EMERGING MARKETS
GROWTH FUND
SEEKS LONG-TERM GROWTH OF CAPITAL BY INVESTING IN COMPANIES
OPERATING IN DEVELOPING COUNTRIES AROUND THE WORLD
[cover: illustration of the world]
ANNUAL REPORT
FOR THE YEAR ENDED JUNE 30, 1999
FELLOW SHAREHOLDERS:
Fiscal 1999 was a tumultuous year in emerging markets. Even by the standards of
our investment universe, where stock prices gyrate with regularity, investors
were given an unusually wild ride. Despite the volatility, Emerging Markets
Growth Fund (EMGF) recorded results that were closely in line with our 21.8%
average annual compound rate of return since operations began in 1986.* For the
12 months ended June 30, the value of the fund's shares rose 20.6%.
*All percentage gain/loss figures are in U.S. dollars and include reinvestment
of distributions unless otherwise indicated.
The volatility was reflected in the results recorded by the unmanaged Morgan
Stanley Capital International Emerging Markets Free (EMF) Index, which tracks
stocks in 25 developing countries. After roller-coasting up and down, this
index ended the 12 months ahead 28.7%; this is virtually the same percentage by
which it plunged during the nerve-wracking month of August 1998.
The EMF Index wound up with a larger gain than the fund for the fiscal year for
two reasons. First, relative to its principal benchmark, EMGF was underweighted
in markets that did exceptionally well - notably South Korea, which shot up
306% and is now the index's single largest component at 14.8%; its weighting in
the index was less than 2% as recently as January 1998. The second reason is
that, unlike the index, which includes no cash, a small percentage of the
fund's assets were held in interest-bearing cash equivalents during the year.
On June 30, that percentage was 3.2%.
SELLOFF AND RECOVERY
It is instructive to look back at the circumstances leading to the selloff that
hit the markets earlier in the year and the events foreshadowing the recovery.
The selloff was a continuation of the bear market that began in 1994 and a
response to Russia's decision to devalue the ruble and default on several debt
issues. The repercussions of those actions combined with the Asian contagion
and the near-collapse of a large Wall Street hedge fund to create a dangerous
situation for the world economy. A fair amount of panic selling caused
securities prices in industrialized as well as developing countries to be
hammered hard.
Three timely reductions in short-term interest rates by the Federal Reserve and
steps taken by central bankers in other nations to ease credit prevented
matters from getting worse. Bond markets around the world stabilized and stock
prices turned up. In many emerging markets, they rose for three consecutive
months before weakening again after Brazil devalued the real in January. The
decline following that devaluation, however, was comparatively moderate and
gave way to an upturn that continued, with minor interruptions, through the
spring and into the summer. This upturn can be traced partly to the fact that
Brazil's devaluation did not lead to the global economic meltdown that some
pundits had predicted. When their gloomy prognostications failed to
materialize, confidence began returning to the marketplace.
[Begin Sidebar]
EMGF TOTAL RETURNS VS. MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS
FREE (EMF) INDEX
for periods ended 6/30/99 (with distributions reinvested)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Emerging MSCI
Markets Emerging
Growth Fund Markets
(EMGF) Annualized Free Index Annualized
12 Months +20.6% - +28.7% -
3 Years +12.8 +4.1% -11.5 -4.0%
5 Years +28.7 +5.2 -4.1 -.8%
10 Years +368.5 +16.7 +219.2 +12.3%
</TABLE>
[End Sidebar]
Importantly, the recovery was bolstered, too, by positive developments that
were an outgrowth of the turmoil in emerging markets. Several of the
devaluations that have taken place - including the Mexican peso in 1995 and
Korean won in 1997 - did not prove highly inflationary. Instead, most of the
productivity gains resulting from the devaluations were captured by the local
economy. Meanwhile, needed structural reforms have begun taking place in some
though certainly not all countries. As a result of these developments,
economies that had been floundering have shown signs of turning around.
STOCK SELECTION AND DIVERSIFICATION
In our report to you midway through the fiscal year, we expressed the opinion
that September probably represented the nadir of the four-year-old bear market.
That is still our view, though we hasten to add that our focus is on companies,
and we regard forecasting highs and lows and short-term movements in markets as
something of a guessing game.
We also ventured, with greater conviction, the opinion that the rugged period
we have been going through since $94 would be looked back upon as an
extraordinary buying opportunity. We have continued to treat it as such, taking
advantage of attractive valuations to add to the fund's portfolio. Between
January and June, 32 new names were added, bringing the total number of
companies represented at fiscal year-end to 403. Quite a few of the additions
are commodity-related firms that were hit hard during the bear market. The
strengthening of raw materials prices in recent months has been an important
factor in the recovery.
Our investment strategy is value-oriented and based on proprietary research. It
starts with stock selection; currency and country allocations are simply a
residual of that approach. The result of this method of investing is a
portfolio that is diversified geographically and in terms of industries. The
two areas of heaviest concentration are telecommunications and electronic
components. Together they account for about a third of net assets and for seven
of our 10 largest investments (see table). All seven are world-class companies
that have made a contribution to EMGF's record of success over the years.
Several of these stocks helped our results significantly in fiscal 1999.
[Begin Sidebar]
TEN LARGEST EQUITY HOLDINGS
<TABLE>
<CAPTION>
<S> <C> <C>
Percent of Gain/Loss
for the 12 Months
Percent of Ended 6/30/99*
Net Assets (in U.S. Dollars)
Telefonos de Mexico 5.68% +68.02%
(Telmex)
Taiwan Semiconductor
Manufacturing 4.54 +127.61
Samsung Electronics 3.09 +250.17
Asustek Computer 2.74 +92.93
Cifra 1.88 +30.62
Compania de Telecomunicaciones
de Chile (CTC) 1.51 +21.85
Advanced Semiconductor
Engineering 1.49 +100.44
Grupo Televisa 1.47 +19.18
Telefonica de Argentina 1.44 -3.37
Pohang Iron & Steel 1.41 +260.76
</TABLE>
*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.
[End Sidebar]
TELECOMMUNICATIONS: A GROWTH BUSINESS
Emerging Markets Growth Fund has positions in 55 companies in the
telecommunications industry. They account for about one-fifth of net assets.
Three of the 55 are among our 10 largest investments. Like nearly all of our
telecom holdings, they are former state-run phone monopolies that were
denationalized over the past decade. The privatizations have led to
improvements in efficiency and service, enhancing the profitability and growth
potential of the companies and their attractiveness as long-term investments.
The largest of our telecom holdings is Telefonos de Mexico (Telmex), which
first came into the portfolio 10 years ago and is now our biggest single
investment. The company dominates the phone business in Mexico and continues to
enjoy success as a provider of cellular service. In fiscal 1999, Telmex rose
68.0% in price.
The other two telecom stocks on the list of our 10 largest holdings are CTC,
Chile's main provider of telecommunications services, and Telefonica de
Argentina, which serves Buenos Aires and the southern part of the country. Both
stocks came into the portfolio earlier in the $90s. In fiscal 1999, CTC gained
21.8%, while Telefonica slipped 3.4%, chiefly because of concerns about the
country's economy and currency, which had a moderately negative impact on a
number of prominent Argentine stocks.
[Begin Sidebar]
PERCENT CHANGE IN KEY MARKETS/1/
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Twelve Months Six Months
Ended 6/30/99 Ended 6/30/99
Expressed Expressed Expressed Expressed
in U.S. in Local in U.S. in Local
Dollars Currency Dollars Currency
Argentina 13.1% 13.1% 24.8% 24.9%
Brazil (Free)/2/ -14.7 29.3 18.7 72.3
Chile 16.8 28.8 28.7 41.1
China (Free)/2/ 45.2 45.3 63.1 63.3
Colombia -31.6 -12.2 -17.9 -7.4
Czech Republic -1.3 6.5 5.2 23.5
Greece 46.9 52.0 19.5 34.3
Hungary -16.1 -7.3 -8.8 2.5
India 28.1 31.0 36.9 39.6
Indonesia (Free)/2/ 242.7 59.4 110.9 82.7
Israel 10.1 20.5 25.5 23.8
Jordan 4.7 4.8 1.2 1.1
Mexico (Free)/2/ 30.2 36.0 52.3 44.1
Pakistan 10.9 24.2 6.9 12.5
Peru -20.5 -11.2 19.8 25.6
Philippines (Free)/2/ 50.5 37.4 27.3 24.5
Poland 5.8 19.0 30.9 46.3
Russia -2.3 - /3/ 133.7 - /3/
South Africa 9.9 12.6 30.2 33.5
South Korea 306.2 242.5 77.9 71.2
Sri Lanka -19.2 -11.6 -22.5 -19.0
Taiwan 35.1 27.0 42.3 42.6
Thailand (Free)/2/ 159.8 126.5 58.3 60.6
Turkey -19.6 27.4 45.2 94.3
Venezuela 8.2 18.6 15.5 24.0
Emerging Markets
Growth Fund 20.6 36.9
</TABLE>
/1/Including reinvestment. All indexes are compiled by Morgan Stanley Capital
International and are unmanaged.
/2/The fund is invested in the "free" Brazilian, Chinese, Indonesian, Mexican,
Philippine and Thai stock markets, which consist of securities that can be
purchased by investors other than resident nationals.
/3/Index is quoted in U.S. dollars only.
[End Sidebar]
ELECTRONIC COMPONENTS: THE CUTTING EDGE
EMGF has positions in 11 electronic components companies based in three
countries. Together, they account for a little over 12% of net assets. As with
the telecoms, these are globally competitive firms with well above average
long-term growth prospects. They are on the cutting edge of computer and
semiconductor technology and serve markets all over the world. The four
electronic components firms appearing on the list of our 10 largest holdings
came into the portfolio between 1991 and 1997. The stocks of all four recorded
huge gains and made solid contributions to our fiscal $99 results.
Three of the four are Taiwanese firms: Taiwan Semiconductor Manufacturing, the
world's largest semiconductor foundry (+127.6% for the 12 months); Asustek,
which makes notebook computers and computer equipment (+92.9%); and Advanced
Semiconductor Engineering, Taiwan's largest independent semiconductor assembly
and test subcontractor; its shares rose 100.4%.
The other company on the list is Samsung Electronics, a global leader in the
production of DRAM memory chips and South Korea's largest diversified
electronics manufacturer. Samsung has participated in the dramatic rise in that
country's equity market; the stock went up 250.2% in fiscal 1999.
While telecommunications and electronic components are currently our two main
areas of concentration, in the past sizable holdings in various other
industries have played similarly prominent roles in helping build EMGF's record
of success.
