutely
clear, however, that we have seen the end of the downslide. The decision to
allow the Brazilian real to float freely has introduced a new element of
uncertainty into the financial markets. Meanwhile, in some countries where we
invest, the near-term economic outlook has been deteriorating, and the increase
in the risk premium associated with falling securities prices threatens to have
a further damp-ening effect on business activity.
Where the Fund's Assets Are Invested
<TABLE>
<CAPTION>
PERCENT OF NEW ASSETS MARKET VALUE
OF HOLDINGS
MSCI EMF INDEX/1/ 12/31/98
12/31/97 6/30/98 12/31/98 6/30/98 12/31/98 (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASIA/PACIFIC
China .6% .7% .6% .7% .7% $78,285
Hong Kong .3 .7 .6 -- -- 78,251
India 6.6 5.6 4.8 6.5 7.9 617,559
Indonesia 1.9 1.4 2.0 .9 1.8 254,065
Malaysia 1.2 .9 .9 5.0 -- 115,218
Pakistan .5 .1 .1 .4 .4 10,827
Philippines 2.5 2.7 3.1 1.6 2.1 398,739
South Korea 1.7 2.1 5.4 2.0/2/ 10.7/2/ 685,241
Sri Lanka .1 .1 .1 .1 .1 7,592
Taiwan 5.9 6.5 7.1 9.4/3/ 9.9/3/ 914,472
Thailand .4 .5 .7 1.5 2.8 82,907
Vietnam .1 -- -- -- -- 4,319
21.8 21.3 25.4 28.1 36.4 3,247,475
LATIN AMERICA
Argentina 8.6 8.7 8.6 5.0 4.6 1,098,184
Brazil 16.5 16.1 12.3 16.6 11.9 1,568,773
Chile 2.1 3.2 3.7 4.6 4.5 475,843
Colombia .1 -- -- .8 .8 --
Ecuador .2 .1 -- -- -- 4,153
Mexico 12.1 10.8 12.5 12.1 11.3 1,599,637
Panama .1 .7 1.0 -- -- 129,923
Peru 1.6 2.0 1.7 1.3 1.0 222,487
Venezuela .5 1.3 .9 1.0 1.0 108,787
41.8 42.9 40.7 41.4 35.1 5,207,787
EASTERN EUROPE
Bulgaria .3 .2 .2 -- -- 20,183
Czech Republic .2 .3 .5 1.3 1.1 68,483
Hungary .6 .9 1.0 1.6 1.6 130,183
Kazakhstan -- -- -- -- -- 896
Poland .9 1.4 1.8 .7 1.4 226,874
Republic of Croatia .5 .8 .9 -- -- 109,385
Russian Federation/4/ 6.5 3.8 1.2 2.9 1.3 152,240
Slovakia .1 .1 -- -- -- 5,568
Ukraine .1 .1 -- -- -- 3,188
9.2 7.6 5.6 6.5 5.4 717,000
OTHER MARKETS
Botswana -- -- -- -- -- 270
Egypt .1 .1 .1 -- -- 15,002
Ghana .2 .2 .1 -- -- 20,359
Greece 1.0 2.1 2.6 5.0 7.3 332,016
Kenya -- -- -- -- -- 761
Mauritius .1 .1 .1 -- -- 7,909
Morocco .2 .3 .3 -- -- 37,356
Nigeria -- -- .1 -- -- 7,506
Portugal 1.4 1.6 .9 -- -- 115,420
South Africa 4.8 4.5 4.7 11.9 10.3 600,050
Turkey 5.0 6.0 3.9 3.3 2.0 501,805
12.8 14.9 12.8 20.2 19.6 1,638,454
Multinational 2.0 2.6 1.9 245,497
Other/5/ .3 .5 1.5 195,586
Cash & Equivalents 12.1 10.2 12.1 1,545,982
TOTAL 100.0% 100.0% 100.0% $12,797,781
</TABLE>
/1/ Morgan Stanley Capital International Emerging Markets Free (EMF) Index
also includes Israel (3.6% at 6/30/98 and 3.3% at 12/31/98) and Jordan (0.2% at
6/30/98 and 0.2% at 12/31/98). A dash indicates that the market is not included
in the index. Source: Morgan Stanley Capital International Perspective.
/2/ In September 1998, South Korea's weighting in the index was increased to
reflect 100% of that country's market capitalization instead of 50%.
/3/ In September 1996, Taiwan was added to the EMF Index; its weighting
reflects 50% of that country's market capitalization.
/4/ Includes investments in companies incorporated outside the region that
have significant operations in the region.
/5/ Includes stocks in initial period of acquisition. Also may include
investments in markets where the holdings represent a percentage of net assets
of less than 0.05%.
Although the economies and equity markets in many developing countries are not
turning around as fast as one might hope, we see signs of progress and believe
that the rugged period we have been going through since '94 will be looked back
upon years from now as an extraordinarily attractive buying opportunity. We
have been treating it as such. Rather than scaling back our operations, we have
continued to research companies aggressively, take advantage of attractive
valuations and add selectively to the fund's portfolio.
Our longer range view remains unchanged. We believe the risk premium attached
to emerging markets investing has become too large. Even assuming slower
expansion in many countries, we expect more than two-thirds of the world's
growth to come from the developing world over the next 20 years. This growth
should proceed at a faster pace than in the industrialized nations, benefiting
the securities of well-managed companies in developing countries.
Our investment strategy also remains unchanged. We start with stock selection;
currency and country allocations are simply a residual of that approach. Given
the recent turbulence in the financial markets, we have begun focusing even
harder on the quality of managements and have become less willing to take
positions where the decision to buy rests largely on a stock being inexpensive
vis-a-vis other companies in the same industry.
In our view, the recent tendency of emerging markets to move downward in
concert has been an aberration--a characteristic of this particular stage of
the bear market. The fund remains broadly diversified, and we firmly believe
this diversification is in our shareholders' best interests.
AN OPEN-END INTERVAL FUND
Finally, we should note that Emerging Markets Growth Fund anticipates reopening
for additional purchases of its shares after the fiscal year ending June 30,
1999. At that time, it will convert to an open-end interval fund. This change
will provide shareholders with an opportunity to redeem shares each month. We
are pleased with the solid support shown by our investors and do not expect
increased interest in selling shares. We look for the fund's share base to
continue expanding as it has for some time--slowly, and under the careful
supervision of an independent Board of Directors that has limited the growth of
new sales each year.
On pages 5-7, you will find a brief overview of the markets that represent our
largest areas of concentration. On page 8 there is a description of EMGF's
adviser and additional information on our investment approach.
We look forward to reporting to you again in another six months.
Sincerely,
/s/ Walter P. Stern
Walter P. Stern
Chairman
/s/ Nancy Englander
Nancy Englander
President
February 5, 1999
FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE
PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY. INVESTING FOR SHORT PERIODS
MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY
DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY. All investments are
subject to certain risks. Those which include common stocks are affected by
fluctuating stock prices. Investments outside the United States, especially
those in developing countries, are subject to additional risks, including
currency fluctuations, political and social instability, differing securities
regulations and accounting standards, limited public information, possible
changes in taxation and periods of illiquidity. Accordingly, investors should
maintain a long-term perspective.
HERE IS A BRIEF LOOK AT THE INVESTMENT LANDSCAPE IN THE MARKETS REPRESENTING
EMERGING MARKETS GROWTH FUND'S FIVE LARGEST AREAS OF CONCENTRATION ON DECEMBER
31. OUR HOLDINGS IN THESE MARKETS ACCOUNT FOR NEARLY HALF OF NET ASSETS.
(PERCENTAGE CHANGES FOR MARKETS AND STOCK PRICES ARE IN U.S. DOLLARS.)
MEXICO (12.5% OF NET ASSETS)
The fund's largest area of concentration, Mexico was adversely affected during
the fiscal half year by its association in the minds of investors with Brazil
and by falling oil prices. Economic activity slowed and is likely to slow
further in 1999. With less revenue flowing into the government's coffers from
Pemex, the state-owned petroleum monopoly, President Zedillo was forced to
propose a relatively austere budget in November. It contained tax increases and
generated the kind of lively, open debate that has been largely absent from
Mexican politics during seven decades of one-party rule. The budget approved in
late December sets the stage for what we expect will be disciplined growth in
the future. Near term, however, Mexico's economy and financial markets will
continue to feel the effects of events in Brazil and other countries that have
been caught in the financial storm.
Lower prices for oil and other commodities have not severely impacted Mexico's
total export earnings mainly because of the recent emergence of new
export-oriented industries. Mexico has become more diversified economically and
is one of the few developing countries recording gains in both employment and
real wages.
The Zedillo administration is aiming to enter the presidential election year of
2000 with a stable currency and a favorable balance of payments, something the
Institutional Revolutionary Party (PRI) has been unable to do during the past
four presidential election years.
During the negotiations on the 1999 budget, a proposed excise tax on phone
calls was cut out of the final package. This was a positive development for
Telmex, Mexico's largest company and the fund's biggest holding (4.9% of net
assets on December 31). Telmex continues to have good success as a provider of
cellular service, and that part of its business should enjoy further gains in
the coming year with the imposition of calling party pays, as cellular phone
users are likely to give out their numbers more liberally if they know they
won't be paying for incoming calls. The company faces increased competition for
long-distance business, a comparatively small part of its operation. We have
added to the fund's position in Telmex and trimmed back a few of our
investments outside the telecommunications industry.
BRAZIL (12.3% OF NET ASSETS)
The devaluation of the real and subsequent decision to let it float in the
currency markets was largely a response to events that took place during the
fiscal half year. In August, when Russia devalued the ruble, defaulted on
domestic debts and imposed a 90-day moratorium on external debt, the impact on
Brazil was severe. Investors began moving substantial sums of money out of the
country. The central bank was forced to use considerable reserves to defend the
real against speculative attacks. Meanwhile, interest rates increased
dramatically--into the 80%-100% range in some cases--and the economy stalled.
The actions taken by Brazil's central bank in January represented an attempt to
establish a more realistic value for the real and create conditions that could
eventually lead to lower interest rates and help pull the country out of
recession.
The Brazilian stock market fluctuated widely during the half year. It turned
down after the Russian devaluation and default and then rallied for a while
before sinking again in early December, after Congress failed to pass tax
increases called for by President Cardoso. A few weeks later, when it became
clear that the Cardoso administration would get higher taxes after all, the
market firmed up again for a short time. However, it finished the six-month
period down 28.2%.
We have made some changes in our Brazilian investments. Taking advantage of
price weakness, we have added to our holdings in several of the new companies
created by the privatization of the fixed-line, cellular and long-distance
components of Telecomunicacoes Brasileiras (Telebras), Brazil's biggest
telephone company. The opportunities created by the privatization are
reminiscent of those presented in the United States by the breakup of AT&T in
the 1980s--ideal for those investors willing and able to sort through the
details and find undervalued situations. At the same time, on a larger scale
than in Mexico, we have reduced our investments in a number of other
industries. We believe these changes place the fund in a good position to
benefit from Brazil's excellent long-term growth potential while weathering
whatever additional turbulence may develop in the financial markets.
ARGENTINA (8.6% OF NET ASSETS)
The recession rolling across Latin America was felt throughout Argentina during
the July-December period. The economy, which a year earlier had been growing
rapidly, became increasingly sluggish. Unemployment, which has been chronically
high for some time, rose further, and exports of numerous products, including
cars, softened. The Argentine economy is domestically oriented, and it is
unclear how much it may actually be hurt in the coming year by declining
exports to Brazil, its principal trading partner. The answer is likely to
depend on the severity of Brazil's economic slump and the impact of its
devalued currency on foreign trade. We are optimistic that the Argentine
economy, which is blessed with low inflation and anchored by a sound banking
system, may be able to work its way through this recession with only moderate
damage.
President Menem apparently has decided against running for re-election in 1999,
but he is likely to remain a behind-the-scenes power in the Paretido
Justicialista or Peronist party. His successor as party nominee is expected to
be Eduardo Duhalde, who will square off against Fernando de la Rua, currently
the mayor of Buenos Aires, in the October election. We would be surprised if
that election produces drastic changes in economic policy.
For the six months ended December 31, the Argentine stock market was down 9.4%.