[Begin Sidebar]
WHERE THE FUND'S ASSETS ARE INVESTED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Percent of Net Market Value
Assets MSCI EMF of Holdings
Index/1/ 6/30/99 (in
6/30/97 6/30/98 12/31/98 6/30/99 6/30/99 thousands)
ASIA/PACIFIC
China 1.0% .7% .6% .4% .8% $71,555
Hong Kong .3 .7 .6 .7 - 129,939
India 7.5 5.6 4.8 5.57 .5 1,003,816
Indonesia 3.5 1.4 2.0 3.02 .3 537,103
Malaysia 3.4 .9 .9 2.2 -/2/ 397,284
Pakistan .4 .1 .1 .1 .3 10,827
Philippines 3.8 2.7 3.1 2.41 .8 430,313
South Korea 6.4 2.1 5.4 7.9/3/ 14.8/3/ 1,441,560
Sri Lanka .1 .1 .1 - - 4,567
Taiwan 9.5 6.5 7.1 10.9/4/ 12.3/4/ 1,979,328
Thailand .9 .5 .7 .93 .8 165,772
Vietnam .1 - - - - 2,410
36.9 21.3 25.4 34.0 43.6 6,174,474
LATIN AMERICA
Argentina 6.6 8.7 8.6 4.7 2.4 854,036
Brazil 16.9 16.1 12.3 10.1 8.7 1,823,181
Chile 2.2 3.2 3.7 3.2 3.9 572,472
Colombia .2 - - - .4 -
Ecuador .2 .1 - - - 166
Mexico 8.2 10.8 12.5 14.4 11.9 2,618,475
Panama .2 .7 1.0 .1 - 25,145
Peru 2.2 2.0 1.7 1.1 .8 204,289
Venezuela .5 1.3 .9 .9 .8 163,850
37.2 42.9 40.7 34.5 28.9 6,261,614
EASTERN EUROPE
Bulgaria .3 .2 .2 - - 4,076
Czech Republic .2 .3 .5 .6 .8 114,148
Hungary .4 .9 1.0 2.3 1.2 408,732
Kazakhstan - - - - - 1,254
Poland .5 1.4 1.8 2.0 1.2 374,404
Republic of .4 .8 .9 .6 - 100,182
Croatia
Russian 6.7 3.8 1.2 2.0 2.0 358,463
Federation/5/
Slovakia .1 .1 - - - 4,703
Ukraine - .1 - - - 1,205
8.6 7.6 5.6 7.5 5.2 1,367,167
OTHER MARKETS
Botswana - - - - - 3,482
Egypt .1 .1 .1 .1 - 14,872
Estonia - - - .1 - 16,652
Ghana .2 .2 .1 .1 - 19,279
Greece .8 2.1 2.6 1.5 6.2 274,165
Israel - - .3 1.8 2.9 322,617
Kenya - - - - - 485
Mauritius .1 .1 .1 - - 7,169
Morocco .2 .3 .3 .2 - 31,219
Nigeria - - .1 - - 7,515
Portugal .7 1.6 .9 .1 - 26,868
South Africa 3.9 4.5 4.7 5.6 11.0 1,013,893
Turkey 2.3 6.0 3.9 5.2 2.1 935,907
8.3 14.9 13.1 14.7 22.2 2,674,123
Multinational 2.2 2.6 1.9 2.6 464,367
Other/6/ .6 .5 1.2 3.3 595,936
Cash & 6.2 10.2 12.1 3.4 609,743
Equivalents
TOTAL 100.0% 100.0% 100.0% 100.0% $18,147,424
</TABLE>
/1/Morgan Stanley Capital International Emerging Markets Free (EMF) Index also
includes Jordan (0.1% at 6/30/99). A dash indicates that the market is not
included in the index. Source: Morgan Stanley Capital International
Perspective.
/2/In November 1998, Malaysia was removed from the index.
/3/In September 1998, South Korea's weighting in the index was increased to
reflect 100% of that country's market capitalization instead of 50%.
/4/In September 1996, Taiwan was added to the index; its weighting reflects 50%
of that country's market capitalization.
/5/Includes investments in companies incorporated outside the region that have
significant operations in the region.
/6/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%.
[End Sidebar]
For example, during the fund's formative years in the 1980s, we had large and
generally profitable investments in the cement industry. EMGF presently has
small positions in 14 cement-manufacturing stocks, which account for just over
2% of net assets. During much of the $90s, banking has been well represented in
the portfolio, and several of our investments in that industry also have been
quite profitable. Currently, the fund holds shares in 47 banking organizations
based in 20 countries. Banking is our third-largest area of concentration,
accounting for 9.5% of net assets.
A CHANGE IN OUR STATUS
We would like to remind shareholders that Emerging Markets Growth Fund has
reopened for additional purchases. It also has been converted into an open-end
interval fund. This change in status, which took effect July 1, provides
shareholders with an opportunity to redeem shares each month. Redemptions since
July 1 have been very minimal. We are pleased by the continued support shown by
our investors and do not anticipate increased interest in selling shares. EMGF
now has more than 700 shareholders and net assets of just over $18 billion. We
expect the share base to continue expanding as it has for some time - slowly,
and under the careful supervision of the fund's independent Board of Directors,
which has limited the growth of new sales each year.
On pages 6-8, you will find a brief overview of the markets that are
prominently represented in our portfolio. On page 9 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
August 12, 1999
The fund's investment adviser, Capital International, Inc. and other Capital
Group Companies are taking steps to address the Year 2000 challenge. Our
principal computer systems and other internal business systems around the world
have been updated to process date-related information properly following the
turn of the century. They are Year 2000 compliant. Testing of those systems
with those of other service providers will continue through the remainder of
this year. Additionally, the issue of readiness for Year 2000 is being taken
into account by Capital's investment professionals as they evaluate companies.
Here are the total returns and annual compound returns with all distributions
reinvested for periods ended June 30, 1999 - 10 years: +368.51%, or +16.70% a
year; 5 years: +28.71%, or +5.18% a year; 12 months: +20.59%.
FIGURES SHOWN ARE PAST 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. INVESTING OUTSIDE THE UNITED STATES IS SUBJECT TO ADDITIONAL
RISKS, SUCH AS CURRENCY FLUCTUATIONS AND POLITICAL INSTABILITY, WHICH ARE
DETAILED IN THE FUND'S PROSPECTUS.
THE INVESTMENT LANDSCAPE
We believe that good companies are good companies wherever they are based. The
geographic concentrations of assets found in Emerging Markets Growth Fund's
portfolio rarely reflect any determination on our part to invest more in one
country or region. More often, they are the by-product of themes prevalent in
the portfolio, such as the attractive opportunities presenting themselves in
telecommunications and electronic components. Geographic concentrations are the
result of buy and sell decisions made on a stock-by-stock basis, based on
intensive, proprietary research. While the emphasis of that research is on
companies, EMGF's portfolio managers and analysts also keep a close eye on
political and macroeconomic considerations that can affect our holdings. Here
is a look at the investment landscape in the fund's six largest countries of
concentration on June 30. The six account for more than 50% of net assets.
(Percentage changes for markets and stock prices are in U.S. dollars).
MEXICO (14.4% OF NET ASSETS)
The fund's largest area of concentration, Mexico enjoyed improving economic
conditions during the latter part of the fiscal year, thanks largely to
increased revenue from higher oil prices and a moderate recovery in domestic
consumption and investment. Expectations are that this improvement will
continue during the coming months.
Problems in the banking system remain, and a number of businesses not
represented in the fund's portfolio declared bankruptcy over the past year. In
a move aimed at maintaining economic stability during the presidential election
year of 2000, the country obtained $23.7 billion in financing commitments from
the United States, Canada, the International Monetary Fund, the World Bank and
the Inter-American Development Bank.
The Mexican stock market rose 52% in the final six months after declining
sharply during the first part of the fund's fiscal year and ended with a
12-month gain of 30%. Telmex held up better than the market as a whole during
the decline and outpaced it during the upturn. The company is firmly
established as the dominant provider of telecommunications service in a country
where there is considerable unmet demand. Telmex continues to have success in
the cellular business.
Recently it has begun investing in companies based in other Latin American
countries and the United States.
In addition to Telmex, the fund's Mexican holdings include Cifra, a retailing
firm; Grupo Televisa, a producer of television programming; Cemex, the
country's leading cement supplier; and a number of beverage companies.
TAIWAN (10.9% OF NET ASSETS)
Taiwan is an excellent example of a market where our strategy is based almost
entirely on the global competitiveness and prospects for the companies in which
we invest. The majority of our holdings are in firms that are part of the
Taiwanese semiconductor industry, which is benefiting from strong worldwide
demand for better, faster computing power and for systems that can avoid
potential Y2K problems.
Taiwan Semiconductor Manufacturing (TSM), our second-largest holding, is
experiencing an upturn in orders for its microchips after a slowdown in 1998.
The company's rising sales and profits are, in large measure, a reflection of a
growing tendency among computer manufacturers to outsource their microchip
production. As the world's leading subcontractors, TSM and Advanced
Semiconductor Engineering, another of the fund's holdings, are prime
beneficiaries of this trend.
Similarly, Asustek has become a major source of electronic components for large
companies such as Hewlett-Packard, Sony and Gateway. It also is having success
selling notebook computers. Additionally, Asustek is introducing servers -
high-margin products - at a time when demand for them is growing rapidly as
data networks and the Internet replace voice networks.
The Taiwanese stock market, which is dominated by electronic component
companies, rose 35% during the fiscal year. After the close of the period,
however, it gave up considerable ground due to escalated tensions with mainland
China over the issue of Taiwan's sovereignty.
BRAZIL (10.1% OF NET ASSETS)
Fiscal 1999 was an exceptionally challenging period for Brazil. When Russia
devalued the ruble, emerging markets investors who had been rattled by the
Asian devaluations appeared to have lost whatever appetite they may have had
left for currency risk. Their confidence was shaken further after the third
most industrialized state in the country, Minas Gerais, reneged on payments to
the federal government. Subsequently, the head of the central bank resigned, as
did his successor two weeks later. After Brazil released the real to float in
the foreign exchange markets, its value fell about 40% relative to the U.S.
dollar.
Since March, Brazil has been on the comeback trail. Although exports have
lagged slightly and the economy remains in recession, it has shown signs of
recovering; inflation has not spiraled out of control in the wake of the
devaluation; and the new head of the central bank, Arminio Fraga, has
demonstrated a clear understanding of his country's problems. His focus has
been on reducing interest rates and gaining the approval of Congress for fiscal
reforms.
The Brazilian equity market strengthened partway through fiscal $99 but still
finished the 12 months down 15%, making it the worst performing of any emerging
market in which we have sizable investments. The fund has positions in 39
Brazilian companies, including several cellular, wireline and long-distance
firms spun off from Telecomunicacoes Brasileiras (Telebras), at the time of its
privatization in July 1998. Our other large investments include Banco Itau, one
of Brazil's biggest banks, and Cervejaria Brahma, Latin America's largest
brewer.
SOUTH KOREA (7.9% OF NET ASSETS)
In the year-and-a-half since President Kim Dae-jung took office, South Korea
has become one of Asia's most impressive recovery stories. After dipping to an
all-time low during the region's recent crisis, industrial output has recovered
much more rapidly than anticipated. Interest rates have been lowered, enabling
companies to refinance and recapitalize more cheaply. The government has closed
failing banks and taken steps aimed at improving the country's troubled
financial system. It also has removed barriers to foreign ownership of local
companies and pressed hard for other economic reforms.
South Korea has begun prompt repayment of bailout funds supplied during the
crisis by the International Monetary Fund - a step that has enhanced the
nation's creditworthiness. Meanwhile, the government has tried to improve
relations with North Korea, although military incidents have continued. The
Hyundai group has said it plans to build a plant in the north.
Like Taiwan, South Korea is a major force in microchips. In addition to its
position in Samsung Electronics, Emerging Markets Growth Fund has several
smaller investments in other manufacturers of electronic components. Altogether
the fund owns shares in 17 South Korean companies, including Pohang Iron and
Steel, the world's second-largest steelmaker. Nearly all of our South Korean
holdings participated in the broad advance shown by that country's stock market
in fiscal 1999.
SOUTH AFRICA (5.6% OF NET ASSETS)
South Africa's recession ended this past year, but the recovery so far has been
weak. Unemployment remains high, consumer spending has shown very little
growth, and gross domestic product has posted only small gains. At the same
time, the rand has remained relatively stable, and capital inflows and the
country's budget deficit and current account deficit have improved.
The victory in June by the ruling African National Congress foreshadows a
continuation of policies pursued by the ANC since it became the nation's first
democratically elected government five years ago. Deficit reduction and the
privatization of some state-owned assets are likely to be goals that carry a
high priority. Meanwhile, monetary policy shows signs of being loosened in an
attempt to stimulate business activity.
In a sluggish economic environment, the South African stock market recorded a
comparatively modest gain of 10% for the 12 months through June. With our South
African investments, we have tried to be highly selective, searching out
well-managed companies that have the potential to prosper even if the pace of
growth remains subpar. Our largest holding is Sasol, a synthetic fuel producer;
the stock accounted for 1.4% of net assets on June 30 and rose 23.6% for the
fiscal year. Other South African holdings include South African Breweries, the
country's largest beer producer, and Metro Cash and Carry, a distributor of
groceries and consumer goods.
INDIA (5.5% OF NET ASSETS)
The Indian economy had its share of troubles early this past year. Inflation
increased, the value of the rupee declined, and a mutual fund scandal spooked
more than a few domestic investors. The Baharatiya Janata Party (BJP) coalition
government struggled in its efforts to streamline the nation's securities
markets. Eventually, for a variety of reasons, the coalition fell apart.
Then it rained and things took a turn for the better. Strong monsoons boosted
the country's agricultural output, nourishing the overall economy. The rate of
increase in inflation subsided and the rupee stabilized to some degree.
Meanwhile, in an effort to encourage Indians to invest, the government
eliminated taxes on mutual fund dividends. Recently, India came out ahead in a
tense confrontation with Pakistan over the disputed territory of Kashmir - a
development that renewed the BJP's popularity and could lead to the party
winning a clear majority in general elections scheduled for September.
For the 12 months through June, the Indian stock market rose 28%. The fund owns
shares in 41 Indian companies. More than half of these holdings participated in
the advance. Our largest Indian investment is Hindustan Lever, a diversified
manufacturer of consumer goods; the stock rose 55% for the 12 months and
represented nearly 1% of net assets on June 30. Other Indian holdings include
Mahanagar Telephone Nigam (MNTL), which serves Bombay and New Delhi; Infosys, a
software consulting company that sells its services all over the world; and Zee
Telefilms, a producer of Hindi television programming.
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 the fund 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 EMGF. 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 300 times that amount of assets, together with over 700
shareholders - many of whom have been with us for quite a few years - and a
portfolio of securities representing more than 400 companies based in over 40
nations. As the 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. Its investment management affiliates 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
managers, 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 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>
EMERGING MARKETS GROWTH FUND
INVESTMENT PORTFOLIO, JUNE 30, 1999
<S> <C> <C> <C> <C> <C>
Equity
Securities
Common Preferred Convertible Percent of
INDUSTRY DIVERSIFICATION Stocks Stocks Bonds Bonds Net Assets
Telecommunications 18.05% 2.38% - 0.04% 20.47
Electronic Components 11.93 0.11 - - 12.04
Banking 7.85 1.66 - - 9.51
Beverages & Tobacco 6.24 1.73 - - 7.97
Energy Sources 4.77 0.23 0.07% - 5.07
Merchandising 3.32 0.03 - - 3.35
Business & Public Services 2.26 0.03 0.02 - 2.31
Other Industries 30.22 1.25 0.57 3.88 35.92
84.64% 7.42% 0.66% 3.92% 96.64
Short-Term Securities 3.22
Excess of cash and receivables 0.14
over liabilities, including net
unrealized depreciation on
foreign currency contracts
Net Assets 100.00%
</TABLE>
<TABLE>
EMERGING MARKETS GROWTH FUND
Investment Portfolio, June 30, 1999
<S> <C> <C> <C>
Number of Shares Market
or Value Percent of
EQUITY SECURITIES Principal Amount (000) Net Assets
(Common and preferred stocks and convertible debentures)
- ---------------------------------------- -------- -------- --------
ARGENTINA - 4.23%
Banco de Galicia y Buenos Aires SA, Class B (1) 3,001,324 15,399
Banco de Galicia y Buenos Aires SA, Class B (ADR) (1) 4,352,313 88,134 .57
Banco Frances del Rio de la Plata SA 743,100 4,831
Banco Frances del Rio de la Plata SA (ADR) 1,090,439 20,718 .14
Banco Frances del Rio de la Plata SA,rights expire July 2, 1999 (2) 743,100 1
Banco Rio de la Plata SA, Class B (ADR) 4,965,500 47,172 .26
BI SA (acquired 10/21/93, cost: $5,755,000) (1), (3) 6,130,000 6,387 .04
CEI Citicorp Holdings SA, Class B (2) 120,770 350 -
Disco SA (ADR) (2) 777,900 12,252 .07
Hidroneuquen SA (acquired 11/11/93, cost: $29,086,000) (1), (2), (3) 28,022,311 14,013 .08
IRSA Inversiones y Representaciones SA (1) 6,534,903 20,130
IRSA Inversiones y Representaciones SA (GDR) (1) 866,986 26,768
IRSA Inversiones y Representaciones SA 4.50% convertible
bond August 2, 2003 (acquired 5/28/97, cost: $3,962,000) (1), (3) $3,400,000 3,672 .28
Nortel Inversora SA, Class A, preferred (ADR) 714,550 8,675
(acquired 11/24/92, cost: $5,002,000) (3)
Nortel Inversora SA, Class B, prefeered (ADR) 1,712,140 29,748 .21
Perez Companc SA, Class B 3,842,457 22,097
Perez Companc SA, Class B (ADR) 13,881 160 .12
Quilmes Industrial SA, preferred (ADS) 1,950,600 24,139 .13
Telecom Argentina STET - France Telecom SA, Class B 2,800,000 15,402
Telecom Argentina STET - France Telecom SA, Class B (ADS) 5,438,800 145,488 .89
Telefonica de Argentina SA, Class B 4,910,000 15,223
Telefonica de Argentina SA, Class B (ADS) 7,840,900 246,008 1.44
---------- ----------
766,767 4.23
---------- ----------
BOTSWANA - 0.02%
Sechaba Breweries Ltd. 3,053,900 3,482 .02
---------- ----------
BRAZIL - 8.31%
Banco Bradesco SA, preferred nominative (ADR) 6,066,619 28,816 .16
Banco do Estado de Sao Paulo SA, preferred nominative 262,092,700 11,186 .06
Banco Itau SA, preferred nominative 427,689,500 220,010 1.21
Banco Nacional SA, ordinary nominative (2) 2,500,000 - -
Banco Nacional SA, preferred nominative (2) 215,940,814 - -
Banco Real de Investimento SA, preferred nominative 4,674,000 4,360 .02
Bompreco SA Supermercados do Nordeste, preferred nominative (GDR) 479,000 4,551 .02
Brasmotor SA, preferred nominative 27,624,932 2,185 .01
Centrais Eletricas Brasileiras SA - ELETROBRAS, ordinary 943,231 8,725
nominative (ADR)
Centrais Eletricas Brasileiras SA - ELETROBRAS, Class B, 1,470,409 14,520 .13
preferred nominative (ADR)
Centrais Geradoras do Sul do Brasil SA - GERASUL, Class B, 1 - -
preferred nominative (ADR)
Cia. Cervejaria Brahma, ordinary nominative (ADR) 11,224 89
Cia. Cervejaria Brahma, preferred nominative (ADR) 17,340,906 196,169 1.08
Cia. de Eletricidade do Estado do Rio de Janeiro - CERJ, 54,454,482,525 13,237 .07
ordinary nominative (2)
Cia. de Tecidos Norte de Minas - COTEMINAS, ordinary nominative (GDR) 535,000 2,207
Cia. de Tecidos Norte de Minas - COTEMINAS, preferred nominative 96,994,466 8,115 .06
Cia. Energetica de Minas Gerais - CEMIG, preferred nominative (ADR) 4,786,375 101,112
Cia. Energetica de Minas Gerais - CEMIG, preferred nominative (ADR)
(acquired 6/21/96, cost: $8,690,000) (3) 418,674 8,844 .60
Cia. Paranaense de Energia - COPEL, Class B, preferred nominative (ADR) 728,133 6,098 .03
Cia. Paulista de Forca e Luz - CPFL 77,464,000 4,992 .03
Cia. Vale do Rio Doce, preferred nominative (ADR) 3,569,637 70,500 .39
Consorcio Real Brasileiro de Administracao SA, Class F, 1,414,000 991 .01
preferred nominative
Dixie Toga SA, preferred nominative 328,302 63 -
Embratel Participacoes SA, ordinary nominative (2) 153,981,900 1,149
Embratel Participacoes SA, preferred nominative (ADR) 9,298,847 129,022 .72
Empresa Nacional de Commercio Redito SA - Encopar, preferred nominative 25,471,488 22 -
GP Capital Partners, LP (acquired 1/28/94, cost: $18,651,000) (3) 27,000 10,139 .06
Multicanal Participacoes SA, preferred nominative (ADR) 1,178,400 5,008 .03
(formerly Globo Cabo) (2)
Petroleo Brasileiro SA - PETROBRAS 2,688,135 40,154 .22
REALPAR Participacoes, Class A, preferred nominative (2) 3,000 3 -
REAL SA Participacoes e Administracao, Class A, preferred nominative 3,000 2 -
Sadia SA Industria e Comercio, preferred nominative 4,882,000 3,036 .02
SA White Martins, ordinary nominative 17,975,766 8,332 .05
Souza Cruz SA, ordinary nominative 2,996,300 21,088 .12
Tele Celular Sul Participacoes SA, ordinary nominative 171,061,600 254
Tele Celular Sul Participacoes SA, preferred nominative (ADR) 1,337,405 29,005 .16
Tele Centro Oeste Celular Participacoes SA, ordinary nominative 25,566,300 25
Tele Centro Oeste Celular Participacoes SA, preferred nominative (ADR) 6,262,317 24,658 .14
Tele Centro Sul Participacoes SA, preferred nominative (ADR) 13,263 736 -
Telecomunicacoes Brasileiras Holding Co., preferred nominative (ADR) 641,100 57,819
Telecomunicaoes Brasileiras SA, preferred nominative (ADR) (2) 2,845,486 178 .32
Telecomunicacoes de Sao Paulo SA - Telesp, ordinary nominative 151,639,592 12,601
Telecomunicacoes de Sao Paulo SA - Telesp, preferred nominative 316,928,456 37,623 .28
Telecomunicacoes de Sao Paulo SA - Telesp Celular, ordinary nominative 35,164,592 1,133
Telecomunicacoes de Sao Paulo SA - Telesp Celular, Class B, 589,923,051 29,379 .17
preferred nominative
Tele Leste Celular Participacoes SA, ordinary nominative 25,909,600 12
Tele Leste Celular Participacoes SA, preferred nominative (ADR) 317,642 9,450 .05
Telemig Celular Participacoes SA, ordinary nominative 25,909,600 29
Telemig Celular Participacoes SA, preferred nominative (ADR) 935,493 23,037
Telemig Celular Participacoes SA, Class C preferred nominative (2) 385,195,000 3,430 .15
Tele Nordeste Celular Participacoes SA, ordinary nominative 25,566,300 22
Tele Nordeste Celular Participacoes SA, preferred nominative (ADR) 731,912 19,762 .11
Tele Norte Celular Participacoes SA, ordinary nominative 25,566,300 14
Tele Norte Celular Participacoes SA, preferred nominative (ADR) 163,341 4,420 .02
Tele Norte Leste Participacoes SA, ordinary nominative 5,979,000 55
Tele Norte Leste Participacoes SA, preferred nominative (ADR) 1,559,117 28,941 .16
Telesp Celular Participacoes SA, ordinary nominative 25,583,300 137
Telesp Celular Participacoes SA, preferred nominative (ADR) (2) 2,652,838 70,963 .39
Telesp Participacoes SA, ordinary nominative 5,114,200 66
Telesp Participacoes SA, preferred nominative (ADR) 2,934,269 67,121 .37
TeleSudeste Celular Participacoes SA, ordinary nominative 171,061,600 474
TeleSudeste Celular Participacoes SA, preferred nominative (ADR) 1,066,149 30,918 .17
Unibanco - Uniao de Bancos Brasileiros SA, units (GDR) 5,285,150 127,174 .70
Usinas Siderurgicas de Minas Gerais SA, preferred nominative (ADR)
(acquired 9/1/93, cost: $7,958,000) (3) 1,224,205 3,979 .02
---------- ----------
1,508,140 8.31
---------- ----------
CHILE - 3.15%