Emerging Markets Growth Fund's principal Argentine investments are two
telecommunications providers that have long served different parts of the
country. They will begin to compete head to head in the coming year. Telecom
Argentina currently covers the northern region. Telef<UNDEF>nica de Argentina
covers the south, including the city of Buenos Aires. Competition between them
could put pressure on prices and earnings for a period of time. Both are
well-managed companies carrying attractive valuations, so we believe both may
do well once the Argentine economy resumes its pattern of impressive growth.
TAIWAN (7.1% OF NET ASSETS)
The Taiwanese economy slowed during the July-December period and is now growing
at a rate of between 4% and 5% a year. This is about half of its average for
the past 30 years and the lowest level in more than a decade. Still, 4%-5% is
considerably more robust than the current pace of business activity in most
other Asian countries.
In recent months, the government has taken a number of steps aimed at
minimizing the impact of the region's troubles on the domestic economy. It has
cut interest rates, reduced bank reserve ratios, increased government spending
on construction projects and announced a plan to provide state-backed loans to
companies with financial problems.
The government, which is controlled by the Nationalist Party (Kuomingtang),
also has organized a stock market bailout for the second time in four years
(the first was in 1996, after the financial markets were rattled by the
test-firing of Chinese missiles in nearby waters). One feature of the latest
bailout allows banks and insurers contributing to a government fund that buys
stocks to carry those securities on the books as long-term investments; this
means losses taken on shares that were bought to prop up the market do not have
to be reported at the present time for tax purposes.
Taiwan's equity market declined a relatively modest 5.0% in the fiscal half
year. EMGF owns shares in 19 Taiwanese companies. We have generally avoided
financial stocks because of concern over problems in the country's banking
system. Our holdings are heavily concentrated in export-oriented technology
firms. The two largest positions are Taiwan Semiconductor Manufacturing (TSMC),
the world's biggest integrated circuit foundry, and Asustek, a producer of
printed circuit boards. Between them, these two companies account for about 4%
of the fund's net assets. Both firms have managed to increase market share in
their niches of the technology business, and both have shown better than
expected earnings growth. For the six months, the price of Asustek shares rose
14.4%, while TSMC was up 6.8%.
SOUTH KOREA (5.4% OF NET ASSETS)
A year ago, South Korea's economy was sinking into recession. High interest
rates were stifling growth. The won was under attack, and currency outflows had
almost bankrupted the country. In a symbolic protest against foreign ownership
of local businesses, some Koreans were refusing to eat American-style fried
chicken at KFC restaurants. In the months that followed, the stock market
continued to fall, and the country's finance minister, Kang Kyong-shik, was
sacked, charged with gross negligence in the implementation of economic policy,
and imprisoned for three months.
The situation since then has changed rather dramatically. Interest rates have
come down. Retail sales are still sluggish, but industrial production is up,
and the recession shows evidence of having hit bottom. The currency situation
has improved, and foreign investors are being welcomed once again. Although Mr.
Kang is still being held accountable for past policy failures, he is now out on
bail.
Emerging Markets Growth Fund owns securities in 19 Korean companies, the
largest of which is Samsung. Most of our holdings have participated in the
recent stock market rally.
We have been monitoring the upturn in South Korea with cautious optimism. In
our view, this country could be among the first to emerge from the region's
severe slump. At the same time, we believe its economy would benefit from
further restructuring and reforms. We welcome actions that have been taken to
open financial markets to foreign investors and evidence of increased
receptiveness among government officials and the public toward foreign
investment.
About the Fund and its Adviser
Emerging Markets Growth Fund was organized in 1986 by the International Finance
Corporation (IFC), an affiliate of the World Bank, as a vehicle for investing
in the securities of companies domiciled in developing countries. The premise
behind the formation of EMGF was that rapid growth in these countries can
create very attractive investment opportunities. It also was felt that the
availability of equity capital would stimulate the development of capital
markets and encourage countries to liberalize their investment regulations.
An affiliate of Capital International, Inc., the fund's current investment
adviser, was selected by the IFC from a number of global investment firms to
manage Emerging Markets Growth Fund. The fund started with $50 million in
assets, 13 institutional shareholders and a small portfolio of stocks
representing four markets. Today it has more than $12 billion in assets, 753
institutional and individual investors, and a portfolio of securities
representing more than 400 companies based in over 40 nations. As Emerging
Markets Growth Fund has grown, its adviser has steadily expanded its research
activities in developing countries and devoted increased resources to the task
of managing emerging markets investments.
Capital International, Inc., a subsidiary of Capital Group International, Inc.,
is one of The Capital Group Companies. These companies form one of the world's
most experienced investment advisory organizations, with roots dating back to
1931. The organization has been involved in international investing since the
1950s and has become one of the world's largest managers of emerging markets
assets.
The investment management affiliates of Capital Group International, Inc.
employ a value-oriented and research-driven approach. They maintain a global
investment intelligence network that continues to grow and currently employs
more than 100 investment professionals based on three continents. They include
analysts and portfolio counselors, born in over 30 countries, who speak a
variety of languages. These professionals travel millions of miles each year,
keeping a close watch on industry trends and government actions and
scrutinizing thousands of companies, including hundreds of firms based in
less-developed countries. Currently more than 30 of the organization's analysts
cover emerging markets, compared with four when EMGF began.
This extensive research effort combines intensive company and industry analysis
with a political and macroeconomic overview, and we believe it has given our
family of companies--and the funds they manage, including Emerging Markets
Growth Fund--an important competitive edge.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
EMERGING MARKETS GROWTH FUND
Investment Portfolio - December 31, 1998
(Unaudited)
Equity Securities
Common Preferred Convertible
Percent of
INDUSTRY DIVERSIFICATION Stocks Stocks Bonds Bonds
Net Assets
Telecommunications 16.5 % 3.89 % 0 % 0.05 %
20.44 %
Banking 5.97 2.27 0 0.04
8.28
Beverages & Tobacco 6.13 1.69 0
7.82
Electronic Components 5.29 0 0.04
5.33
Utilities: Electric & Gas 3.05 1.73 0
4.78
Energy Sources 3.57 0.51 0.01
4.09
Merchandising 2.75 0.03 0
2.78
Other Industries 25.72 0.76 0.42 7.5
34.4
68.98 % 10.88 % 0.47 % 7.59 %
87.92
Short-Term Securities
12.24
Excess of liabilities over cash and receivables, including
net unrealized depreciation on foreign currency contracts
(.16)
Net Assets
100.00 %
TEN LARGEST EQUITY HOLDINGS Percent of
Net Assets Percent of Gain/Loss for the
Telefonos de Mexico (Telemex) 4.93 %
+ 1.48 %
Samsung Electronics 2.66
+123.79
Taiwan Semiconductor Manufacturing 2.5
+ 6.78
Telefonica de Argentina 1.82
- 13.71
Asustek Computer 1.62
+ 14.38
Compania de Telecommunicaciones de Chile 1.57
+ 1.85
Cifra 1.56
- 17.07
Banco Itau 1.49
- 14.42
Hellenic Bottling 1.47
- 0.21
Telecom Argentina 1.38
- 7.35
*The percent change reflects the increase or decrease
in the market price per share of respective 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.
</TABLE>
<TABLE>
<S> <C> <C> <C>
EMERGING MARKETS GROWTH FUND, INC.
Investment Portfolio - DECEMBER 31, 1998
Number of
EQUITY SECURITIES Shares Market Percent
(common and preferred stocks or Value of Net
and convertible debentures) Principal (000) Assets
Amount
Argentina - 6.68%
Banco de Galicia y Buenos Aires SA, Class B 3,001,324 $13,218
Banco de Galicia y Buenos Aires SA, Class B (ADR) 3,917,713 69,050 .64
Banco Frances del Rio de la Plata SA 743,100 5,281
Banco Frances del Rio de la Plata SA (ADR) 1,090,439 22,627 .22
Banco Rio de la Plata SA, Class B (ADR) 5,267,400 68,476 .54
BI SA (acquired 10/21/93, cost: $5,755,000)(1) 6,130,000 6,437 .05
CEI Citicorp Holdings SA, Class B(2) 120,770 375
Disco SA (ADR)(2) 777,900 15,850 .12
Hidroneuquen SA (acquired 11/11/93, cost: $29,086,000)(1,2,3) 28,022,311 29,086 .22
IRSA Inversiones y Representaciones SA(1) 6,534,903 17,923
IRSA Inversiones y Representaciones SA (GDR)(1) 866,987 24,113 .35
IRSA Inversiones y Representaciones SA 4.50% convertible
bond August 2, 2003 (acquired 5/28/97,cost:$3,943,000)(1,3) 3,400,000 3,332
Nortel Inversora SA, Class A, preferred (ADR)
(acquired 11/24/92, cost:$4,944,000)(1) 714,550 9,244
Nortel Inversora SA, Class B, preferred (ADR) 1,712,140 27,394 .29
Perez Companc SA, Class B 5,111,457 21,642
Perez Companc SA, Class B (ADR) 13,881 118 .17
Sociedad Comercial del Plata SA 1,059,290 747 .01
Telecom Argentina STET-France Telecom SA, Class B 2,800,000 15,835
Telecom Argentina STET-France Telecom SA, Class B (ADS) 5,837,200 160,523 1.38
Telefonica de Argentina SA, Class B 4,910,000 14,007
Telefonica de Argentina SA, Class B (ADS) 7,840,900 219,055 1.82
YPF SA, Class D (ADR) 3,979,800 111,185 .87
---------- ----------
855,518 6.68
---------- ----------
Botswana - 0.00%
Sechaba Breweries Ltd. 233,900 270 .00
----------
Brazil - 11.71%