Antofagasta Holdings PLC 4,836,130 22,179 .12
Compania Cervecerias Unidas SA (ADS) 1,845,100 52,816 .29
Compania de Telecomunicaciones de Chile SA (ADR) (1) 11,082,605 274,294 1.51
Distribucion y Servicio D&S SA (ADR) 1,711,500 32,091 .18
Embotelladora Andina SA, Class A, preferred (ADR) 3,153,650 63,073
Embotelladora Andina SA, Class B, preferred (ADR) 1,968,200 30,015 .51
Empresa Nacional de Electricidad SA (ADR) 5,352,134 64,895 .36
Gener SA (ADR) 248,643 4,413 .02
Linea Aerea Nacional Chile SA (ADS) 1,011,000 7,267 .04
Santa Isabel SA (ADR) (1) (2) 1,154,300 11,687 .06
Sociedad Quimica y Minera de Chile SA, Class A (ADR) 15,062 527
Sociedad Quimica y Minera de Chile SA, Class B (ADR) 260,500 9,215 .06
---------- ----------
572,472 3.15
---------- ----------
CHINA - 0.39%
China Eastern Airlines Corp. Ltd., Class H (2) 41,520,000 5,512
China Eastern Airlines Corp. Ltd., Class H (ADR) (2) 175,700 2,295 .04
China Resources Beijing Land Ltd. 12,301,600 2,822 .02
China Telecom (Hong Kong) Ltd. (2) 995,900 2,766 .01
Guang Dong Electric Power Development Co. Ltd., Class B 3,191,448 2,197 .01
Huaneng Power International, Inc., Class N (ADR) 1,484,500 25,422 .14
Jiangxi Copper Co. Ltd., Class H 13,697,500 1,801 .01
Ng Fung Hong Ltd. 32,724,500 27,207 .15
Qingling Motors Co., Ltd., Class H 6,324,200 1,533 .01
---------- ----------
71,555 .39
---------- ----------
REPUBLIC OF CROATIA - 0.55%
PLIVA d.d. (GDR) (1) 6,639,453 99,924 .55
---------- ----------
CZECH REPUBLIC - 0.62%
CESKE RADIOKOMUNIKACE AS (GDR) (2) 1,169,300 40,341 .22
SPT TELECOM, a.s. (2) 4,516,440 73,234 .40
---------- ----------
113,575 .62
---------- ----------
ECUADOR - 0.00%
La Cemento Nacional SA (GDR) 2,376 166 -
---------- ----------
EGYPT - 0.08%
AL-Ahram Beverages Co. (GDR) (1), (2) , 520,000 14,872 .08
---------- ----------
ESTONIA - 0.09%
AS Eesti Telekom (GDR) 838,900 16,652 .09
---------- ----------
GHANA - 0.11%
Ashanti Goldfields Co. Ltd. 698,714 4,839
Ashanti Goldfields Co. Ltd. (GDR) 170,747 1,185
Ashanti Goldfields Co. Ltd. 5.50% exchangeable note March 15, 2003 $15,970,000 13,255 .11
---------- ----------
19,279 .11
---------- ----------
GREECE - 1.51%
Alpha Credit Bank (2) 447,300 28,811 .16
Aluminium de Grece SAIC (1) 1,132,620 44,743 .25
Ergobank SA 136,217 14,566 .08
Hellenic Bottling Co. SA 6,110,090 147,537 .81
Stet Hellas Telecommunications SA (ADR) (2) 1,446,950 32,376 .18
Titan Cement Co. SA 66,644 6,132 .03
---------- ----------
274,165 1.51
---------- ----------
HONG KONG - 0.72%
China-Hongkong Photo Products Holdings Ltd. 12,491,900 1,997 .01
China Resources Enterprise, Ltd. 35,267,300 62,278 .35
Legend Holdings Ltd. 68,379,100 65,664 .36
---------- ----------
129,939 .72
---------- ----------
HUNGARY - 2.25%
Gedeon Richter Ltd. 926,500 40,308 .23
Graboplast Textil- es Muborgyarto Rt 141,200 846 -
Magyar Tavkozlesi Rt. 32,850,650 177,615
Magyar Tavkozlesi Rt. (ADR) 1,411,000 38,803 1.19
Mezogep (2) 268,700 2,438 .01
MOL Magyar Olaj- es Gazipari Rt. (GDR) (1) 6,174,690 148,722 .82
. ---------- ----------
408,732 2.25
---------- ----------
INDIA - 5.53%
Asea Brown Boveri Ltd. 1,114,500 9,135 .05
Asian Paints (India) Ltd. 544,600 3,908 .02
Bajaj Auto Ltd. 4,808,150 60,060
Bajaj Auto Ltd. (GDR) 441,800 7,334 .37
Bharat Petroleum Corp. Ltd. 4,869,350 29,569 .16
Cadbury India 9,000 159 -
Carrier Aircon Ltd. 911,500 4,634 .03
Castrol India Ltd. 4,329,200 41,583 .23
Credit Rating Information Services of India 15,000 177 -
Cummins India Ltd. 1,850,000 18,069 .10
Digital Equipment (India) Ltd. 40,000 395 -
East India Hotels Ltd. 869,065 4,214 .02
Essar Steel Ltd. (2) 300 - -
Flex Industries Ltd. 260,480 60
Flex Industries Ltd., warrants, expire November 23, 1999 (2) 116,210 - -
Hindalco Industries Ltd. 564,945 8,205 .05
Hindustan Lever Ltd. 3,215,600 176,706 .97
Hindustan Petroleum Corp. Ltd. 2,536,300 14,553 .08
Housing Development Finance Corp. Ltd . 294,300 15,099 .08
Indian Aluminium Co., Ltd. 776,520 1,112 .01
Indian Rayon and Industries Ltd. 943,875 3,073
Indian Rayon and Industries Ltd. (GDR) (2) 384,200 1,335 .03
Indo Gulf Fertilisers and Chemicals Corp. Ltd. 2,155,200 2,632
Indo Gulf Fertilisers and Chemicals Corp. Ltd. (GDR) 1,770,900 2,037 .03
Industrial Credit and Investment Corp. of India Ltd. 1,330 2 -
Infosys Technologies Ltd. 1,201,350 100,690 .56
Ispat Industries Ltd. 3.00% convertible Eurobond April 1, 2001 $4,624,000 971
Ispat Industries Ltd. 3.00% convertible bond April 1, 2001
(acquired 3/1/94, cost: $6,300,000) (3) $6,375,000 1,339 .01
I.T.C. Ltd. 176,147 4,438 .02
LML Ltd. 5,800 7 -
Madras Cements Ltd. 22,000 2,313 .01
Mahanagar Telephone Nigam Ltd. (1), (2) 30,722,400 131,941
Mahanagar Telephone Nigam Ltd. (GDR) (1) 895,100 9,085 .78
Mahindra & Mahindra Ltd. 2,658,516 15,469
Mahindra & Mahindra Ltd. (GDR) 997,333 6,832
Mahindra & Mahindra Ltd. 5.00% convertible bond July 9, 2001
(acquired 7/3/96, cost: $5,953,000) (3) $5,954,000 5,686 .15
Master Gain Scheme (2) 76,000 20 -
Max India Ltd. (2) 304,497 1064
Max India Ltd. 12.50% nonconvertible debenture March 2, 2004 (2) INR41,957 203 .01
Motor Industries Co. Ltd. (1) 201,855 18,592 .10
Nicholas Piramal India Ltd. (1) 1,885,700 13,236 .07
Niko Resources Ltd. 1,000,000 3,734 .02
Ranbaxy Laboratories Ltd. 2,335,900 35,381
Ranbaxy Laboratories Ltd. (GDR) 1,419,200 23,771 .33
Raymond Woollen Mills Ltd. 200 - -
Reliance Industries Ltd. 23,620,035 96,394
Reliance Industries Ltd. (GDR) 667,150 6,738 .57
Tata Engineering and Locomotive Co. Ltd. 77,400 367 -
Tata Infotech Ltd. 205,000 5,026 .03
United Phosphorus Ltd. 479,750 1,263
United Phosphorus Ltd. (GDR) 263,864 633 .01
Videsh Sanchar Nigam Ltd. 1,906,864 40,066
Videsh Sanchar Nigam Ltd. (GDR) 3,122,600 39,735 .44
Zee Telefilms Ltd. (1), (2) 1,017,200 34,173 .19
---------- ----------
1,003,218 5.53
---------- ----------
INDONESIA - 2.83%
APP Finance (VII) Mauritius Ltd. 3.50% convertible bond April 30, 2003
(acquired 4/23/98, cost: $6,180,000) (3) $6,180,000 4,589 .02
Asia Pacific Resources International Holdings Ltd., Class A (2) 1,179,269 1,400 .01
Asia Pulp & Paper Co. Ltd (ADR) (2) 8,422,300 81,065
Asia Pulp & Paper Co. Ltd. (ADR) warrants, expire July 27, 2000 (2) 548,860 1,441 .45
PT Astra International (2) 113,893,800 52,375 .29
Gulf Indonesia Resources Ltd. (2) 2,686,200 30,891 .17
PT Hanjaya Mandala Sampoerna Tbk (2) 37,812,500 87,217 .48
PT Indah Kiat Pulp & Paper Corp. Tbk (2) 178,106,100 83,203 .46
PT Indofood Sukses Makmur Tbk (2) 83,552,900 114,657 .63
PT Indo-Rama Synthetics (1), (2) 35,611,400 7,798 .04
PT Inti Indorayon Utama Tbk (2) 1 - -
PT Pabrik Kertas Tjiwi Kimia (2) 11,653,272 4,508
PT Pabrik Kertas Tjiwi Kimia, warrants, expire July 15, 2002 (2) 410,175 100 .03
Perusahaan Perseroan (Persero) PT Indonesian Satellite Corp. 3,174,500 6,117
Perusahaan Perseroan (Persero) PT Indonesian Satellite Corp. (ADR) 1,710,830 33,361 .22
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia, Class B 6,224,040 3,634
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia, Class B (ADR) 84,564 1,052 .03
---------- ----------
513,408 2.83
---------- ----------
ISRAEL - 1.78%
Bank Hapoalim Ltd. 15,791,100 40,588 .22
Bank Leumi le-Israel B.M. (2) 66,226,500 125,394 .69
ECI Telecom Ltd. 1,584,000 52,569 .29
First International Bank of Israel Ltd.- (1) 2,967,783 3,603
First International Bank of Israel Ltd.- (5) 1,469,600 9,191 .07
Koor Industries Ltd. 185,000 21,371 .12
Matav-Cable Systems Media Ltd. (2) 359,800 7,818
Matav-Cable Systems Media Ltd. (ADS) 168,400 7,494 .09
Orbotech Ltd. (1) (2) 739,000 38,520 .21
Sapiens International Corp. NV (1) (2) 1,617,000 16,069 .09
---------- ----------
322,617 1.78
---------- ----------
KAZAKHSTAN - 0.01%
JSC Kazkommertsbank (ADR)
(acquired 9/10/97, cost: $4,024,000) (2), (3) 154,000 1,254 .01
---------- ----------
KENYA - 0.00%
Kenya Commercial Bank Ltd. 768,000 485 -
---------- ----------
MALAYSIA - 2.19%
Amway (Malaysia) Holdings Bhd. 1,721,200 3,963 .02
Commerce Asset-Holding Bhd. 22,559,000 55,804 .31
Edaran Otomobil Nasional Bhd. 183,000 684 -
Guinness Anchor Bhd. 7,028,000 7,731 .04
Hap Seng Consolidated Bhd. 13,566,100 8,425 .05
Hong Leong Credit Bhd. 1,833,600 2,654
Hong Leong Credit Bhd., warrants, expire December 27, 2001 (2) 174,400 77 .02
IJM Corp. Bhd. 12,127,714 10,532 .06
IOI Corp. Bhd. 25,909,500 16,432 .09
Leader Universal Holdings Bhd. (2) 8,535,000 3,571 .02
Malayan Banking Bhd. 15,704,800 47,114 .26
Malaysian Pacific Industries Bhd. 2,132,800 5,949 .03
Nestle (Malaysia) Sdn. Bhd. 5,548,100 21,900 .12
Oriental Holdings Bhd. 4,641,820 12,704 .07
PPB Oil Palms Bhd. 5,588,800 3,544 .02
Road Builder (M) Holdings Bhd. 2,944,000 5,656 .03
Rothmans of Pall Mall (Malaysia) Bhd. 3,273,500 24,767 .14
Sime Darby Bhd. 29,595,000 38,785 .21
Sime UEP Properties Bhd. 3,461,700 4,446 .02
Star Publications (Malaysia) Bhd. 2,365,000 5,601 .03
Tan Chong Motor Holdings Bhd. 4,937,000 2,884 .02
Telekom Malaysia Bhd. 11,515,000 43,030 .24
UMW Holdings Bhd. 6,475,859 14,571
UMW Holdings Bhd., warrants, expire January 26, 2000 (2) 574,819 502 .08
YTL Corp. Bhd. 25,145,900 52,939 .29
YTL Power International Bhd. 3,152,000 3,019 .02
---------- ----------
397,284 2.19
---------- ----------
MAURITIUS - 0.04%
State Bank of Mauritius 10,927,000 7,169 .04
---------- ----------
MEXICO - 13.79%
Apasco, SA de CV 11,396,645 74,911 .41
Carso Global Telecom, SA de CV 6,095,300 38,703 .21
Cemex, SA de CV, Class A 2,139,762 10,628
Cemex, SA de CV, Class B 19,958,451 99,134
Cemex, SA de CV, Class B (ADR) 2,372,100 23,128
Cemex, SA de CV, ordinary participation certificates 16,942,012 83,701
Cemex, SA de CV, ordinary participation certificates (ADR) 1,246,265 12,151 1.26
Cifra, SA de CV, Class C (2) 48,679,034 89,364
Cifra, SA de CV, Class V (2) 111,495,853 217,489
Cifra, SA de CV, Class V (ADR) (2) 1,701,643 33,182 1.88
Coca-Cola FEMSA, SA de CV, Class L (ADR) (2) 1,796,300 34,803 .19
Consorcio International Hospital, SA de CV, convertible preferred
(acquired 9/25/97, cost: $4,827,000) (2), (3) $23,970 5,393 .03
Controladora Comercial Mexicana, SA de CV Units 28,122,870 29,612 .16
Grupo Carso, SA de CV, Class A, ordinary participation certificates 1,828,100 8,507 .05
Grupo Financiero Banamex Accival, SA de CV, Class L (2) 1,956,254 4,786
Grupo Financiero Banamex Accival, SA de CV, Class O (2) 2,900,000 7,372
Grupo Financiero Banamex Accival, SA de CV 7.00% $103,000 102
convertible Eurobond December 15, 1999
Grupo Financiero Banamex Accival, SA de CV 11.00%
convertible bond July 15, 2003
(acquired 7/12/96, cost: $356,000) (3) $371,000 365 .07
Grupo Financiero Bancomer, SA de CV, Class O (2) 37,100,000 13,495
Grupo Financiero Bancomer, SA de CV, Series L2, 26.64% MXN5,750,000 612 .08
convertible subordinated debentures May 16, 2002
Grupo Financiero BBV Probursa, SA de CV, Class B (2) 63,464,331 8,505 .05
Grupo Industrial Emprex, Class B 7,544,600 30,252
Grupo Industrial Emprex, Class B (ADR) 3,798,040 151,447 1.00
Grupo Industrial Maseca, SA de CV, Class B (ADR) 740,200 6,616 .04
Grupo Mexico, SA de CV, Class B 4,886,800 20,817 .11
Grupo Televisa, SA, ordinary participation certificates (2) 295,000 6,624
Grupo Televisa, SA, ordinary participation certificates (ADR) (2) 5,818,099 260,724 1.47
Kimberly-Clark de Mexico, SA de CV, Class A 42,726,400 176,095 .97
ordinary participation certificates
Pepsi-Gemex, SA de CV, ordinary participation certificates (GDR) (2) 1,176,800 10,738 .06
Telefonos de Mexico, SA de CV, Class A 9,137,500 36,494
Telefonos de Mexico, SA de CV, Class A (ADR) 71,000 284
Telefonos de Mexico, SA de CV, Class L 13,706,250 55,105
Telefonos de Mexico, SA de CV, Class L (ADR) 11,610,475 938,272 5.68
TV Azteca, SA de CV (ADR) (2) 2,385,300 12,374 .07
---------- ----------
2,501,785 13.79
---------- ----------
MOROCCO - 0.17%
Banque Commerciale du Maroc 35,443 3,594 .02
Cimenterie de l'Oriental, Class A 100,641 10,275 .06
ONA SA 56,000 6,108 .03
Societe des Brasseries du Maroc 23,432 5,251 .03
Wafabank, Class A 58,000 5,991 .03
---------- ----------
31,219 .17
---------- ----------
NIGERIA - 0.04%
United Bank for Africa (GDR) (1) 425,000 7,515 .04
---------- ----------
PAKISTAN - 0.06%
Chakwal Cement Co. Ltd. (GDR) (2) 891,111 - -
Engro Chemical Pakistan Ltd. 3,010,668 4,234 .02
Hub Power Co. Ltd. (GDR) (2) 553,328 3,043 .02
Pakistan Telecommunication Corp. (GDR) 104,400 3,550 .02
---------- ----------
10,827 .06
---------- ----------
PERU - 1.07%
Banco Continental 12,533,937 6,359 .04
Cementos Lima SA 683,611 10,569 .06
Compania de Minas Buenaventura SA, Class B 995,485 7,621
Compania de Minas Buenaventura SA, Class B (ADR) 1,264,502 19,363 .15
Credicorp Ltd. (1) 6,673,760 73,411 .40
Minsur SA-Trabajo 3,752,622 7,999 .04
Ontario-Quinta (acquired 8/15/94, cost: $7,413,000) (3) 7,224,130 6,754 .04
Telefonica del Peru SA, Class B (ADS) 4,047,400 61,217 .34
---------- ----------
193,293 1.07
---------- ----------
PHILIPPINES - 2.31%
Ayala Corp. 127,385,112 41,903
Ayala Corp., Class B (GDS) 1,390,435 4032 .25
Ayala Land, Inc. 175,115,433 55,299
Ayala Land, Inc. 6.00% convertible bond March 19, 2002 PHP260,000,000 5,474 .34
Bacnotan Consolidated Industries, Inc. 1,134,200 597
Bacnotan Consolidated Industries, Inc. 5.50% $298,000 113
convertible Eurobond June 21, 2004
Bacnotan Consolidated Industries, Inc. 5.50%
convertible bond June 21, 2004
(aquired 2/8/94, cost: $4,488,000) (3) $4,500,000 1,710 0.01
Bank of the Philippine Islands 16,179,490 57,905 .32
Bayan Telecommunications Holdings Corp. (acquired 933,940 2,458
2/12/98, cost: $1,595,000) (2), (3)
Bayan Telecommunications Holdings Corp., Class A
(acquired 2/12/98, cost: $2,385,000) (2), (3) 24,335 64
Bayan Telecommunications Holdings Corp., Class B
(acquired 2/12/98, cost: $61,000) (2), (3) 7,946 21
Bayan Telecommunications Holdings Corp., convertible preferred
(acquired 12/22/97, cost: $9,000,000) (2), (3) 180,000 9,000 .06
Benpres Holdings Corp. (2) 46,425,300 10,995
Benpres Holdings Corp. (GDR) (2) 6,758,294 31,426 .23
Fortune Cement Corp. (2) 19,950,000 840 -
Hi Cement Corp. (1) 99,155,900 4905
Hi Cement Corp., convertible bond May 27,2000 (1) PHP33,051,900 870 .03
International Container Terminal Services, Inc. (2) 19,533,588 2,545
International Container Terminal Services, Inc. 6.00% convertible bond
February 19,2000 (acquired 2/18/93, cost: $4,000,000) (3) $4,000,000 3,600 .03
JG Summit Holdings, Inc., Class B (2) 7,716,300 853
JG Summit Holdings, Inc. 3.50% convertible bond December 23, 2003
(acquired 12/9/93, cost: $5,727,000) (3) $5,727,000 4,267 .03
Manila Electric Co., Class A (GDR) (2) 854,848 10,995
Manila Electric Co., Class B 2,023,584 7,296 .10
Metropolitan Bank and Trust Co. 373,680 3,737 .02
Philippine Airlines Inc. (2) 53,811,256 - -
Philippine Long Distance Telephone Co., ordinary 245,590 7,497
Philippine Long Distance Telephone Co., ordinary (ADS) 2,697,916 81,275
Philippine Long Distance Telephone Co., convertible 95,200 4,950 .52
preferred, Series III (GDS)
PR Holdings, Inc., subscription rights (acquired 2,236,600 - -
7/8/92, cost: $9,835,000) (2), (3)
San Miguel Corp., Class B 18,898,607 41,279 .23
SM Prime Holdings, Inc. 78,177,100 17,693 .10
Southeast Asia Cement Holdings, Inc. (2) 4,086,108 59 -
Universal Robina Corp. 30,222,000 6,442 .04
---------- ----------
420,100 2.31
---------- ----------
POLAND - 2.06%
@Entertainment Inc. (2) 274,000 5,138 .03
Bank Handlowy w Warszawie SA 1,457,496 20,243
Bank Handlowy w Warszawie SA (GDR) (2) 756,121 11,985 .18
Bank Rozwoju Eksportu SA 1,159,437 36,491 .20
Elektrim SA (1) 5,080,325 71,855
Elektrim SA 2.00% convertible bond May 30, 2004 (1) DEM10,990,000 8,048
Elektrim SA 3.75% convertible bond July 2, 2004 (1) EUR51,975,000 53,421 .73
EXBUD SA (1), (2) 646,154 5,039
EXBUD SA, (ADR) (1), (2) 397,630 3,131 .05
KGHM Polska Miedz SA (1), (2) 2,000,000 12,589
KGHM Polska Miedz SA (GDR) (1), (2) 5,581,800 75,354 .48
Polifarb Cieszyn-Wroclaw 1,967,667 3,811 .02
Telekomunikacja Polska SA (GDR) (2) 9,315,700 66,374 .37
---------- ----------
373,479 2.06
---------- ----------
PORTUGAL - 0.15%
TELECEL- Comunicacoes Pessoais, SA 208,600 26,868 .15
TVI - Televisao Independente, SA, nonvoting preferred (2) 52 - -
---------- ----------
26,868 .15
---------- ----------
RUSSIAN FEDERATION - 1.97%
AO Mosenergo Power Generation and Electrification Amalgamation (ADS) 4,015,300 17,989 .10
AO Torgovy Dom Gum (Russian Depositary Trust Certificate) (2) 1,350,000 2,079 .01
Avalon Oil PLC (1), (2) 5,068,000 399 -
Global Tele-Systems Ltd. (acquired 2/2/96, cost: less than $1,000) (2) 262,963 21,300 .12
Irkutskenergo (ADR) 1,320,000 6,665 .04
JSC Moscow City Telephone Network (MGTS) (2) 60,150 8,421 .05
Kamaz (2) 4,345,000 500 -
Lenenergo (2) 28,336,800 1,417 .01
Lukinter Finance BV 3.50% convertible bond May 6, 2002 $16,128,000 11,773 .07
LUKoil Holding (ADR) 4,557,420 180,474
LUKoil Holding, preferred (ADR) 84,300 607 .99
New Century Capital Partners, LP (acquired 12/7/95, 5,256,300 2750 .02
cost:$5,492,000) (2), (3), (4)
Nizhny Novgorod Sviazinform (2) 780,000 780
Nizhny Novgorod Sviazinform (ADR) (2) 1,110,000 2,059 .02
RAO Gazprom (ADR) (2) 1,606,630 18,075
RAO Gazprom (ADR) (acquired 10/21/96, cost: $38,674,000) (2), (3) 2,322,800 26,132 .24
Russian Telecommunications Development Corp. (1), (2)
(acquired 12/22/93, cost: $3,800,000) (2), (3) 380,000 - -
Russian Telecommunications Development Corp., nonvoting (1), (2)
(acquired 12/22/93, cost: $6,200,000) (2), (3) 620,000 - -
St. Petersburg Telephone Network JSC (2) 12,913,020 7,748 .04
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 489,784,700 42,856
Unified Energy System of Russia (GDR) 155,000 1,434 .24
Xavier Corp. (1), (2) 1,350,000 - -
---------- ----------
356,573 1.97
---------- ----------
SLOVAKIA - 0.03%
VSZ, AS (1) 1,146,027 4,703 .03
---------- ----------
SOUTH AFRICA - 5.44%
African Oxygen Ltd. 4,256,451 6,209 .03
Bidvest Group Ltd. 2,943,799 24,594 .14
Coronation Holdings Ltd. (1), (2) 565,100 11,990
Coronation Holdings Ltd.,Class N, (2) 4,462,204 93,050 .58
Edgars Stores Ltd. 239 2 -
Energy Africa Ltd. (2) 3,341,300 5,677 .03
Gencor Ltd. 8,456,800 23,270 .13
Hudaco Industries Ltd. 1,472,200 1,952 .01
International Pepsi-Cola Bottler Investments (acquired 17,784 728 -
12/18/95, cost: $1,678,000) (2), (3)
Iscor Ltd. (1) 171,034,668 53,584 .30
JD Group Ltd. 3,081,246 18,847 .10
M-Web Holdings Ltd. (2) 2,216,400 9,185 .05
Metro Cash and Carry Ltd. (1) 90,755,003 75,219 .42
Nasionale Pers Beperk, Class N (1) 10,947,300 65,781 .36
Rembrandt Group Ltd. 8,398,300 70,024 .39
Sage Group Ltd. 1,678,666 5,078 .03
Sasol Ltd. (1) 35,131,304 250,701 1.38
South Africa Capital Growth Fund, LP, Class A
(acquired 8/25/95, cost: $1,768,000) (2), (3),(4) 2,180 1,870
South Africa Capital Growth Fund, LP, Class D
(acquired 8/25/95, cost: $10,867,000) (2),(3),(4) 13,650 11,711 .07
South African Breweries Ltd. (2) 26,162,073 227,243 1.25
South African Private Equity Fund III, LP (acquired 9/23/98, 30,333 30,333 .17
cost: $30,333,000) (1), (2), (3), (4)