Aracruz Celulose SA, Class B, preferred nominative (ADR) 533,550 4,268 .03
Banco Bradesco SA, preferred nominative 9,497,135,214 52,675
Banco Bradesco SA, preferred nominative rights,
expire February 10, 1999(2) 406,626,659 236 .41
Banco do Estado de Sao Paulo SA, preferred nominative 416,041,700 17,220 .13
Banco Itau SA, preferred nominative 390,527,500 190,736 1.49
Banco Nacional SA, preferred nominative(2) 215,940,814 -
Banco Nacional SA, ordinary nominative(2) 2,500,000 - -
Banco Real de Investimento SA, preferred nominative 4,674,000 8,977 .07
Banco Real SA, preferred nominative 10,830,650 10,400 .08
Bompreco SA Supermercados do Nordeste 479,000 3,593 .03
Brasmotor SA, preferred nominative 28,143,932 2,796 .02
Centrais Eletricas Brasileiras SA - ELETROBRAS, Class B,
preferred nominative (ADR) 7,525,674 67,731
Centrais Eletricas Brasileiras SA - ELETROBRAS,
ordinary nominative 47,394,000 816 .90
Centrais Eletricas Brasileiras SA - ELETROBRAS,
ordinary nominative (ADR) 5,847,450 46,780
Centrais Geradoras do Sul do Brasil SA - GERASUL,
preferred nominative, Class B (ADR)(2) 664,678 3,822
Centrais Geradoras do Sul do Brasil SA - GERASUL,
ordinary nominative (2) 66,330,000 87 .06
Centrais Geradoras do Sul do Brasil SA - GERASUL,
ordinary nominative (ADR)(2) 646,609 3,880
Cia. Cervejaria Brahma, preferred nominative 179,628,137 78,513
Cia. Cervejaria Brahma, preferred nominative (ADR) 7,345,200 69,320 1.15
Cia. Cervejaria Brahma, ordinary nominative 224,483 99
Cia. Ciminto Portland Itau, preferred nominative 32,712,300 3,723 .03
Cia de Eletricidade do Estado do Rio de Janeiro - CERJ,
ordinary nominative (2) 54,454,482,525 18,031 .14
Cia. de Tecidos Norte de Minas- COTEMINAS
preferred nominative 93,094,466 10,018
Cia. de Tecidos Norte de Minas- COTEMINAS .10
ordinary nominative (GDR) 535,000 2,475
Cia. Energetica de Minas Gerais-CEMIG,
preferred nominative 807,913,110 15,382
Cia. Energetica de Minas Gerais-CEMIG,
preferred nominative (ADR) 4,230,580 79,852 .81
Cia. Energetica de Minas Gerais-CEMIG,
preferred nominative (ADR)
(acquired 6/21/96, cost: $9,501,000)(1) 457,575 8,637
Cia. Paranaense de Energia-COPEL, Class B,
preferred nominative 2,760,117,562 19,878
Cia. Paranaense de Energia- COPEL, Class B,
preferred nominative (ADR) 3,499,800 24,936 .41
Cia. Paranaense de Energia -COPEL,
ordinary nominative 1,359,819,600 7,767
Cia. Paulista de Forca e Luz - CPFL,
preferred nominative 651,445 43
Cia. Paulista de Forca e Luz - CPFL, .15
ordinary nominative 259,336,000 18,677
Cia. Vale do Rio Doce (ADR) 3,454,037 44,039 .34
Consorcio Real Brasileiro de Administracao SA, Class F,
preferred nominative 1,414,000 2,575 .02
Dixie Toga SA, preferred nominative 2,091,000 623
ELETROPAULO - Eletricidade de Sao Paulo SA,
preferred nominative 35,298,925 1,636 .01
Embratel participacoes SA preferred nominative(2) 552,090 8
Embratel participacoes SA preferred nominative (ADR)(2) 5,370,295 74,849 .59
Embratel participacoes SA ordinary nominative(2) 171,173,600 1,488
Empresa Nacional de Commercio Redito SA - Encopar,
preferred nominative 31,438,488 47 .00
Globa Cabo, preferred nominative (ADR) (2) 1,446,000 3,254 .03
GP Capital Partners, LP
(acquired 1/28/94, cost: $20,809,000)(1,2) 27,000 18,965 .15
LIGHT - Servicos de Eletricidade SA, ordinary nominative 47,495,688 5,780 .05
Mesbla SA, preferred nominative (2) 111,674,640 24
Mesbla SA, ordinary nominative (2) 1,041,447,836 259
Mesbla SA, ordinary nominative, rights(2) 2,289,787,401 114 .00
Petroleo Brasileiro SA - PETROBRAS, preferred nominative 580,236,000 65,805 .51
REAL Concorcio Participacoes preferred nominative(2) 1,414,000 1,939 .02
REAL Holdings Participacoes, preferred nominative(2) 4,674,000 6,949 .06
REALPAR Participacoes Class A, preferred nominative(2) 3,000 4 .00
REAL SA participacoes e Administracao, Class A,
preferred nominative 3,000 5
Sadia Concordia SAIC, preferred nominative 4,882,000 2,506 .02
SA White Martins, ordinary nominative 11,983,844 5,754 .05
Souza Cruz SA, ordinary nominative 2,861,000 18,473 .14
Tele Celular Sul Participacoes SA, preferred nominative(2) 60,052,090 101 .00
Tele Celular Sul Participacoes SA, preferred nominative (ADR)(2) 509,450 8,884 .07
Tele Celular Sul Participacoes SA, ordinary nominative(2) 172,290,100 160 .00
Tele Centro Oeste Celular Participacoes SA,
preferred nominative(2) 552,090 1 .00
Tele Centro Oeste Celular Participacoes SA,
preferred nominative (ADR) (2) 1,686,234 4,953 .04
Tele Centro Oeste Celular Participacoes SA,
ordinary nominative (2) 171,061,600 134 .00
Tele Centro Sul Participacoes SA, preferred nominative (2) 552,090 5 .00
Tele Centro Sul Participacoes SA, preferred nominative (ADR) 940,499 39,325 .32
Tele Centro Sul Participacoes SA, ordinary nominative (2) 171,061,600 1,133
Telecomunicacoes Brasileiras SA (Telebras),
preferred nominative (ADR) 1,430,686 156 .00
Telecomunicacoes Brasileiras SA (Telebras),
ordinary nominative 5,636,300 0
Telecomunicacoes de Sao Paulo SA - Telesp,
preferred nominative 545,908,566 74,430 .59
Telecomunicacoes de Sao Paulo SA - Telesp,
ordinary nominative (2) 35,164,592 793
Telecomunicacoes de Sao Paulo SA - Telesp Celular, Class B,
preferred nominative (2) 613,609,551 26,972
Telecomunicacoes de Sao Paulo SA - Telesp Celular,
ordinary nominative (2) 151,639,592 13,055 .31
Tele Leste Celular Participacoes SA, preferred nominative (2) 552,090 0 .00
Tele Leste Celular Participacoes SA, preferred nominative (ADR) 95,090 2,698 .02
Tele Leste Celular Participacoes SA, ordinary nominative (2) 171,061,600 68
Telemig Celular Participacoes SA, preferred nominative (2) 552,090 1
Telemig Celular Participacoes SA, preferred nominative (ADR) (2) 237,725 5,052
Telemig Celular Participacoes SA, ordinary nominative (2) 171,061,600 120 .10
Telemig Celular Participacoes SA, Class C
preferred nominative (2) 385,195,000 7,557
Tele Nordeste Celular Participacoes SA,
preferred nominative (2) 552,090 1 .00
Tele Nordeste Celular Participacoes SA,
preferred nominative (ADR) (2) 264,325 4,890 .04
Tele Nordeste Celular Participacoes SA,
ordinary nominative (2) 171,061,600 86 .00
Tele Norte Celular Participacoes SA, preferred nominative (2) 552,090 0 .00
Tele Norte Celular Participacoes SA, preferred nominative (ADR) (2) 95,090 2,146 .02
Tele Norte Celular Participacoes SA, ordinary nominative (2) 171,061,600 55 .00
Tele Norte Leste Participacoes SA, preferred nominative (2) 552,090 7 .00
Tele Norte Leste Participacoes SA, preferred nominative (ADR) (2) 4,410,995 54,862 .44
Tele Norte Leste Participacoes SA, ordinary nominative (2) 171,061,600 1,402
Telesp Celular Participacoes SA, preferred nominative (2) 60,052,090 442 .00
Telesp Celular Participacoes SA, preferred nominative (ADR) (2) 1,902,838 33,300 .27
Telesp Celular Participacoes SA, ordinary nominative (2) 171,174,100 737
Telesp Participacoes SA, preferred nominative (2) 552,090 13 .00
Telesp Participacoes SA, preferred nominative (ADR) 3,963,295 87,688 .71
Telesp Participacoes SA, ordinary nominative (2) 162,602,100 2,086
Tele Sudeste Celular Participacoes SA, preferred nominative (2) 552,090 2 .00
Tele Sudeste Celular Participacoes SA, preferred nominative (ADR) 911,299 18,852 .15
Tele Sudeste Celular Participacoes SA, ordinary nominative (2) 171,061,600 481 .00
Unibanco - Uniao de Bancos Brasileiros SA, units (GDR) 5,285,150 76,304 .61
Usinas Siderurgicas de Minas Gerais SA,
preferred nominative (ADR)
(acquired 9/1/93, cost: $7,598,000) (1) 1,224,205 2,601 .02
---------- ----------
1,498,017 11.71
---------- ----------
Chile - 3.72%
Antofagasta Holdings PLC 4,836,130 14,440 .11
Compania Cervecerias Unidas SA (ADS) 1,144,700 22,035 .17
Compania de Telecomunicaciones de Chile SA (ADR) 9,681,805 200,292 1.57
Distribucion y Servicio D&S SA (ADR) 1,711,500 19,682 .15
Embotelladora Andina SA, Class A, preferred (ADR) 3,069,450 44,507
Embotelladora Andina SA, Class B, preferred (ADR) 1,871,400 24,328 .54
Empresa Nacional de Electricidad SA (ADR) 9,099,409 103,506 .81
Enersis SA (ADR) 1,100,456 28,406 .22
Gener SA (ADR) 248,643 3,978 .03
Santa Isabel SA (ADR) 889,500 5,893 .05
Sociedad Quimica y Minera de Chile SA, Class B (ADR) 260,500 8,776 .07
---------- ----------
475,843 3.72
---------- ----------
China - 0.61%
China Eastern Airlines Corp. Ltd., Class H (2) 41,520,000 2,787
China Eastern Airlines Corp. Ltd., Class H (ADR) (2) 175,700 1,098 .03
China Resources Beijing Land Ltd. 35,079,400 8,739 .07
China Telecom (Hong Kong) Ltd. (2) 11,366,000 19,660 .15
China Yuchai International Ltd. (2) 904,300 509 .00
Guang Dong Electric Power Development Co. Ltd., Class B 3,191,448 869 .01
Huaneng Power International, Inc., Class N (ADR) (2) 808,100 11,718 .09
Jiangsu Expressway Co. Ltd.,Class H 4,172,400 910 .01
Jiangxi Copper Co. Ltd., Class H 18,071,500 1,026 .01
Ng Fung Hong Ltd. 32,634,500 29,277 .23
Qingling Motors Co.,Ltd., Class H 9,636,200 1,692 .01
---------- ----------
78,285 .61
---------- ----------
Republic of Croatia - 0.85%
PLIVA d.d. (GDR) 6,589,453 109,385 .85
---------- ----------
109,385 .85
---------- ----------
Czech Republic - 0.54%
CESKE RADIOKOMUNIKACE AS (GDR) (2) 348,400 11,236 .09
SPT TELECOM, a.s. (2) 3,752,840 57,247 .45
---------- ----------
68,483 .54
Ecuador - 0.01%
La Cemento Nacional SA (GDR)(3) 13,030 1,342 .01
---------- ----------
Egypt - 0.12%
AL-Ahram Beverages Co. (GDR)(2,3) 520,000 15,002 .12
------------- ------------
Finland - 0.00%
Sonera (American Depositary Receipts) 0 .00
------------- ------------
Ghana - 0.16%
Ashanti Goldfields Co. Ltd. (GDR) 860,000 8,062
Ashanti Goldfields Co. Ltd. .16
5.50% exchangeable note March 15, 2003 $15,970,000 12,297
---------- ----------
20,359 .16
---------- ----------
Greece - 2.59%
Aluminium de Grece SAIC (3) 377,540 21,973 .17
Ergobank SA 766,310 88,625 .69
Hellenic Bottling Co. SA 6,110,090 188,548 1.47
Katselis Sons SA 5,620 51 .00
Titan Cement Co. SA 427,644 32,819 .26
---------- ----------
332,016 2.59
---------- ----------
Hong Kong - 0.61%
China - Hongkong Photo Products Holdings Ltd. 12,491,900 1,193 .01
China Resources Enterprise, Ltd. 44,785,300 69,950 .54
Legend Holdings Ltd 20,208,100 7,108 .06
Siu-Fung Ceramics Holdings Ltd. (2) 7,869,409 0 .00
---------- ----------
78,251 .61