---------- ----------
987,048 5.44
---------- ----------
SOUTH KOREA - 7.95%
Anam Industrial Co. Ltd. (2) 493,181 3,401 .02
Daewoo Securities Co., Ltd., ordinary 719,212 13,980 .08
Hansol Paper Co., Ltd. 912,205 14,501 .08
Hyundai Motor Co. 1,976,035 46,861
Hyundai Motor Co., nonvoting preferred (GDR) 967,670 5,541 .29
Keumkang Ltd. (1), (2) 370,900 23,392 .13
Korea Telecom Corp. (ADS) (2) 1,993,500 79,740 .44
Korea Zinc Co. Ltd. 1,171,512 35,424 .20
LG Electronics Inc. 1,851,500 51,186
LG Electronics Inc., nonvoting preferred (GDR) 216,150 1,367 .29
LG Semicon Co., Ltd. 177,598 1,280 .01
Mirae Corp. 130,527 592 -
Pohang Iron & Steel Co., Ltd. 1,746,615 208,794
Pohang Iron & Steel Co., Ltd. (ADR) 1,411,940 47,476 1.41
Samsung Display Devices (1) 2,438,506 132,722
Samsung Display Devices (GDR) (1), (2) 2,301,000 29,280
Samsung Display Devices 0.50% convertible Eurobond April 12, 2002 (1) $770,000 993 .90
Samsung Electronics Co., Ltd. 3,371,167 369,882
Samsung Electronics Co., Ltd. (GDS) 3,173,098 170,713
Samsung Electronics Co., Ltd., nonvoting preferred 114,143 6,360
Samsung Electronics Co., Ltd., nonvoting preferred (GDS) 518,058 14,117 3.09
Samsung Fire & Marine Insurance 34,670 24,411 .13
Seoul Asia Index Trust (International Depositary Receipts) 80 272 -
Shinhan Bank (2) 1,153,740 12,958 .07
SK Telecom Co., Ltd. 42,402 57,348
SK Telecom Co., Ltd. (ADR) 4,895,145 83,217
SK Telecom Co., Ltd., rights expire July 23, 1999 (2) 10,941 5,752 .81
---------- ----------
1,441,560 7.95
---------- ----------
SRI LANKA - 0.02%
Asian Hotels Corp. Ltd. (2) 7,335,000 513 .00
Development Finance Corp. of Ceylon (1) 1,788,861 2,477 .01
National Development Bank of Sri Lanka 1,296,600 1,577 .01
---------- ----------
4,567 .02
---------- ----------
TAIWAN - 10.90%
Acer Peripherals Inc. 5,960,916 14,768 .08
Advanced Semiconductor Engineering, Inc. (2) 73,787,765 249,082
Advanced Semiconductor Engineering, Inc. (GDR) (2) 918,790 20,282 1.49
ASE Test Ltd. (2) 3,832,000 82,388 .45
Asia Cement Corp. 11,629,048 10,444 .06
Asia Corporate Partners Fund, Class B
(acquired 3/12/96, cost: $19,965,000) (2), (3), (4) 40,000 20,032 .11
Asustek Computer Inc. 39,323,904 443,292
Asustek Computer Inc. (GDR) 3,750,699 54,010 2.74
Cathay Construction Co. Ltd. 6,207,620 3,384 .02
China Steel Corp. 8,400,000 6,347 .03
CMC Magnetics Corp.(2) 45,060,400 206,533 1.14
Compal Electronics Inc. 4,786,904 18,827 .10
Primax Electronics Ltd. (1) (2) 12,319,703 17,551 .10
Seres Capital (Cayman Islands)(acquired 3/12/96, cost: 2 62
$25,000) (1), (2), (3)
Seres Capital (Cayman Islands), nonvoting (acquired 8 312 -
3/12/96, cost: $125,000) (1), (2), (3)
Taiwan Semiconductor Manufacturing Co. Ltd. (2) 194,665,291 744,539
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR) (2) 2,346,160 79,769 4.54
Wus Printed Circuit Co., Ltd. (2) 3,231,430 7,706 .04
---------- ----------
1,979,328 10.90
---------- ----------
THAILAND - 0.91%
Charoen Pokphand Feedmill PCL (2) 1,266,890 2,063 .01
Dusit Thani PCL (2) 990,000 1,128 .01
Electricity Generating Authority of Thailand 11,540,947 22,080 .12
Post Publishing PCL (1) 2,525,000 3,426 .02
PTT Exploration and Production PCL (2) 6,121,500 46,846 .26
Serm Suk PCL 210,166 1,112
Serm Suk PCL, local registered 64,960 301 .01
Siam City Cement PCL (2) 7,601,463 31,355 .17
Siam Commercial Bank PCL (1) (2) 1,109,466 1,535
Siam Commercial Bank PCL, warrants, expire May 10, 2002 (1), (2) 11,568,800 7,456
Siam Commercial Bank PCL, warrants, expire June 22, 2004 (1), (2) 277,366 -
Siam Commercial Bank PCL 5.25% convertible preferred May, 2009 (1), (2) 33,229,200 47,342 .31
Wattachak PCL 3.50% convertible bond December 6, 2003 $6,400,000 - -
---------- ----------
164,644 .91
---------- ----------
TURKEY - 5.13%
Adana Cimento Sanayii TAS, Class A 490,794,129 7,796
Adana Cimento Sanayii TAS, Class C 168,549,570 352 .04
Akbank Turk AS 3,012,000,000 44,272 .24
Aktas Elektrik Ticaret AS 48,349,118 8,367 .05
Ege Biracilik ve Malt Sanayii AS 248,615,938 18,566 .10
Erciyas Biracilik ve Malt Sanayii AS (1) 718,942,600 16,533 .09
Eregli Demir ve Celik Fabrikalari TAS (1), (2) 3,207,760,000 44,868 .25
Koc Holding AS 711,433,076 44,695 .25
Migros Turk TAS (1) 70,262,162 87,451 .48
Nergis Holding AS (1), (2) 201,128,000 844 -
Netas, Northern Electric Telekomunikasyon AS 177,175,960 3,738 .02
Petrol Ofisi AS 241,004,837 85,704 .47
Trakya Cam Sanayii AS (1) 1,067,071,517 8,348 .05
Turk Dis Ticaret Bankasi AS (2) 65,630,000 284 -
Turkiye Garanti Bankasi AS (2) 10,974,688,280 81,957 .45
Turkiye Is Bankasi AS, Class C 12,990,819,048 230,983 1.27
Turkiye Is Bankasi AS (GDR) (2) 159,000 282 -
Turkiye Sise ve Cam Fabrikalari AS (1) 2,755,282,735 25,475 .14
Yapi ve Kredi Bankasi AS (1) (2) 15,287,179,623 221,076 1.22
Yapi ve Kredi Koray AS, Class B (1),(2) 302,600,000 1,309 .01
---------- ----------
932,900 5.13
---------- ----------
UKRAINE - 0.01%
JKX Oil & Gas PLC (1) (2) 5,230,233 865
JKX Oil & Gas PLC 7.00% convertible bond June 30, 2001
(acquired 6/6/96, cost: $2,000,000) (1), (3) $2,000,000 340 .01
---------- ----------
1,205 .01
---------- ----------
VENEZUELA - 0.45%
Compania Anonima Nacional Telefonos de Venezuela - 2,979,300 81,186 .45
CANTV, Class D (ADR) (1) ---------- ----------
81,186 .45
---------- ----------
VIETNAM - 0.01%
Vietnam Frontier Fund (acquired 7/21/94, cost: 222,610 779 -
$2,293,000) (2), (3)
Vietnam Investment Fund, ordinary, units (acquired 8/4/94, 6 -
cost: less than $1,000) (2), (3), (4)
Vietnam Investment Fund, preferred, units (acquired 30 1,631 .01
8/4/94, cost: $3,206,000) (2), (3), (4)
---------- ----------
2,410 .01
---------- ----------
MULTINATIONAL - 2.56%
Aminex PLC (acquired 8/1/97, cost: $3,856,000) (2), (3) 3,250,000 1,229 .01
Argosy Minerals Inc. (formerly Argosy Mining Corp.) (2) 254,677 21 -
Armada Gold Corp. (2) 3,264,000 89
Armada Gold Corp. 10.00% convertible bond July 8, 2004 CAD800,000 22 -
Asia Pacific Resources International Holdings Ltd. (1), (2) 3,024,800 5,442 .03
Billiton PLC 35,577,300 121,811 .67
Black Swan Gold Mines Ltd. (2) 2,275,000 371 -
Capital International Global Emerging Markets Private Equity Fund, L.P.
(acquired 6/30/99, cost: $56,572,000) (3), (4) 56,000 61,306 .34
Cie. Financiere pour l'Europe Centrale SA (GDR) (2) 82,995 588 -
Coca-Cola Beverages PLC (2) 11,908,480 25,337 .14
DiamondWorks Ltd. (2) 3,966,000 471
DiamondWorks Ltd. warrants, expire July 15, 1999 (2) 1,000,000 - -
Freeport-McMoRan Copper & Gold Inc., Class A 91,900 1,539 .01
Genting International PLC (2) 300 - -
Glencar Mining PLC (2) 519,735 238 -
Goldbelt Resources Ltd. (2) 766,372 16 -
Kimberley Resources Ltd. (2) 426,221 141 -
MIH Ltd. (1) (2) 1,064,940 28,221 .16
New Asia East Investment Fund Ltd., Class A (acquired 293,600 2,911
5/23/96, cost: $2,936,000) (2), (3), (4)
New Asia East Investment Fund Ltd., Class B (acquired 4,006,400 39,719 .24
(acquired cost: $40,064,000) (2), (3), (4)
New Europe East Investment Fund Ltd., Class B (acquired 436 36,428 .20
6/4/93, cost: $33,792,000) (2), (3)
Oliver Gold Corp. (2) 75,795 4 -
Panamerican Beverages, Inc., Class A 5,814,700 138,463 .76
---------- ----------
464,367 2.56
---------- ----------
MISCELLANEOUS - 3.28% ---------- ----------
Equity securities in initial period of acquisition 595,936 3.28
---------- ----------
TOTAL EQUITY SECURITIES (cost: $13,622,271,000) 16,826,668 92.72
BONDS AND NOTES
- --------------------------------------------
ARGENTINA - 0.48%
Republic of Argentina:
8.75% July 10, 2002 ARS4,430 3,622
11.00% October 9, 2006 $16,225 15,069
11.375% January 30, 2017 28,795 24,836
11.75% February 12, 2007 ARS24,830 19,711 .35
Bonos del Tesoro 8.75% May 9, 2002 $18,750 17,024 .09
CEI Citicorp Holdings SA, Series B 11.25% February 14, 2007 ARS10,575 7,007 .04
---------- ----------
87,269 .48
---------- ----------
BRAZIL - 1.74%
Federal Republic of Brazil:
11.625% April 15, 2004 $180 167 -
Capitalization Bond PIK 8.00% April 15, 2014 399,897 260,433 1.44
Debt Conversion Bond 5.9375% April 15, 2012 (5) 28,850 17,419 .10
MYDFA Trust:
5.875% September 15, 2007 (acquired 10/2/96, cost: $12,381,000) (3) (5) 14,029 9,645
5.875% September 15, 2007 (5) 3,920 2,695 .06
NMB Series EI-L, 5.9375% April 15, 2009 (5) 4,600 3,140
Series EI-L, 5.875% April 15, 2006 (5) 20,752 16,212 .11
Brazil Global Bond 10.125% May 15, 2027 2,366 1,780 .01
Globo Comunicacoes E Partcipacoes Ltd. 10.625% December 5, 2008 4,835 3,445 .02
McCaw International, Ltd. (owned by NEXTEL Communications, 170 105 -
Inc.) 0%/13.00% April 15, 2007 (6) ---------- ----------
315,041 1.74
---------- ----------
BULGARIA - 0.02%
Republic of Bulgaria Front Loaded Interest Reduction Bond,
Series A, 2.50% July 28, 2012 (5) 6,815 4,076 .02
---------- ----------
CZECH REPUBLIC - 0.00%
Komercni Finance BV 9.00%/10.75% May 15, 2008 660 573 -
REPUBLIC OF CROATIA - 0.00%
Croatian Government, Series B, 5.8125% July 31, 2006 (5) 310 258 -
INDIA - 0.00%
Flex Industries Ltd. 13.50% December 31, 2004 INR29,929 598 -
INDONESIA - 0.13%
APP International Finance 11.75% October 1, 2005 $700 548 -
Indah Kiat International Finance:
8.875% November 1, 2000 475 419
10.00% July 1, 2007 10,340 7,160
11.875% June 15, 2002 4,850 3,941
12.50% June 15, 2006 150 119 .06
International Finance Co. 10.00% June 1, 2007 1,950 1,419 .01
Pindo Deli Finance Mauritius Ltd.:
10.25% October 1, 2002 3,895 2,852
10.75% October 1, 2007 10,375 7,237 .06
---------- ----------
23,695 .13
---------- ----------
MEXICO - 0.64%
Banco Nacional de Comercio Exterior, S.N.C.