---------- ----------
Hungary - 1.02%
Gedeon Richter Ltd. 926,500 39,475 .31
Graboplast Textil- es Muborgyarto Rt. 141,200 1,079 .01
MATAV, Hungarian Telecommunications Co. Ltd 12,271,550 70,151 .55
Mezogep (2) 268,700 3,743 .03
MOL Magyar Olaj- es Gazipari Rt. (GDR) 570,100 15,735 .12
---------- ----------
130,183 1.02
---------- ----------
India - 4.82%
Asian Paints (India) Ltd. 544,600 3,654 .03
Bajaj Auto Ltd. 4,808,150 59,082
Bajaj Auto Ltd. (GDR) 441,800 6,737 .51
Bharat Petroleum Corp. Ltd. 4,135,200 22,734 .18
Cadbury India 9,000 101 .00
Carrier Aircon Ltd. 911,500 4,218 .03
Credit Rating Information Services of India 15,000 153 .00
Cummins India Ltd. 1,850,000 13,411 .10
Digital Equipment (India) Ltd. 40,000 142 .00
East India Hotels Ltd. (2) 869,065 4,812 .04
Essar Steel Ltd. 300 - .00
Flex Industries Ltd. 260,480 49 .00
Flex Industries Ltd., warrants, expire November 23, 1999 (2) 116,210 0 .00
Grasim Industries Ltd. 479 2 .00
Grasim Industries Ltd. (GDR) 20 0 .00
Hindalco Industries Ltd. 1,917,095 23,160
Hindalco Industries Ltd, (GDR) 549,226 6,316 .23
Hindustan Lever Ltd. 2,840,400 111,494 .87
Hindustan Petroleum Corp. Ltd. 3,529,300 19,560 .15
Housing Development Finance Corp. Ltd. 294,300 15,114 .12
Indian Aluminium Co., Ltd. 776,520 1,657 .01
Indian Rayon and Industries Ltd. 1,527,825 4,052
Indian Rayon and Industries Ltd. (GDR) 560,300 1,429 .04
Indo Gulf Fertilisers and Chemicals Corp. Ltd. 2,155,200 1,420
Indo Gulf Fertilisers and Chemicals Corp. Ltd.(GDR) 1,770,900 1,195 .02
Industrial Credit and Investment Corp. of India Ltd. 1,330 1 .00
Infosys Technologies Ltd. 11,000 767 .01
Ispat Industries Ltd. 3.00% convertible Eurobond
April 1, 2001 $4,624,000 1,110
Ispat Industries Ltd. 3.00% convertible bond April 1, 2001 .02
(acquired 3/1/94, cost: $6,279,000) (1) $6,375,000 1,530
I.T.C. Ltd. 176,147 3,118 .02
LML Ltd. 41,900 73 .00
Madras Cements Ltd. 22,000 2,126 .02
Mahanagar Telephone Nigam Ltd. (2) 22,227,300 95,993
Mahanagar Telephone Nigam Ltd.(GDR) 895,100 11,077 .84
Mahindra & Mahindra Ltd. 2,658,516 10,341
Mahindra & Mahindra Ltd. (GDR) 997,333 3,964
Mahindra & Mahindra Ltd. 5.00% convertible bond .16
July 9, 2001 (acquired 7/3/96; cost: $5,953,000) $5,954,000 5,478
Master Gain Scheme (2) 112,800 24 .00
Max India Ltd. 304,497 1,080
Max India Ltd. 12.50% nonconvertible debenture .01
March 2, 2004 $41,957 203
Motor Industries Co. Ltd. (3) 201,855 17,368 .14
Nicholas Piramal India Ltd. (3) 1,885,700 15,281 .12
Niko Resources Ltd. (2) 1,000,000 3,653 .03
Ranbaxy Laboratories Ltd. 3,199,900 20,258
Ranbaxy Laboratories Ltd.(GDR) 1,769,050 15,745 .28
Raymond Woollen Mills Ltd. 200 0 .00
Reliance Industries Ltd. 15,560,035 43,870
Reliance Industries Ltd. (GDR) 667,150 3,886 .37
Tata Engineering and Locomotive Co. Ltd. 77,400 300 .00
United Phosphorus Ltd. (2) 822,700 2,513
United Phosphorus Ltd. (GDR) 358,964 719 .03
Videsh Sanchar Nigam Ltd. 986,800 18,075
Videsh Sanchar Nigam Ltd. (GDR) 1,824,600 22,579 .32
Zee Telefilms Ltd. (3) 1,017,200 15,323 .12
---------- ----------
616,947 4.82
---------- ----------
Indonesia - 1.78%
APP Finance (VII) Mauritius convertible bond 3.50%
April 30, 2003 (acquired 4/23/98, cost: $6,180,000)(1) $6,180,000 3,368 .03
Asia Pacific Resources International Holdings Ltd., Class A(2) 2,445,269 1,681 .01
Asia Pulp & Paper Co. Ltd. (ADR) (2) 2,744,300 22,469 .18
PT Astra Internasional (2) 94,513,300 12,117 .09
PT Bank Internasional Indonesia 10,231,459 295
PT Bank Internasional Indonesia, warrants,
expire January 17, 2000 (2) 909,462 8 .00
PT BAT Indonesia 531,000 1,021 .01
Gulf Indonesia Resources Ltd. (2) 484,700 3,150 .03
PT Hanjaya Mandala Sampoerna Tbk 29,150,500 19,714 .15
PT Indah Kiat Pulp & Paper Corp. Tbk 183,914,600 51,284 .40
PT Indofood Sukses Makmur Tbk 75,844,400 39,381 .31
PT Indo-Rama Synthetics 32,292,400 5,900 .05
PT International Nickel Indonesia 4,274,500 1,534 .01
PT Jaya Real Property 1,549,000 59 .00
PT Modern Photo Film Co. (2) 10,500,800 673 .01
PT Mulia Industrindo 7,175,572 345 .00
PT Pabrik Kertas Tjiwi Kimia 11,653,272 3,100
PT Pabrik Kertas Tjiwi Kimia warrants expire July 15, 2002 (2) 410,175 49 .02
Perusahaan Perseroan (Persero) PT Indonesian
Satellite Corp. 3,701,500 4,947
Perusahaan Perseroan (Persero) PT Indonesian .24
Satellite Corp. (ADR) 2,102,330 25,622
Perusahaan Perseroan (Persero) PT Telekomunikasi
Indonesia, Class B 42,093,500 14,571
Perusahaan Perseroan (Persero) PT Telekomunikasi .15
Indonesia, Class B (ADR) 729,000 4,739
PT Semen Gresik (GDR) 11,314,600 12,040 .09
PT United Tractors (2) 466,000 30 .00
---------- ----------
228,097 1.78
---------- ----------
---------- ----------
Kazakhstan - 0.01%
JSC Kazkommertsbank (ADR)
(acquired 9/10/97, cost: $4,024,000) (1)(2) 154,000 896 .01
------------ ----------
Kenya - 0.01%
Kenya Commercial Bank 768,000 761 .01
Malaysia - 0.90%
Amway (Malaysia) Holdings Bhd. 1,721,200 2,473 .02
Commerce Asset-Holding Bhd. 372,000 201 .00
Edaran Otomobile Nasional Bhd. 183,000 202 .00
Guinness Anchor Bhd. 7,028,000 4,945 .04
Hap Seng Consolidated Bhd. 13,566,100 6,123 .05
Hong Leong Credit Bhd. 1,833,600 939
Hong Leong Credit Bhd., .01
warrants, expire December 27, 2001 (2) 174,400 16
IJM Corp. Bhd. 10,305,714 4,537 .04
IOI Corp. Bhd. 25,909,500 10,405 .08
Leader Universal Holdings Bhd. 8,535,000 1,651 .01
Malaysian Airline System Bhd. 711,000 272 .00
Malaysian Pacific Industries Bhd 2,132,800 2,043 .02
Nestle (Malaysia) Sdn. Bhd. 5,548,100 15,535 .12
Oriental Holdings Bhd. 3,279,820 3,534 .03
O.Y.L. Industries Bhd. 364,000 637 .00
PPB Oil Palms Bhd. 5,588,800 2,996 .02
Road Builder (M) Holdings Bhd. 2,944,000 1,985 .02
Rothmans of Pall Mall (Malaysia) Bhd. 2,147,500 8,861 .07
Sime Darby Bhd. 23,549,000 18,913 .14
Sime UEP Properties Bhd. 3,461,700 2,296 .02
Star Publications (Malaysia) Bhd. 2,365,000 2,353 .02
Tan Chong Motor Holdings Bhd. 4,937,000 1,119 .01
UMW Holdings Bhd. 6,930,859 5,107 .04
UMW Holdings Bhd., warrants, expire January 26, 2000 (2) 574,819 91
YTL Corp. Bhd. 17,854,900 16,248 .13
YTL Power International Bhd. (2) 3,152,000 1,736 .01
---------- ----------
115,218 .90
---------- ----------
Mauritius - 0.06%
State Bank of Mauritius 10,927,000 7,909 .06
---------- ----------
Mexico - 10.56%
Apasco, SA de CV 2,472,576 8,719 .07
Carso Global Telecom, SA de CV 2,993,300 10,102 .08
Cemex, SA de CV, Class A 2,956,762 6,483
Cemex, SA de CV, Class B 13,254,251 33,280
Cemex, SA de CV, Class B (ADR) 1,451,500 7,076 .48
Cemex, SA de CV, ordinary participation certificates 6,726,075 14,510
Cemex,SA de CV, ordinary participation certificates(ADR) 24,506 104
Cifra, SA de CV, Class C (2) 48,679,034 60,006
Cifra, SA de CV, Class V 97,841,753 118,632 1.56
Cifra, SA de CV, Class V (ADR) 1,701,643 20,420
Coca-Cola FEMSA, SA de CV, Class L (ADR) 1,361,300 18,037 .14
Consorcio International Hospital, SA de CV, convertible
preferred (acquired 9/25/97, cost: $4,827,000) (1) (2) 23,970 5,393 .04
Grupo Carso, SA de CV, Class A, ordinary
participation certificates 1,828,100 6,216 .05
Grupo Financiero Banamex Accival, SA de CV, Class B (2) 2,962,200 3,891
Grupo Financiero Banamex Accival, SA de CV, Class L (2) 5,277,554 6,079
Grupo Financiero Banamex Accival, SA de CV,
7.00% convertible Eurobond December 15, 1999 $103,000 100 .08
Grupo Financiero Banamex Accival, SA de CV,
11.00% convertible July 15, 2003
(acquired 7/12/96, cost: $354,000)(1) $ 371,000 330
Grupo Financiero Bancomer, SA de CV, Class B 37,100,000 7,947
Grupo Financiero Bancomer, SA de CV., Series L2 25.387% .07
convertible subordinated debentures May 16, 2002 (4) MXN5,750,000 566
Grupo Financiero BBV Probursa, SA de CV, Class B (2) 48,650,331 5,604 .04
Grupo Industrial Emprex - B (2) 2,571,800 68,474 .54
Grupo Industrial Maseca, SA de CV, Class B (ADR) 1,083,300 13,474 .11
Grupo Mexico, SA de CV, Class B (2) 4,886,800 12,838 .10
Grupo Televisa, SA, ordinary participation certificates (2) 295,000 3,720
Grupo Televisa, SA, ordinary participation certificates (ADR) (2) 5,818,099 143,635 1.15
Kimberly-Clark de Mexico, SA de CV, Class A,
ordinary participation certificates 38,035,400 121,443 .95
Pepsi-Gemex, SA de CV, ordinary participation
certificates (GDR) 364,500 2,848 .02
Telefonos de Mexico, SA de CV, Class A 9,137,500 22,758
Telefonos de Mexico, SA de CV, Class A (ADR) 71,000 166
Telefonos de Mexico, SA de CV, Class L 13,706,250 33,791 4.93
Telefonos de Mexico, SA de CV, Class L (ADR) 11,826,275 575,792
TV Azteca, SA de CV, (ADR) 2,926,700 19,572 .15
---------- ----------
1,352,006 10.56
---------- ----------
Morocco - 0.29%
Banque Commerciale du Maroc 35,443 3,864 .03
Cimenterie de l'Oriental, Class A 100,641 11,949 .09
ONA SA 56,000 6,516 .05
Societe des Brasseries du Maroc 23,432 6,626 .05
Wafabank, Class A 67,100 8,401 .07
---------- ----------
37,356 .29
---------- ----------
Nigeria - 0.06%
United Bank for Africa (GDR) (2)(3) 425,000 7,506 .06
Pakistan - 0.09%
Chakwal Cement Co. Ltd. (GDR) 891,111 - .00
Engro Chemical Pakistan Ltd. 2,508,890 4,541 .04
Hub Power Co. Ltd. (GDR) 553,328 3,154 .03
Pakistan Telecommunication Corp. (GDR) 104,400 3,132 .02
---------- ----------
10,827 .09
---------- ----------
Peru - 1.33%
Banco Continental (2) 5,909,000 3,184 .02
Cementos Lima SA 641,889 8,343 .07
Compania de Minas Buenaventura SA, Class B 995,485 5,996
Compania de Minas Buenaventura SA, Class B (ADR) 1,264,502 16,439 .18
Credicorp Ltd. (3) 6,475,473 58,279 .46
Minsur SA-Trabajo 3,522,186 5,493 .04
Ontario-Quinta (acquired 8/15/94, cost: $7,400,000) (1) 7,224,130 6,774 .05
Telefonica del Peru SA Class B (ADS) 5,166,100 65,545 .51
---------- ----------
170,053 1.33
---------- ----------
Philippines - 2.76%
Ayala Corp., Class B 82,767,010 29,369
Ayala Corp., Class B (GDS) 1,158,696 2,607 .25
Ayala Land, Inc. 150,740,033 42,790
Ayala Land, Inc. 6.00% convertible bond March 19, 2002 PHP260,000,000 4,267 .37
Bacnotan Consolidated Industries, Inc. 567,100 585
Bacnotan Consolidated Industries, Inc. 5.50% convertible
Eurobond June 21, 2004 $298,000 101 .02
Bacnotan Consolidated Industries, Inc. 5.50% convertible
bond June 21, 2004 (acquired 6/8/94, cost: $4,486,000) (1) $4,500,000 1,530
Bank of the Philippine Islands 10,389,990 22,121 .17
Bayan Telecommunications Holding Corp.
(acquired 2/12/98, cost: $407,000) (1) (2) 174,237 450
Bayan Telecommunications Holding Corp. convertible
preferred (acquired 12/22/97, cost: $9,000,000) (1) (2) 180,000 9,000 .07
Benpres Holdings Corp. (GDR) (2) 6,758,294 20,275 .16
C & P Homes, Inc. (2) 31,688,450 548 .00
Fil-Estate Land, Inc. (2) 25,300,000 470 .00
Fortune Cement Corp. (2) 42,335,625 1,770 .01
HI Cement Corp. 33,051,900 1,518 .01
International Container Terminal Services, Inc. (2) 19,533,588 1,638
International Container Terminal Services, Inc.
6.00% convertible bond February 19,2000 .04
(acquired 2/18/93, cost: $4,000,000) (1) $4,000,000 3,400
JG Summit Holdings, Inc., Class B 18,772,900 1,163
JG Summit Holdings, Inc., Class B (GDS) (2) 20,000 113
JG Summit Holdings, Inc. 3.50% convertible bond .06
December 23, 2003 (acquired 12/9/93, cost: $9,870,000) (1) $9,870,000 6,169
Keppel Philippines Holdings, Inc., Class B (2) 4,081 0 .00
Manila Electric Co., Class B 2,023,584 6,528 .05
Metropolitan Bank and Trust Co. 1,458,670 10,540 .08
Philippine Airlines, Inc. (2) 53,811,255 - .00
Philippine Long Distance Telephone Co., ordinary 464,090 11,977
Philippine Long Distance Telephone Co., ordinary (ADS) 3,791,116 98,332
Philippine Long Distance Telephone Co., convertible .90
preferred, Series III (GDS) 95,200 4,522
PR Holdings, Inc., subscription rights
(acquired 7/8/92, cost: $9,835,000) (1) (2) 2,236,600 - .00
San Miguel Corp., Class B 27,999,852 54,193 .42
SM Prime Holdings, Inc. 70,845,000 13,529 .11
Southeast Asia Cement Holdings, Inc. 72,174,108 894 .01
Universal Robina Corp. 30,222,000 3,393 .03
---------- ----------
353,792 2.76
---------- ----------
Poland - 1.55%
@ Entertainment (2) 142,200 960
@ Entertainment (acquired 8/1/97, cost: $9,584,000)(1,2) 461,000 3,112 .03
Bank Handlowy w Warszawie SA 1,457,496 18,006
Bank Handlowy w Warszawie SA (GDR) 756,121 9,830 .22
Bank Rozwoju Eksportu SA 901,675 20,838 .17
BIG Bank GDANSKI SA 2,584,063 2,322 .02
Elektrim SA 2,610,325 28,300
Elektrim SA, 2.00% convertible bond May 30, 2004 DEM9,890,000 5,930 .27
EXBUD SA (2) (3) 634,193 5,482 .04
KGHM Polska Miedz SA (GDR) (3) 6,423,200 46,086 .36
Optimus SA 156,483 1,518 .01
Polifarb Cieszyn-Wroclaw 1,967,667 4,688 .04
Telekomunikacje Polska SA (GDR) (2) 9,565,700 49,024 .38
Zaklady Metali Lekkich "Kety" SA (2) 163,964 1,548 .01
Zaklady Piwowarskie w Zywcu SA 2,304 276 .00
---------- ----------
197,920 1.55
---------- ----------
Portugal - 0.90%
Portugal Telecom, SA 550,205 25,189
Portugal Telecom, SA (ADR) 622,400 27,775 .41
TELECEL-Comunicacoes Pessoais, SA 306,000 62,456 .49
TVI - Televisao Independente, SA nonvoting preferred (2) 26,375 0 .00
---------- ----------
115,420 .90
---------- ----------
Russian Federation - 1.18%
AO Mosenergo Power Generation and Electrification
Amalgamation 67,500,000 1,350
AO Mosenergo Power Generation and Electrification .08
Amalgamation (ADS) 3,439,500 6,879
AO Mosenergo Power Generation and Electrification
Amalgamation (Russian Depositary Trust Certificate) 750 1,500
AO Torgovy Dom Gum (Russian Depositary Trust Certificate) 270 1,134 .01
Avalon Oil PLC (2) (3) 5,068,000 420 .00
Global Tele-Systems Ltd.,(acquired 2/2/96,
cost: less than $1,000) (1) (2) 262,963 14,660 .11
Irkutskenergo (Russian Depositary Trust Certificate) 645 5,483 .04
JSC Moscow City Telephone Network (MGTS) 14,550 728
JSC Moscow City Telephone Network (MGTS)
(Russian Depositary Trust Certificate) (2) 1,111 2,778 .03
Kamaz (2) 4,345,000 87 .00
Lenenergo (2) 28,336,800 1,417 .01
Lukinter Finance BV 3.50% convertible bond May 6, 2002 $1,128,000 384 .00
LUKoil Holding, preferred (ADR) 84,300 337
LUKoil Holding (ADR) 1,789,600 28,990 .23
New Century Capital Partners, LP
(acquired 12/7/95,cost: $5,492,000) (1)(2)(5) 5,256,300 2,750 .03
Nizhny Novgorod Sviazinform (2) 780,000 234
Nizhny Novgorod Sviazinform
(Russian Depositary Trust Certificate) (2) 74 666 .01
Ramco Energy PLC (2)(3) 1,421,000 5,186 .04
RAO Gazprom (ADR) 1,606,630 13,696
RAO Gazprom (ADR)
(acquired 10/21/96, cost:$38,674,000) (1) 2,322,800 19,802 .26
Russian Telecommunications Development Corp.
(acquired 12/22/93, cost: $3,800,000) (1)(2) 380,000 950
Russian Telecommunications Development Corp.,
nonvoting ordinary (acquired 12/22/93, .02
cost: $6,200,000) (1)(2) 620,000 1,550
St. Petersburg Telephone Network JSC (2) 12,913,020 2,583 .02
Star Mining Corp. (2) 18,884,400 35 .00
StoryFirst Communications Inc., Class B, senior
convertible preferred (acquired 10/14/97,
cost: $14,848,000) (1) (2) (3) 10,383 3,115 .02
Unified Energy System of Russia 1,091,686,400 33,296
Unified Energy System of Russia (GDR) 396,200 1,238 .27
Xavier Corp. (2) (3) 1,350,000 - .00
---------- ------------
151,248 1.18
---------- ------------
Slovakia - 0.04%
VSZ, AS (3) 1,146,027 5,568 .04
---------- ------------
South Africa - 4.61%
African Oxygen Ltd. 6,964,047 8,283 .06
Bidvest Group Ltd. 1,867,719 13,550 .11
Coronation Holdings Ltd., Class N 3,327,374 45,228
Coronation Holdings Ltd. 568,632 7,662 .41
Ellerine Holdings Ltd. 920,465 1,986 .02
Energy Africa Ltd.(2) 2,880,800 4,405 .03
Gencor Ltd. 6,804,500 11,446 .09
Hudaco Industries Ltd. 1,472,200 1,286 .01
International Pepsi-Cola Bottler Investments
(aquired 12/18/95, cost:$9,900,000) (1)(2)(3)(5) 100,000 10,000 .08
Iscor Ltd. (3) 129,334,668 23,293 .18
JD Group Ltd. 3,055,811 13,499 .11
Malbak Ltd. 1,324,590 585 .00
Metro Cash and Carry Ltd. 39,711,581 26,315 .21
Nasionale Pers Beperk, Class N 5,508,200 21,526 .17
New Clicks Holdings Ltd. 684,267 663 .01
Rembrandt Group Ltd. 8,398,300 51,370 .40
Sage Group Ltd. 1,631,990 4,575 .04
Sasol Ltd. (3) 32,131,304 121,472 .95
South Africa Capital Growth Fund, LP, Class A
(acquired 8/25/95, cost: $1,861,000) (1) (5) 2,180 1,968
South Africa Capital Growth Fund, LP, Class D .11
(acquired 8/25/95, cost: $11,450,000) (1) (5) 13,650 12,326
South African Breweries Ltd. 9,204,154 155,136 1.20
South African Druggists Ltd.(3) 4,633,039 23,065 .18
South African Private Equity Fund III, LP
(acquired 9/23/98, cost: $30,333,000) (1)(2)(3)(5) 30,333 30,333 .24
---------- ----------
589,972 4.61
---------- ----------
South Korea - 5.32%
Anam Industrial Co. Ltd. (2) 634,872 2,513 .02
Daehan Asia Trust (International Depositary Receipts) 2,820 1,354 .01
Daehan Korea Trust (International Depositary Receipts) 500 137 .00
Daewoo Securities Co., Ltd., ordinary (2) 678,502 10,630 .08
Hansol Paper Co., Ltd. 877,120 10,014 .08
Hansol Paper Co., Ltd. 0.25% convertible bond August 8, 2006 $950,000 789
Hyundai Motor Co. 1,180,610 21,054
Hyundai Motor Co., nonvoting preferred (GDR) 572,600 1,818 .18
Korea Electric Power Corp. 2,340 58 .00
Korea Industrial Leasing Co., Ltd. (2) 241,000 478 .00
Korea Pacific Trust (International Depositary Receipts)(2) 3,000 1,935 .02
Korea Zinc Co. Ltd. 623,320 14,285 .11
LG Electronics Inc., nonvoting preferred (GDR) 311,710 834 .02
LG Semicon Co., Ltd. (2) 177,598 1,983 .02
Mirae Corp. 130,527 351 .00
Pohang Iron & Steel Co., Ltd. 1,209,240 74,746
Pohang Iron & Steel Co., Ltd. (ADR) 21,400 361 .58
Samsung Display Devices (3) 2,110,856 104,312
Samsung Display Devices 0.50% convertible Eurobonds .82
April 12, 2002(3) $770,000 870
Samsung Electronics Co., Ltd., nonvoting preferred 114,143 3,767
Samsung Electronics Co., Ltd., nonvoting preferred (GDS) 518,058 7,835 2.66
Samsung Electronics Co., Ltd. 3,322,382 223,430
Samsung Electronics Co., Ltd.(GDS) 2,716,704 105,272
Seoul Asia Index Trust (International Depositary Receipts) 80 250 .00
SK Telecom Co., Ltd. 89,628 65,849
SK Telecom Co., Ltd. (ADR) 2,555,486 26,034 .72
Yukong Ltd., warrants, expire June 18, 1999 (2) 8,000 151 .00
---------- ----------
681,110 5.32
---------- ----------
Sri Lanka - 0.06%