7.25% February 2, 2004 $850 779 -
Bancomex Trust 11.25% May 30, 2006 3,000 3,066 .02
Grupo Televisa, SA 0%/13.25% May 15, 2008 (6) 3,000 2,430 .01
Innova, S de RL 12.875% Senior Notes due April 1, 2007 1,000 808 -
United Mexican States Government Bonds:
9.875% January 15, 2007 55,000 55,069
11.375% September 15, 2016 16,920 17,808
11.50% May 15, 2026 33,315 36,730 .61
---------- ----------
116,690 .64
---------- ----------
PANAMA - 0.14%
Republic of Panama:
8.875% September 30, 2027 5,990 4,927 .03
Interest Reduction Bonds 3.75% July 17, 2014
3.75% (acquired 11/8/95, cost: $1,197,000) (3), (5) 2,504 1,840 .01
Past Due Interest Bonds:
5.9375% July 17, 2016 (4) 24,159 17,787 .10
5.9375% July 17, 2016 (acquired 6/21/96, cost: $562,000) (3), (5) 803 591 -
---------- ----------
25,145 .14
---------- ----------
PERU - 0.06%
Republic of Peru Past Due Interest Bond 4.00% March 7, 2017
(acquired 3/7/97, cost: $12,282,000) (3), (5) 18,100 10,996 .06
---------- ----------
PHILIPPINES - 0.06%
Republc of Philippines:
Front Loaded Interest Reduction Bonds, Series B, 6.00%
June 1, 2008 (5) 2,290 2,134 .01
8.875% April 15, 2008 6,750 6,607 .04
9.875% January 15,2019 1,500 1,472 .01
---------- ----------
10,213 .06
---------- ----------
POLAND - 0.00%
Netia Holdings BV 0%/11.25% November 1, 2007 (6) 875 549 -
Republic of Poland past Due Interest Bond 5.00% October 27, 2014 (5) 100 88 -
PTC International Finance BV 0%/10.75% July 1, 2007 (6) 400 288 -
---------- ----------
925
---------- ----------
RUSSIAN FEDERATION - 0.01%
Russia 12.75% June 24, 2028 (acquired 6/18/98, cost: $896,000) (3) 910 501 -
Russia 6.0625% December 15, 2015 (acquired 3/7/97, cost: 344 55 -
less than $1,000) (5)
Russia Principal Loan 6.0625% December 15, 2020 (5) 10,784 1,334 .01
---------- ----------
1,890 .01
---------- ----------
THAILAND - 0.01%
Advance Agro PCL 13.00% November 15, 2007 (5) 1,435 1,128 .01
---------- ----------
TURKEY - 0.02%
Cellco Finance NV 15.00% August 1, 2005 $2,050 2,117 .02
Republic of Turkey 12.00% December 15, 2018 900 890 -
---------- ----------
3,007 .02
---------- ----------
VENEZUELA - 0.46%
Republic of Venezuela:
Front Loaded Interest Reduction Bonds:
Series A Eurobond 6.00% March 31, 2007 (5) 4,762 3,613
Series B Eurobond 6.00% March 31, 2007 (5) 1,714 1,301 .03
Debt Conversion Bonds:
6.3125% December 18, 2007 (5) 44,929 34,258
9.25% September 15, 2027 66,910 43,492 .43
---------- ----------
82,664 .46
---------- ----------
SOUTH AFRICA - 0.15%
Republic of South Africa 13.00% August 31, 2010 ZAR183,500 26,845 .15
---------- ----------
TOTAL BONDS AND NOTES (cost: $698,862,000) 711,013 3.92
SHORT-TERM SECURITIES
- -------------------------------------------- -------- -------- --------
CORPORATE SHORT-TERM NOTES - 2.77%
Abbey National North America 4.84%-4.86% due 8/5-8/9/99 $56,000 55,717 .31
American Honda Finance Corp. 4.86%-4.87% due 7/7-7/21/99 43,500 43,422 .24
Arco British Ltd. 4.87%-5.20% due 7/21-7/27/99 50,000 49,833 .28
CBA (Delaware) Finance Inc. 4.87% due 8/3/99 21,200 21,102 .12
Eksportfinans A/S 4.86% due 7/9/99 10,000 9,988 .06
Equilon Enterprises, LLC 4.83%-4.88% due 7/9-7/22/99 37,650 37,561 .21
General Electric Capital Corp. 4.87% due 8/12/99 15,000 14,911 .08
Motiva Enterprises LLC 4.88% due 7/23-8/6/99 40,000 39,837 .22
National Australia Funding (Delaware) Inc. 4.91%-5.14% 35,000 34,570 .19
due 7/29/99-11/2/99
Reed Elsevier Inc. 4.89%-5.19% due 7/26-8/23/99 40,000 39,812 .22
Rio Tinto America, Inc. 4.86%-5.20% due 7/22-8/10/99 51,450 51,225 .28
Svenska Hendelsbanken Inc. 4.86%-4.87% due 7/12-8/6/99 57,200 56,972 .31
UBS Finance (DE) Inc. 5.2% due 8/30/99 30,000 29,736 .16
Westpac Capital Corp. 4.95% due 11/5/99 17,000 16,681 .09
---------- ----------
501,367 2.77
---------- ----------
FEDERAL AGENCY DISCOUNT NOTES - 0.14%
Fannie Mae 4.88%-5.29% due 10/18/99 26,400 25,982 .14
NON-U.S. GOVERNMENT SHORT-TERM OBLIGATIONS - 0.24%
Mexican Cetes Treasury Bills due 7/8/99 $2,332 2,473 .01
Polish Government Bonds, Series PLN, 14.00% due 2/12/00 PLN6,100 1,558 .01
Turkish Government Treasury Bills due 4/19/00 TRL17,600,000 23,116 .13
Turkish Government Treasury Bonds, Series CPI, 30.00% due 8/18-9/29/99 TRL3,803,160 16,485 .09
---------- ----------
43,632 .24
---------- ----------
NON-U.S. CURRENCY - 0.07%
Chilean Pesos CHP12,692 25 -
Taiwanese Dollars TWD416,303 12,893 .07
---------- ----------
12,918 .07
---------- ----------
---------- ----------
TOTAL SHORT-TERM SECURITIES (cost $583,238,000) 583,899 3.22
---------- ----------
TOTAL INVESTMENT SECURITIES (cost: $14,904,371,000) 18,121,580 99.86
Net unrealized depreciation on foreign currency contracts (7) (19,683) (0.11)
Excess of cash and receivables over payables 45,527 .25
(excludes open foreign currency contracts)
NET ASSETS 18,147,424 100%
1. The fund owns 5.00% 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.
2. Non-income producing securities.
3. Purchased in a private placement transaction; resale to
the public may require registration, and no right to demand
registration under U.S. law exists. As of June 30, 1999,
the total market value and cost of such securities was
$367,225,000 and $456,742,000, respectively, and the
market value represented 2.02% of net assets. Such securities, excluding
certain convertible bonds and American Depositary Receipts,
are valued at fair value.
4. Includes an unfunded capital commitment representing a
binding commitment made by the fund which may be
paid in the future.
5. Coupon rate may change periodically.
6. Represents a zero coupon bond that will convert to
a coupon-bearing security at a later date.
</TABLE>
<TABLE>
7. As of June 30, 1999, the net payable
consists of the following:
<S> <C> <C> <C> <C> <C>
Contract U.S. Valuation
Amount at 6/30/1999 Unrealized
(Appreciation/
Non-U.S. U.S. U.S. Amount Depreciation)
(000) (000) (000) (000) (000)
Sales:
European Monetary Union expiring 12/21/99 - 2/11/00 EUR 679 $711 $689,62 $23.00
South African Rands expiring 9/30 - 10/25/99 ZAR1,532,3 (19,595)
Thai Bahts expiring 11/4/99 THB110,063 (111)
Foreign currency contracts - net (19,683)
</TABLE>
EQUITY SECURIES ADDED TO THE
PORTFOLIO SINCE DECEMBER 31, 1998
Akbank Turk
Alpha Credit Bank
Asea Brown Boveri
AS Eesti Telekom
Bank Hapoalim
Bank Leumi le-Israel
Capital International Global Emerging Markets Private
Equity Fund L.P.
Castrol India
CMC Magnetics
Controladora Comerical Mexicana
ECI Telecom
Edgars Stores
First International Bank of Israel
Genting International
PT Inti Indorayon Utama
Keumkang
Koor Industries
Korea Telecom
Linea Aerea Nacional Chile
Malayan Banking
Matav-Cable Systems Media
MIH
M-Web Holdings
Orbotech
Quilmes Industrial
Samsung Fire & Marine Insurance
Sapiens International
Shinhan Bank
Stet Hellas Telecommunications
Tata Infotech
Telekom Malaysia
Yapi ve Kredi Koray
EQUITY SECURITIES ELIMINATED FROM
THE PORTFOLIO SINCE DECEMBER 31, 1998
Acer Computer International
Aracruz Celulose
Banco Real
PT Bank Internasional Indonesia
PT BAT Indonesia
BIG Bank GDANKSI
C & P Homes
China Yuchai International
Cia. Cimento Portland Itau
Daehan Asia Trust
Daehan Korea Trust
Delta Electronics
Dragon Oil
ELETROPAULO- Eletricidade de Sao Paulo
Ellerine Holdings
Enersis
Euorosov Energy
Fil- Estate Land
Grasim Industries
PT International Nickel Indonesia
PT Jaya Real Property
Jiangsu Expressway
Katselis Sons
Keppel Philippines Holdings
Korea Electric Power
Korea Industrial Leasing
Korea Pacific Trust
LIGHT- Servicos De Eletricidade
Malaysian Airline System
Malbak
Mesbla
PT Modern Photo Film
PT Mulia Industrindo
Nan Ya Plastics
New Clicks Holdings
Optimus
O.Y.L. Industries
Portugal Telecom
Ramco Energy
REAL Consorcio Participacoes
REAL Holdings Participacoes
PT Semen Gresik
Sibir Energy
Siu-Fung Ceramics Holdings
Sociedad Comercial del Plata
Sonera Group
South African Druggists
Star Mining
Sutton Resources
Taiwan Mask
Unicap Electronics Industrial
PT United Tractors
Yangming Marine Transport
YPF
Yukong
Zaklady Metali Lekkich "Kety"
Zaklady Piwowarskie w Zywcu
FINANCIAL STATEMENTS
The Fund's audited financial satements, including the related notes thereto,
dated June 30, 1999, are incorporated by reference in the Statement of
Additional Information from the Fund's Annual Report dated as of
June 30, 1999. A copy of the report delivered with this Statement of
Additional Information should be retained for future reference.
<TABLE>
Emerging Markets Growth Fund
Financial Statements
Statement of Assets and Liabilities (dollars in
at June 30, 1999 thousands)
<S> <C> <C>
Assets:
Investment securities at market
(cost: $14,904,371) $18,121,580
Cash 11,398
Receivables for--
Sales of investments $178,807
Sales of fund's shares 9,268
Dividends and accrued interest 75,033 263,108
-------------- --------------
18,396,086
--------------
Liabilities:
Non-U.S. taxes payable 12,761
Payables for--
Purchases of investments 105,967
Unfunded capital commitments 98,264
Open forward currency contracts 19,683
Management services 8,752
Accrued expenses 3,235 235,901
-------------- --------------
248,662
--------------
Net Assets at June 30, 1999 --
Equivalent to $55.53 per share on
326,822,483 shares of $0.01 par value
capital stock outstanding (authorized
capital stock -- 400,000,000 shares) $18,147,424
==============
Statement of Operations (dollars in
for the Year Ended June 30, 1999 thousands)
Investment Income:
Income:
Dividends $254,461
Interest 256,798 $511,259
--------------
Expenses:
Management services fee 83,851
Custodian fee 13,016
Registration statement and prospectus 800
Auditing and legal fees 433
Reports to shareholders 10
Taxes other than federal income tax 188
Directors' fees 204
Other expenses 1,133 99,635
-------------- --------------
Income before non-U.S. taxes 411,624
Non-U.S. taxes 2
--------------
Net investment income 411,622
--------------
Realized Loss and Unrealized
Appreciation on Investments:
Realized loss before non-U.S. taxes (1,036,549)
Non-U.S. taxes (3)
--------------
Net realized loss (1,036,552)
Net unrealized appreciation on investment
securities 3,960,069
Net change in unrealized depreciation
on open forward currency contracts (15,888)
--------------
Net unrealized appreciation 3,944,181
Non-U.S. taxes (9,221)
--------------
Net unrealized appreciation on
investments 3,934,960
--------------
Net realized loss and unrealized
appreciation on investments 2,898,408
--------------
Net Increase in Net Assets Resulting
from Operations $3,310,030
==============
Statement of Changes in Net Assets
(dollars in
thousands)
Year Ended
36,341
1999 1998
--------------- ---------------
Operations:
Net investment income $411,622 $350,719
Net realized loss on investments (1,036,552) (45,790)
Net unrealized appreciation (depreciation)
on investments 3,934,960 (4,643,969)
-------------- ---------------
Net increase (decrease) in net assets
resulting from operations 3,310,030 (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:
58,327,982 and 52,680,219 shares, respec 2,473,079 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 2,473,079 4,387,690
-------------- ---------------
Total Increase (Decrease) in Net Assets 5,783,109 (1,219,329)
Net Assets:
Beginning of year 12,364,315 13,583,644
-------------- ---------------
End of year (including net investment
income over net distributions: $154,942 and
($270,619), respectively) $18,147,424 $12,364,315
=============== ===============
See Notes to Financial Statements
</TABLE>
Emerging Markets Growth Fund
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Organization - Emerging Markets Growth Fund, Inc. (the "fund") was registered
under the Investment Company Act of 1940 as a closed-end, diversified
management investment company. On July 1, 1999, the fund converted to an
open-ended interval fund. The fund's investment objective is to seek long-term
capital growth through investment in developing country equity securities.
Significant Accounting Policies - The financial statements have been prepared
in conformity with generally accepted accounting principles which require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. 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 and 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 and other
assets and liabilities are included with the net realized and unrealized gain
or loss on investment securities.
Security Transactions and Related Investment Income - Security
transactions are accounted for as of the trade date. Realized gains and losses
from securities transactions are determined based on specific identified cost.
In the event securities are purchased on a delayed delivery or "when-issued"
basis, the fund will instruct the custodian to segregate liquid assets in an
amount sufficient to meet its payment obligations in these transactions.
Dividend income is recognized on the ex-dividend date, and interest income is
recognized on an accrual basis. Discounts and premiums on securities purchased
are amortized daily over the expected life of the security.
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 fund records realized gains or losses at the time the forward
contract is closed or offset by a matching contract. 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 possible movements in non-U.S. exchange rates and securities values
underlying these instruments. Purchases and sales of forward currency exchange
contracts having the same settlement date and broker are offset and presented
net in the statement of assets and liabilities.
Non-U.S. Investment Risk
Investments in securities of non-U.S. issuers in certain countries involves
special investment risks. These risks may include, but are not limited to,
investment and repatriation restrictions, revaluation of currencies, adverse
political, social and economic developments, government involvement in the
private sector, limited and less reliable investor information, lack of
liquidity, 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 35%. 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.
Federal Income Taxation
The fund complies with the requirements of the Internal Revenue Code
applicable to regulated investment companies and intends to distribute all of
its net taxable income and net capital gains for the fiscal year. As a
regulated investment company, the fund is not subject to income taxes if such
distributions are made. Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, the fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund.
As of June 30, 1999, net unrealized appreciation on investments, excluding
forward currency contracts, for federal income tax purposes aggregated
$3,006,243,000 on unrealized appreciation of securities, net of accumulated
deferred taxes totaling $9,221,000, of which $4,259,904,000 related to
appreciated securities and $1,253,661,000 related to depreciated securities.
During the fiscal year ended June 30, 1999, the fund realized, on a tax basis,
a net capital loss of $1,247,726,000 on securities transactions. The fund had
available at June 30, 1999, a net capital loss carryforward totaling
$556,055,000 which may be used to offset capital gains realized during
subsequent years through 2007 and thereby relieve the fund and its shareholders
of any federal income tax liability with respect to the capital gains that are
so offset. The fund will not make distributions from capital gains while a
capital loss carryforward remains. In addition, the fund has deferred, for
federal income tax purposes, to fiscal year ending June 30, 2000, the
recognition of capital losses totaling $720,329,000 which were realized during
the period November 1, 1998 through June 30, 1999. For the fiscal year ended
June 30, 1999, the fund recognized, for federal income tax purposes, net gains
related to non-U.S. currency transactions of $7,325,000. Such amounts were
treated as ordinary income for federal income tax purposes. The cost of
portfolio securities, excluding forward currency contracts, for federal income
tax purposes was $15,106,115,000 at June 30, 1999.
Fees and Transactions with Related Parties
Investment Advisory Fee - The fee of $83,851,000 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 in effect through June 30, 1999, provided 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 indirect 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 June 30, 1999, aggregate amounts deferred and earnings thereon
were $104,000. These amounts are included with accrued expenses.
Investment Transactions and Other Disclosures
As of June 30, 1999, accumulated undistributed net realized loss on investments
was $1,416,382,000 and additional paid-in capital was $16,220,630,000. The
fund reclassified $9,299,000 from undistributed net realized loss to additional
paid-in capital and $13,939,000 from additional paid-in capital to
undistributed net investment income for the fiscal year ended June 30, 1999 as
a result of permanent differences between book and tax.
The fund made purchases and sales of investment securities, excluding certain
short-term securities, of $7,541,767,000 and $4,241,354,000, respectively,
during the fiscal year ended June 30, 1999.
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 $13,016,000 includes $125,000 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
fiscal year ended June 30, 1999, such non-U.S. taxes were $25,714,000. Net
realized currency losses on dividends, interest, withholding taxes reclaimable,
sales of non-U.S. bonds and notes, and other receivables and payables, on a
book basis, were $80,377,000 for the fiscal year ended June 30, 1999.
<TABLE>
Per-Share Data and Ratios Year
ended
June 30
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year $46.05 $70.87 $57.57 $52.36 $58.75
-------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income 1.48 1.56 1.61 1.30 0.87
Net realized and unrealized
gain (loss) on investments
before non-U.S. taxes 8.03 (20.69) 14.51 6.49 (0.79)
Non-U.S. taxes (0.03) 0.05 (0.01) (0.01) (0.03)
-------- -------- -------- -------- --------
Total income (loss) from
investment operations 9.48 (19.08) 16.11 7.78 .05
-------- -------- -------- -------- --------
Less Distributions:
Dividends from net
investment income -- (2.36) (1.79) (1.30) (.63)
Distributions from net
realized gains -- (3.38) (1.02) (1.27) (5.81)
-------- -------- -------- -------- --------
Total distributions -- (5.74) (2.81) (2.57) (6.44)
-------- -------- -------- -------- --------
Net Asset Value, End of Year $55.53 $46.05 $70.87 $57.57 $52.36
======= ======= ======= ======= =======
Total Return 20.59% (27.56)% 29.17% 15.49% (1.22)%
Ratios/Supplemental Data:
Net assets, end of year
(in millions) $18,147 $12,364 $13,584 $8,451 $5,572
Ratio of expenses to average
net assets .73% .76% .78% .84% .91%
Ratio of expenses and non-U.S.
taxes to average net assets .73% .80% .78% .85% .94%
Ratio of net income to average
net assets 3.03% 2.58% 2.74% 2.54% 1.70%
Portfolio turnover rate 33.71% 23.41% 23.75% 17.78% 23.75%
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Emerging Markets Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the per-share data and ratios present fairly, in all
material respects, the financial position of Emerging Markets Growth Fund (the
"Fund") at June 30, 1999, the results of its operations, the changes in its net
assets, and the per-share data and ratios for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and per-share data and ratios (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSECOOPERS LLP
Los Angeles, California
August 13, 1999
Tax Information (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. Please note that the fund did not make any
distribution to its shareholders during the current fiscal year.
The fund makes an election under the Internal Revenue Code Section 853 to pass
through non-U.S. taxes paid by the fund to its shareholders. The amount of
non-U.S. taxes and foreign source income on a per-share basis for the fiscal
year ended June 30, 1999 are $0.08 and $0.52, respectively. Shareholders are
entitled to a foreign tax credit or an itemized deduction, at their option.
Generally, it is more advantageous to claim a credit rather than to take a
deduction.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, none of the
dividends paid by the fund from net investment income represent qualifying
dividends.
Certain states may exempt from income taxation that portion of the dividends
paid from net investment income that is derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 0.0015% of the fund's
net investment income was derived from interest on direct U.S. Treasury
obligations.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many plan retirement trusts may need this information for their annual
information reporting.
Since the amounts above are reported for the fund's fiscal year and not the
calendar year, shareholders should refer to their Form 1099-DIV or other tax
information which will be mailed in January 2000 to determine the calendar year
amounts to be included on their 1999 tax returns. Shareholders should consult
their tax advisers.
BOARD OF DIRECTORS
ROBERT E. ANGELICA, Berkeley Heights, New Jersey
President and Chief Investment Officer,
AT&T Investment Management Corporation
R. MICHAEL BARTH,* The Hague, The Netherlands
Chief Executive Officer, F.M.O., The Netherlands
Development Finance Company
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
Executive Director, Abu Dhabi Investment Authority
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, The Netherlands
Director, Investment Strategy, Pensioenfonds PGGM
HUGH G. LYNCH, New York, New York
Managing Director, International Investments,
General Motors Investment Management Corporation
HELMUT MADER, Kronberg, Germany
Former Director, Deutsche Bank AG
JOHN G. MCDONALD, Stanford, California
The IBJ Professor of Finance,
Graduate School of Business, Stanford University
WILLIAM ROBINSON, New South Wales, Australia
Director, Deutsche Fund Management Limited
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.
*Effective June 21, 1999
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.
VALERIE Y. LEWIS, Los Angeles, California
Assistant Secretary of the fund
Fund Compliance Specialist, The Capital Group Companies, 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
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
400 South Hope Street
Los Angeles, California 90071-2889
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/4241/75010
E 1999 Emerging Markets Growth Fund, Inc.
Lit. No. EMGF-011-0999(NLS)