Asian Hotels Corp. Ltd. 12,215,000 1,295 .01
Development Finance Corp. of Ceylon (3) 1,788,861 3,871 .03
National Develpoment Bank of Sri Lanka 1,296,600 2,426 .02
---------- ----------
7,592 .06
---------- ----------
Taiwan - 7.15%
Acer Computer International Ltd. 84,100 42 .00
Acer Peripherals Inc. 13,931,406 18,881 .15
Advanced Semiconductor Engineering, Inc. (2) 55,960,765 93,935
Advanced Semiconductor Engineering, Inc. (GDR) 918,790 8,499 .80
ASE Test Ltd. (2)(3) 2,388,500 77,328 .60
Asia Cement Corp. 24,831,048 23,388 .18
Asia Corporate Partners Fund, Class B
(acquired 3/12/96; cost: $20,027,000) (1)(2)(5) 40,000 18,684 .15
Asustek Computer Inc. (2) 22,217,503 207,879 1.62
Cathay Construction Co. Ltd. 12,407,620 7,675 .06
China Steel Corp. 4,397,250 2,652 .02
Compal Electronics Inc.(2) 28,527,800 93,112 .73
Delta Electronics Inc., 0.50% convertible bond
March 6, 2004 (acquired 2/27/97, cost: $4,246,000) (1) $4,232,000 4,697 .04
Nan Ya Plastics Corp. 1.75% Eurobond July 19, 2001 $1,850,000 2,100 .02
Primax Electronics Ltd. (2)(3) 9,197,703 10,092 .08
Seres Capital (Cayman Islands)
(acquired 3/12/96; cost:$25,000) (1)(3) 2 25
Seres Capital (Cayman Islands), nonvoting
(acquired 3/12/96; cost: $125,000) (1) 8 125 .00
Taiwan Mask Corp. (2) 8,716,860 11,949 .09
Taiwan Semiconductor Manufacturing Co. Ltd. (2) 141,703,465 312,744
Taiwan Semiconductor Manufacturing Co. Ltd.,(ADR) (2) 560,000 7,945 2.50
Unicap Electronics Industrial Corp. (2) 431,222 653 .01
Wus Printed Circuit Co., Ltd. (2) 3,231,430 7,333 .06
Yangming Marine Transport Corp. (2) 6,890,800 4,734 .04
---------- ----------
914,472 7.15
---------- ----------
Thailand - 0.64%
Charoen Pokphand Feedmill PCL(2) 1,509,900 1,856 .01
Dusit Thani PCL (2) 990,000 1,094 .01
Electricity Generating Authority of Thailand (2) 11,540,947 31,403 .24
Post Publishing PCL (2) 2,525,000 3,208 .03
PTT Exploration and Production PCL (2) 4,537,300 32,087 .25
Serm Suk PCL (2) 210,166 1,173
Serm Suk PCL, local registered (2) 64,960 341 .01
Siam City Cement PCL (2) 4,543,178 10,040 .08
Siam Commercial Bank PCL 1,109,466 667
Siam Commercial Bank, warrants, expire December 31, 2002 (2) 277,366 - .01
Wattachak 3.50% convertible bond December 6, 2003 $6,400,000 - .00
---------- ----------
81,869 .64
---------- ----------
Turkey - 3.93%
Adana Cimento Sanayii TAS, Class A (4) 302,959,339 5,575
Adana Cimento Sanayii, TAS, Class C 104,042,945 347 .05
Aktas Elektrik Ticaret AS 37,562,168 9,773 .08
Ege Biracilik ve Malt Sanayii AS 213,359,138 16,587 .13
Erciyas Biracilik ve Malt Sanayii AS (3) 157,412,000 10,489 .08
Eregli Demir ve Celik Fabrikalari TAS(2) (3) 370,034,000 15,264 .12
Koc Holding AS 322,358,538 28,129 .22
Migros Turk TAS (3) 70,262,162 70,229 .55
Nergis Holding AS 100,564,000 3,127 .02
Netas, Northern Electric Telekomunikasyon AS (2) 177,175,960 3,261 .03
Petrol Ofisi AS 201,130,437 27,124 .21
Sonera Group Oyj (ADR)(acquired 11/10/98,cost: $332,000) (1)(2) 9,400 660 .01
Trakya Cam Sanayii AS (3) 570,514,574 7,060 .06
Turk Dis Ticaret Bankasi (2) 26,252,000 191
Turkiye Garanti Bankasi AS (2) 2,037,343,977 50,424 .39
Turkiye Is Bankasi AS 5,262,480,149 136,927 1.07
Turkiye Sise ve Cam Fabrikalari AS (3) 1,476,729,947 18,275 .14
Yapi ve Kredi Bankasi AS (3) 8,492,877,569 98,363 .77
---------- ----------
501,805 3.93
---------- ----------
Ukraine - 0.02%
JKX Oil & Gas PLC (2) (3) 8,480,233 1,688
JKX Oil & Gas PLC 7.00% convertible bond June 30, 2001
(acquired 6/6/96, cost: $2,000,000) (1),(3) $2,000,000 1,500 .02
---------- ----------
3,188 .02
---------- ----------
Venezuela - 0.16%
Compania Anonima Nacional Telefonos de Venezuela
CANTV, Class D (ADR) 1,139,500 20,297 .16
------------- ------------
Vietnam - 0.03%
Vietnam Frontier Fund
(acquired 7/21/94, cost: $2,293,000) (1)(2) 222,610 1,113 .01
Vietnam Investment Fund, preferred, units
(acquired 8/4/94, cost: $3,206,000) (1)(2)(5) 30 3,206
Vietnam Investment Fund, ordinary, units
(acquired 8/4/94, cost: less than $1,000) (1)(2)(5) 6 - .02
---------- ----------
4,319 .03
---------- ----------
Multinational - 1.92%
Aminex PLC (acquired 8/1/97, cost: $3,856,000) (1) (2) (3) 3,250,000 728 .01
Argosy Mining Corp. (2) 424,462 42 .00
Armada Gold Corp. (2) 5,315,000 260 .00
Armada Gold Corp. 10.00% convertible bond July 8,2004 CAD800,000 36 .00
Asia Pacific Resources International Holdings Ltd. (2)(3) 3,024,800 6,215 .05
Billiton PLC 21,441,500 42,681 .34
Black Swan Gold Mines Ltd. (2) 2,275,000 297 .00
Cie. Financiere pour l'Europe Centrale SA (GDR)(2) 82,995 504 .00
Coca-Cola Beverages PLC 6,480,780 11,395 .09
DiamondWorks Ltd. (2) 3,966,000 543 .00
Dragon Oil PLC (2) 4,881,199 1,336 .01
Eurosov Energy PLC (2) 42,900 20 .00
Freeport-McMoRan Copper & Gold Inc., Class A 91,900 890 .01
Glencar Mining PLC (2) 519,735 315 .00
Goldbelt Resources Ltd. (2) 766,372 15 .00
Kimberley Resources Ltd. (2) 426,221 63 .00
New Asia East Investment Fund Ltd., Class A
(acquired 5/23/96, cost: $2,936,000) (1) (2) (5) 293,600 2,388
New Asia East Investment Fund Ltd., Class B .27
(acquired 5/23/96, cost: $40,064,000) (1) (2) (5) 4,006,400 32,590
New Europe East Investment Fund Ltd., Class B
(acquired 6/4/93, cost: $34,535,000) (1) (2) 436 42,171 .33
Oliver Gold Corp. (2) 75,795 6 .00
Panamerican Beverages, Inc., Class A 4,368,800 95,294 .75
Sibir Energy PLC (2) 7,311,763 546 .00
Sutton Resources Ltd. (2) 1,689,500 7,162 .06
------------- -----------
245,497 1.92
---------- ----------
Miscellaneous - 1.53%
Equity securities in initial period of acquisition 195,586 1.53
---------- ----------
TOTAL EQUITY SECURITIES (cost: $11,915,857,000) 10,280,185 80.33
---------- ----------
Principal
Amount
(000)
BOND & NOTES
Argentina - 1.90
Republic of Argentina:
6.1875% March 31, 2005 (4) $111,907 94841 .74
8.75% July 10, 2002 ARS15,240 12509 .10
11.00% October 9, 2006 $23,225 22993 .18
11.375% January 30, 2017 19,225 19283 .15
11.75% February 12, 2007 ARS36,650 31182 .24
Bonos Del Tesoro 8.75% May 9, 2002 $60,850 .44
CEI Citicorp Holdings SA, Series B, 11.25% February 14, 2007 ARS10,575 .05
---------- ----------
242666 1.90
---------- ----------
Brazil - 0.55%
Federal Republic of Brazil:
Capitalization Bond PIK 8.00% April 15, 2014 $49,519 29,711 .23
Debt Conversion Bonds: 6.1875% April 15, 2012 (4) .10
MYDFA Trust:
6.25% September 15, 2007
(Acquired 10/2/96, cost: $12,888,000) (1) (4) .06
6.25% September 15, 2007 .02
NMB Series L, 6.625% April 15, 2009 (4) .02
Series EI-L, 6.125% April 15, 2006 (4) .09
Multicanal Participacoes SA, Class B, 12.625% June 18, 2004 .03
(acquired 6/10/96, cost: $5,016,000) (1) ---------- ----------
70756 .55
---------- ----------
Bulgaria - 0.16%
Republic of Bulgaria:
Interest Arrears bond 6.565% July 28, 2011 (4) 5,050 3421 .03
Front Loaded Interest Reduction Bond,
Series A, 2.50% July 28, 2012 (4) 29,025 16762 .13
---------- ----------
20183 .16
---------- ----------
Ecuador - 0.02%
Republic of Ecuador Past Due Interest Bond 6.625%
February 27, 2015 (4) 2811 .02
---------- ----------
2811 .02
---------- ----------
India - 0.00%
Flex Industries Ltd. 13.50% December 31, 2004 INR29,929 612 .00
---------- ----------
612 .00
---------- ----------
Indonesia - 0.20%
APP International Finance 11.75% October 1, 2005 2125 1413 .01
Indah Kiat International Finance:
8.875% November 1, 2000 1225 845 .01
10.00% July 1, 2007 14175 7726 .05
11.875% June 15, 2002 4850 3419 .03
12.50% June 15, 2006 1050 701 .01
International Finance Co. 10.00% June 1, 2007 1950 1151 .01
Pindo Deli finance Mauritius Ltd.:
10.25% October 1, 2002 4845 2713 .02
10.75% October 1, 2007 14815 8000 .06
---------- ----------
25968 .20
---------- ----------
Mexico - 1.93%
Banco Nacional de Comercio Exterior, S.N.C.
7.25% Februaary 2, 2004 77,700 71,484 .56
Bancomext Trust 11.25% May 30, 2006 .05
Grupo Televisa, SA 0%/13.25% May 15, 2008 (6) .02
Innova, S. de R.L. 12.875% Senior Notes due April 1, 2007 .01
United Mexican States Discount Bonds
Series A, unit, 6.1156% December 31, 2019 (4) 1,75 1,435 .01
Series C, 6.201% December 31, 2019 (4) .02
Series D, 6.6016% December 31, 2019 (4) .05
United Mexican States Government Bonds:
8.625% March 12, 2008 14,000 13,118 .10
9.75% February 6, 2001 .14
9.875% January 15, 2007 .51
11.375% September 15, 2016 .14
11.50% May 15, 2026 .32
---------- ----------
247631 1.93
---------- ----------
Panama - 1.02%
Republic of Panama:
8.25% April 22, 2008 7440 6994 .06
8.875% September 30, 2007 7970 7531 .06
Interest Reduction Bonds:
3.75% July 17, 2014
(acquired 11/8/95, cost : $8,024,000) (1) (4) 13864 10467 .08
4.00% July 17, 2014 (4) 41215 31117 .24
Past Due Interest Bonds:
6.6875% July 17, 2016 (4) 93830 70373 .55
6.6875% July 17, 2016 .00
(acquired 6/21/96, cost: $3,219,000) (1) (4) 4589 3441 .03
---------- ----------
129923 1.02
---------- ----------
Peru - 0.41%
Republic of Peru:
Front Loaded Interest Reduction Bonds:
3.25% March 7, 2017 (4) 3000 1714 .01
3.25% March 7, 2017 (acquired 8/5/96, cost: $6,489,000) (1) (4) 11050 6312 .05
Past Due Interest Bonds:
4.00% July 17, 2017 (4) 47750 30202 .24
4.00% July 17, 2017
(acquired 3/7/97, cost: $15,065,000)(1)(4) 22460 14206 .11
---------- ----------
52434 .41
---------- ----------
Philippines - 0.35%
Republic of Philippines:
Front Loaded Interest Reduction Bond, Series B, 5.962%
June 1, 2008 (4) 14250 11828 .09
8.75% October 7, 2016 11500 11396 .09
8.875% April 15, 2008 21750 21723 .17
---------- ----------
44947 .35
---------- ----------
Poland - 0.23%
Republic of Poland Past Due Interest Bond 4.00%
October 27, 2014(4) 29000 27188 .21
Poland Government Bond 14.00% February 12, 2000 PLN6,100 1766 .02
---------- ----------
28954 .23
---------- ----------
Russian Federation - 0.01%
Russia 12.75% June 24, 2028
(acquired 6/18/98, cost: $896,000) (1) $910 291 .00
Russia 5.969% December 15, 2015
(acquired 3/7/97, cost: less than $1,000)(1)(4) 1 0 .00
Russia Principal Loan 5.97% December 15, 2020 (4) 10784 701 .01
---------- ----------
992 .01
South Africa - 0.08%
Republic of South Africa 13.00% August 31, 2010 ZAR70,000 10078 .08
South Korea - 0.03%
Korea Development Bank:
6.50% November 15, 2002 700 635
6.625% November 21, 2003 3000 2682 .02
6.75% December 1, 2005 200 175 .00
7.375% September 17, 2004 700 639 .01
---------- ----------
4131 .03
Thailand - 0.01%
Advance Agro PCL 13.00% Senior Unsecured Notes
November 15, 2007 (acquired 11/19/97,cost: $1,133,000) (1) $1,250 1038 .01
---------- ----------
1038 .01
---------- ----------
Venezuela - 0.69%
Republic of Venezuela:
Front Loaded Interest Reduction Bonds:
Series A Eurobond 6.125% March 31, 2007 (4) 9512 6040 .05
Series B Eurobond 6.125% March 31, 2007 (4) 8905 5655 .04
Debt Conversion Bonds:
5.9375% December 18, 2007 (4) 90428 57874 .45
9.25% September 15, 2027 31275 18921 .15
---------- ----------
88490 .69
---------- ----------
---------- ----------
TOTAL BONDS AND NOTES (cost: $ 1,041,807,000) 971,614 7.59
---------- ----------
----------
SHORT-TERM SECURITIES
CORPORATE SHORT-TERM NOTES - 8.20%
Abbey National North America 5.27% due 1/13/99 40,000 39,925 .31
American Honda Finance Corp. 5.23%-5.36% due 1/21-1/29/99 31,057 30,941 .24
Arco British Ltd. 5.15%-5.16% due 2/9-2/24/99 40,000 39,717 .31
Barclays US Fund Corp. 5.10% due 2/18/99 17,400 17,279 .14
Bayer Corp. 5.16%-5.23% due 1/4-1/12/99 32,500 32,459 .25
BMW US Capital Corp. 5.20% due 1/22/99 32,600 32,497 .25
British Gas Capital Inc. 5.29%-5.30% due 1/4-1/11/99 52,800 52,714 .41
Canada Bills 5.13% due 2/11/99 50,000 49,708 .39
Daimler-Benz North America Corp. 5.12% due 3/16-3/19/99 56,100 55,522 .43
Diageo Capital PLC 5.00%-5.30% due 1/19-3/9/99 83,400 82,785 .64
Dresdner US Finance Inc. 5.26% due 1/6/99 10,700 10,690 .08
Electricite de France 5.20% due 2/16/99 1,700 1,689 .01
Export Development Corp. 4.94%-5.30% due 1/7-2/9/99 45,000 44,933 .35
France Telecom, SA 5.10%-5.15% due 2/11-3/9/99 22,650 22,475 .18
Glaxo Wellcome PLC 5.15%-5.24% due 1/25-2/25/99 74,000 73,698 .58
Halifax PLC 5.09%-5.53% due 1/28-2/8/99 75,700 75,340 .59
International Lease Finance Corp. 5.16% due 1/28/99 20,000 19,920 .16
National Australia Funding (Delaware) Inc. 5.13%-5.28% due 1/5-2/2/99 57,200 57,086 .45
Repsol International Finance BV 5.15% due 1/26-2/1/99 87,700 87,297 .68
Rio Tinto America Inc. 5.06%-5.32% due 2/3-3/5/99 40,800 40,501 .32
Shell Finance (U.K.) PLC 5.14%-5.19% due 2/2-2/4/99 48,700 48,467 .38
SmithKline Beecham Corp. 5.11% due 1/20/99 20,000 19,944 .16
Toyota Motor Corp. 5.21%-5.27% due 1/13-1/21/99 60,000 59,856 .47
Xerox Capital (Europe) PLC 5.07%-5.32% due 1/14-3/4/99 54,500 54,079 .42
---------- ----------
1,049,522 8.20
---------- ----------
Federal Agency Discount Notes - 1.25%
Fannie Mae 5.00%-5.12% due 1/4-2/4/99 57,200 57,060 .45
Federal Home Loan Banks Discount Corp. 5.09%-5.18% due 2/5-2/12/99 36,750 36,552 .29
Freddie Mac 4.76%-5.30% due 1/15-2/12/99 67,200 66,874 .51
---------- ----------
160,486 1.25
---------- ----------
Non-U.S. Government-Short Term Obligations - 2.72%
Mexican Cetes Treasury Bills due 3/11-8/5/99 MXN38,736 35,481 .28
Polish Government Treasury Bills due 1/6-3/31/99 PLN389,430 109,270 .85
Turkey Government Bonds, Series CPI, 30.00% due 8/18-9/29/99 TRL3,803,160 14,320 .11
Turkey Government Teasury Bills due 3/17-5/5/99 TRL78,786,650 188,797 1.48
---------- ----------
347,868 2.72
---------- ----------
Non-U.S. Currency - 0.07%
Chilean Peso CHP23,138 49 .00
Malaysian Ringgit MYR1,623 298 .00
Taiwanese Dollar TWD278,256 8,650 .07
---------- ----------
8,997 .07
---------- ----------
TOTAL SHORT-TERM SECURITIES (cost:$1,570,090,000) 1,566,873 12.24
TOTAL INVESTMENT SECURITIES (cost: $14,527,754,000) 12818672 100.16
Net unrealized depreciation on foreign currency contracts (7) -62402 -.49
Excess of cash and receivables over liabilities
(excludes open foreign currency contracts) 41511 .33
---------- ----------
NET ASSETS $12,797,781 100.00
========== ==========
NET ASSETS including Forward Contracts
(1) Purchased in a private placement transaction;
resale to the public may require registration,
and no right to demand registration under
U.S. law exists. As of December 31, 1998,
the total market value and cost of such
securities was $379,492,000 and $452,768,000,
respectively, and the market value represented
2.97% of net assets. Such securities, excluding
certain convertible bonds and American
Depositary Receipts, are valued at fair value.
(2) Non-income producing securities.
(3) The fund owns 5% or more of the outstanding
voting securities of this company, which
represents investment in an affiliate as
defined in the Investment Company Act of 1940.
(4) Coupon rate may change periodically.
(5) Includes an unfunded capital commitment
representing a binding commitment made by
the fund, which may be paid in the future.
(6) Represents a zero coupon bond that will
convert to a coupon-bearing security at a later date.
(7) As of December 31,1998, the net payable
consists of the following:
</TABLE>
<TABLE>
Contract U.S.
Amount Valuation at 12/31/98
----------- ----------- -----------
Unrealized
Appreciation
Non-U.S. U.S. Amount (Depreciation)
(000) (000) (000) (000)
- ------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales:
Brazilian Reales
expiring 2/24/99 - 11/3/99 BRL979,648 $651,400 $689,625 ($38,225)
French Francs
expiring 1/13/99 - 3/17/99 FRF25,787 4,331 4,620 (289)
German Deutsche Marks
expiring 1/13/99 - 3/17/99 DEM53,090 29,899 31,903 (2,004)
Mexican Pesos
expiring 3/11/99 MXN139,617 11,351 13,362 (2,011)
South African Rands
expiring 1/20/99 - 10/25/99 ZAR1,560,223 234,239 244,093 (9,854)
Taiwanese Dollars
expiring 9/1/99 TWD2,119,689 57,915 65,520 (7,605)
Thai Bahts
expiring 11/4/99 THB110,063 2,885 2,954 (69)
Venezuelan Bolivares
expiring 1/13/99 VEB5,540 8,780 9,717 (937)
-----------------
(60,994)
Purchase:
Brazilian Reales
expiring 3/1/99* BRL125,488 101,200 99,792 (1,408)
-----------------
Foreign currency contracts - net (62,402)
*The fund entered into a forward
purchase contract to partially close
existing forward sales contracts.
</TABLE>
<TABLE>
<S> <C> <C>
SYMBOLS
SECURITIES
ADR - American Depositary Receipts
ADS - American Depositary Shares
GDR - Depositary Receipts
GDS - Global Depositary Shares
NON - US CURRENCY
ARS - Argentine Peso INR - Indian Rupee TRL - Turkish Lira
BRL - Brazilian Real MXN - Mexican Peso TWD - Taiwan Dollar
CAD - Canadian Dollar MYR - Malaysian Dollar VEB - Venuzuelan Bolivar
CHP - Chilean Peso PHP - Philippine Peso ZAR - South African Rand
DEM - German Deutsche Mark PLN - Polish Zloty
FRF - French Franc THB - Thai Baht
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C>
EQUITY SECURITIES ADDED TO THE PORTFOLIO EQUITY SECURITIES ELIMINATED FROM
SINCE JUNE 30,1998 THE PORTFOLIO SINCE JUNE 30, 1998
Amway (Malaysia) Holdings PT Aneka Tambang
Banco Continental Banco Santander-Chile
Black Swan Gold Mines Bangkok Bank
Cadbury India Bank of Ayudhya
Carrier Aircon Bharat Forge
CEI Citicorp Holdings Bombay Dyeing and Manufacturing
CESKE RADIOKOMUNIKACE Centrais Eletricas de Santa Catarina - CELESC
China Telecom (Hong Kong) CESP-Cia. Energetica de Sao Paulo
Coca-Cola Beverages Empresa Paulista de Transmisao de Energia Eletrica - EPTE
Credit Rating Information Services of India Genting International
Digital Equipment (India) Grupo Casa Autrey
Edaran Otomobil Nasional Laboratorio Chile
Embratel Participacoes PT Lautan Luas
Euroserv Energy LG Securities
Globo Cabo PT Lippo Bank
Goldbelt Resources Lite-0n Technology
Infosys Technologies Lojas Americanas
Kenya Commercial Bank Marchmont Gold
Kimberley Resources PT Mayora Indah
LML Multicanal Participacoes
Lukinter Finance New World Infrastructure
Mezogep Petron
REAL Concorcio Participacoes Philippine National Bank
REAL Holdings Participacoes PT PP London Sumatra Indonesia
REALPAR Participacoes Quilmes Industrial
Road Builder (M) Holdings PT Ramayana Lestari Sentosa
Sechaba Breweries Samsung Fire & Marine Insurance
Siam City Cement Shinhan Bank
Sibir Energy Siliconware Precision Industries
Sonera Group Star Cruises
South African Private Equity Fund III Sundaram Finance
Tan Chong Motor Holdings Swedish Motors
Tele Celular Sul Participacoes PT Tambang Timah (Persero)
Tele Centro Oeste Celular Participacoes Technology Resources Industries
Tele Centro Sul Participacoes Thai Farmers Bank
Telekomunikacje Polska Thai Glass Industries
Tele Leste Celular Participacoes Tian An China Investments
Telemig Celular Participacoes Tingyi (Cayman Islands) Holding
Tele Nordeste Celular Participacoes Ton Yi Industrial
Tele Norte Celular Participacoes Zhejiang Expressway
Tele Norte Leste Participacoes
Telesp Celular Participacoes
Telesp Participacoes
Tele Sudeste Celular Participacoes
Turk Dis Ticaret Bankasi
United Bank for Africa
</TABLE>
<TABLE>
<S> <C> <C>
Emerging Markets Growth Fund
Financial Statements
Statement of Assets and Liabilities (dollars in thousands)
at December 31, 1998 (Unaudited)
Assets:
Investment securities at market
(cost: $14,527,754) $12,818,672
Cash 16,154
Non-U.S. taxes receivable 95
Receivables for--
Sales of investments $49,902
Sales of fund's shares 3,137
Dividends and accrued interest 70,216 123,255
---------------- ----------------
12,958,176
----------------
Liabilities:
Payables for--
Purchases of investments 24,455
Unfunded capital commitments 63,486
Open forward currency contracts 62,402
Management services 6,736
Accrued expenses 3,316 160,395
---------------- ----------------
Net Assets at December 31, 1998 --
Equivalent to $40.55 per share on
315,590,376 shares of $0.01 par value
capital stock outstanding (authorized
capital stock -- 400,000,000 shares) $12,797,781
==============
Statement of Operations
for the Six Months Ended December 31, 1998 (dollars in thousands)
(Unaudited)
Investment Income:
Income:
Dividends $98,290
Interest 121,508 $219,798
----------------
Expenses:
Management services fee 37,678
Custodian fee 5,716
Registration statement and prospectus 729
Auditing and legal fees 332
Taxes other than federal income tax 1
Directors' fees 77
Other expenses 516 45,049
---------------- ----------------
Income before non-U.S. taxes 174,749
Non-U.S. taxes 2
----------------
Net investment income 174,747
----------------
Realized Loss and Unrealized
Depreciation on Investments:
Realized loss before non-U.S. taxes (700,108)
Non-U.S. taxes 1
----------------
Net realized loss (700,107)
Net change in unrealized depreciation
on investments (963,121)
Net change in unrealized depreciation
on open forward currency contracts (58,607)
----------------
Net unrealized depreciation (1,021,728)
---------------- ----------------
Net realized loss and unrealized
depreciation on investments (1,721,835)
----------------
Net Decrease in Net Assets Resulting
from Operations ($1,547,088)
==============
Statement of Changes in Net Assets
(dollars in thousands)
Six Months Ended Year Ended
December 31 June 30
1998* 1998
---------------- ----------------
Operations:
Net investment income $174,747 $350,719
Net realized loss on investments (700,107) (45,790)
Net unrealized depreciation
on investments and open foreign currency
contracts (1,021,728) (4,643,969)
---------------- ----------------
Net decrease in net assets
resulting from operations (1,547,088) (4,339,040)
---------------- ----------------
Dividends and Distributions Paid
to Shareholders:
Dividends from net
investment income - (545,105)
Distributions from net realized
gain on investments - (722,874)
---------------- ----------------
Total dividends and
distributions - (1,267,979)
---------------- ----------------
Capital Share Transactions:
Proceeds from shares sold:
47,095,875 and 52,680,219 shares, respectively 1,980,554 3,164,945
Proceeds from shares issued in
reinvestment of net investment
income dividends and
distributions of net realized
gain on investments:
24,142,868 shares - 1,222,745
---------------- ----------------
Net increase in net assets
resulting from capital share
transactions 1,980,554 4,387,690
---------------- ----------------
Total Increase (Decrease) in Net Assets 433,466 (1,219,329)
Net Assets:
Beginning of period 12,364,315 13,583,644
---------------- ----------------
End of period (including excess distributions
over net investment income: $95,872 and
$270,619, respectively) $12,797,781 $12,364,315
=========== ===========
*Unaudited
See Notes to Financial Statements
</TABLE>
Emerging Markets Growth Fund
Notes to Financial Statements
(unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - 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.
SIGNIFICANT ACCOUNTING POLICIES - The following is a summary of the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
SECURITY VALUATION - Equity securities, including depositary receipts, are
valued at the last reported sale price on the exchange or market on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price. In
cases where equity securities are traded on more than one exchange, the
securities are valued on the exchange or market determined by the investment
adviser to be the broadest and most representative market, which may be either
a securities exchange or the over-
the-counter market. Fixed-income securities are valued at prices obtained from
a pricing service,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 quoted bid
and asked prices or at prices for securities of comparable maturity, quality
and type. Securities with original maturities of one year or less having 60
days or less to maturity are amortized to maturity based on their cost if
acquired within 60 days of maturity or, if already held on the 60th day, based
on the value determined on the 61st day. Forward currency contracts are valued
at the mean of their representative quoted bid and asked prices. Securities
and assets for which representative market quotations are not readily available
are valued at fair value as determined in good faith under policies approved by
the Fund's Board.
NON-U.S. CURRENCY TRANSLATION - Assets or liabilities initially expressed in
terms of non-U.S. currencies are translated into U.S. dollars at the prevailing
market rates at the end of the
reporting period. Purchases and sales of securities and income and expenses
are translated into U.S. dollars at the prevailing market rates on the dates of
such transactions. The effects of
changes in non-U.S. currency exchange rates on investment securities are
included with the net realized and unrealized gain or loss on investment
securities.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - As is customary in the
mutual fund industry, securities transactions are accounted for on the date the
securities are purchased or
sold. In the event the fund purchases securities on a delayed delivery or
"when-issued" basis, it will segregate with its custodian liquid assets in an
amount sufficient to meet its payment obligations in these transactions.
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.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid
to shareholders are recorded on the ex-dividend date.
UNFUNDED CAPITAL COMMITMENTS - 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.
FORWARD CURRENCY CONTRACTS - 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 enters into
these contracts to reduce its exposure to fluctuations in foreign exchange
rates arising from investments denominated in non-U.S. currencies. 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. Risks 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.
2. NON-U.S. INVESTMENT RISK
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.
NON-U.S. TAXATION - Dividend income, interest income and realized gain of the
fund derived in certain countries may be subject to certain non-U.S. taxes at
rates ranging from approximately 10% to 36%. The fund provides for such
non-U.S. taxes on investment income, net realized gain and net unrealized gain
at the appropriate rates for each jurisdiction.
3. FEDERAL INCOME TAXATION
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, 1998, net unrealized depreciation on investments, excluding
forward currency contracts, for federal income tax purposes aggregated
$1,698,371,000, of which $1,282,989,000 related to appreciated securities and
$2,981,360,000 related to depreciated securities. During the six months ended
December 31, 1998, the fund realized, on a tax basis, a net capital loss of
$562,461,000 on securities transactions. During the same period the fund
recognized, for federal income tax purposes, ordinary net losses $317,793,000
relating to non-U.S. currency transactions. The cost of portfolio securities,
excluding forward currency contracts, for federal income tax purposes was
$14,538,465,000 at December 31, 1998.
4. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $37,678,000 for management services was
incurred 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;
0.56% of such assets in excess of $11 billion but not exceeding $15 billion;
0.54% of such assets in excess of $15 billion but not exceeding $20 billion;
and 0.52% of such assets in excess of $20 billion. CII is owned by Capital
Group International, Inc., which is a wholly owned subsidiary of The Capital
Group Companies, Inc.
DEFERRED DIRECTORS' FEES - Directors who are unaffiliated with CII may elect to
defer part or all of the fees earned for services as members of the Board.
Amounts deferred are not funded and are general unsecured liabilities of the
fund. As of December 31, 1998, aggregate amounts deferred and earnings thereon
were $31,000. These amounts are included with accrued expenses.
5. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding certain
short-term securities, of $3,078,545,000 and $1,190,332,000, respectively,
during the six months ended December 31, 1998.
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 $5,716,000 includes $130,000 that was paid by these
credits rather than in cash.
Dividend and interest income is recorded net of non-U.S. taxes paid. For the
six months ended December 31, 1998, such non-U.S. taxes were $7,815,000. Net
realized currency losses on dividends, interest, withholding taxes reclaimable,
and purchases and sales of non-U.S. equity securities and bonds, on a book
basis, were $22,558,000 for the six months ended December 31, 1998.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Per-Share Data and Ratios
Six Months Year Ended June 30
Ended
12/31/1998 (1) 1998 1997 1996 1995 1994
Net Asset Value, Beginning of
Period $46.05 $70.87 $57.57 $52.36 $58.75 $44.95
-------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income 0.70 1.56 1.61 1.30 0.87 0.53
Net realized and unrealized
gain (loss) on investments
before non-U.S. taxes (6.20) (20.69) 14.51 6.49 (.79) 15.29
Non-U.S. taxes - 0.05 (.01) (.01) (.03) (.39)
-------- -------- -------- -------- -------- --------
Total income from
investment operations (5.50) (19.08) 16.11 7.78 0.05 15.43
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net
investment income - (2.36) (1.79) (1.30) (.63) (.49)
Distributions from net
realized gains - (3.38) (1.02) (1.27) (5.81) (1.14)
-------- -------- -------- -------- -------- --------
Total distributions - (5.74) (2.81) (2.57) (6.44) (1.63)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $40.55 $46.05 $70.87 $57.57 $52.36 $58.75
======= ======= ======= ======= ======= =======
Total Return (11.94) (2) (27.56)% 29.17% 15.49% (1.22)% 34.33%
Ratios/Supplemental Data:
Net assets, end of period
(in millions) $12,798.00 $12,364.00 $13,584.00 $8,451.00 $5,572.00 $4,170.00
Ratio of expenses to average
net assets .37% (2) .76% .78% .84% .91% 1.00%
Ratio of expenses and non-U.S.
taxes to average net assets .37% (2) .80% .78% .85% .94% 1.04%
Ratio of net income to average
net assets 1.36% (2) 2.58% 2.74% 2.54% 1.70% .91%
Portfolio turnover rate 10.97% (2) 23.41% 23.75% 17.78% 23.75% 18.13%
(1) Unaudited
(2) Based on operations for
the period shown and, accordingly,
not representative of a full
year's operations.
</TABLE>
BOARD OF DIRECTORS
ROBERT E. ANGELICA, Berkeley Heights, New Jersey
President and Chief Investment Officer,
AT&T Investment Management Corporation
NANCY ENGLANDER, Los Angeles, California
President of the fund
Senior Vice President, Capital International, Inc.
DAVID I. FISHER, Los Angeles, California
Vice Chairman of the Board of the fund
Chairman of the Board,
Capital Group International, Inc.
KHALIL FOULATHI, Abu Dhabi, United Arab Emirates
Managing Director, Abu Dhabi Islamic Bank
BEVERLY L. HAMILTON, Los Angeles, California
President, ARCO Investment Management Company
RAYMOND KANNER, Stamford, Connecticut
Senior Investment Manager, IBM Retirement Funds
MARINUS W. KEIJZER, Zeist, Netherlands
Director, Investment Strategy, Pensioenfonds PGGM
HUGH G. LYNCH, New York, New York
Managing Director, International Investments,
General Motors Investment Management Corporation
HELMUT MADER, Frankfurt, Germany
Director, Deutsche Bank AG
JOHN G. MCDONALD, Stanford, California
The IBJ Professor of Finance,
Graduate School of Business, Stanford University
WILLIAM ROBINSON, Gouvieux, France
Director, Aga Khan Fund for Economic Development
PATRICIA A. SMALL, Oakland, California
Treasurer, The Regents of the University of California
WALTER P. STERN, New York, New York
Chairman of the Board of the fund
Vice Chairman of the Board,
Capital Group International, Inc.
SHAW B. WAGENER, Los Angeles, California
Executive Vice President of the fund
President and Director,
Capital International, Inc.
OTHER OFFICERS
ROBERTA A. CONROY, Los Angeles, California
Senior Vice President and Secretary of the fund
Assistant General Counsel,
The Capital Group Companies, Inc.
MICHAEL A. FELIX, Brea, California
Vice President and Treasurer of the fund
Senior Vice President, Capital International, Inc.
HARTMUT GIESECKE, Singapore
Vice President of the fund
Chairman of the Board and Director,
Capital International K.K.;
Senior Vice President and Director,
Capital International, Inc.
PETER C. KELLY, Los Angeles, California
Vice President of the fund
Senior Vice President and Director,
Capital International, Inc.
VICTOR D. KOHN, Los Angeles, California
Vice President of the fund
Senior Vice President and Director,
Capital International, Inc.
NANCY J. KYLE, New York, New York
Vice President of the fund
Senior Vice President and Director,
Capital Guardian Trust Company
ABBE G. SHAPIRO, Los Angeles, California
Vice President of the fund
Vice President, Capital International, Inc.
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER,
CAPITAL INTERNATIONAL, INC.
11100 Santa Monica Boulevard, 15th Floor
Los Angeles, California 90025-3302
135 South State College Boulevard
Brea, California 92821-5823
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
This report is for the information of shareholders of Emerging Markets Growth
Fund, but it may also be used as sales literature when preceded or accompanied
by the current prospectus, which gives details about charges, expenses,
investment objectives and operating policies of the fund.
Printed in USA NA/CG/3984
(c) 1999 Emerging Markets Growth Fund, Inc.
Lit. No. EMGF-013-0299(NLS)
