Clemente Global Growth Fund, Inc.
LETTER TO SHAREHOLDERS
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May 15, 1998
Dear Shareholders:
Global equity markets experienced another dizzying ride in the first quarter of
1998. A generally benign economic environment, along with abundant liquidity,
propelled the US and European equity markets to one record closing after
another, but the journey upward was accompanied by heightened risks born of high
valuations and the dangers of Asian contagion. After a slow start, Clemente
Global Growth Fund (the Fund) rallied to match the 13.7% gains registered by the
FT World Index, the Fund's benchmark, ending the first quarter with an NAV of
$13.11. The price of the Fund's shares was $11.19 on March 31, 1998, up 18.5%
from the start of the year, and the discount to NAV shrank from 18.15% on
December 31, 1997 to 14.66% after the first quarter.
STRONG GLOBAL EQUITY MARKETS IN A SEA OF UNCERTAINTY
The year began on an ominous note: Indonesia's Suharto pushed aside the medicine
prescribed by the financial doctors of the IMF, and his ailing economy and
financial markets soon took a dramatic turn for the worse. The country's
currency and equities plunged more than 70% in just a few days in January, and
Pacific Asia generally followed with a more moderate but still precipitous
decline. The rest of the quarter was characterized by cautious, generally
recovering, Asian markets. One by one, the region's economies endorsed IMF
agreements which put into motion macroeconomic stabilization plans and
longer-term structural reforms, and brought smiles to the faces of investors.
Swift rallies pushed Asian equities sharply higher, especially in Malaysia, the
Philippines, South Korea and Thailand, but significantly short of levels enjoyed
prior to the crash. Investors soon concluded that the rest of the trip back
would require more tangible evidence of economic recovery and reform than had
been displayed to date, and their renewed caution brought the rallies to a halt.
North American and European equity markets generally shrugged off the dangers
emanating from Asia and, clinging to the heady habits established the past
couple of years, continued their move to record levels. Europe led the way, with
most of its markets enjoying a quarterly return that surpassed the 12.68% turned
in by the FT US Index. Economic recovery was proving to be sustainable, and
stronger than expected. A benign inflation and interest rate environment
contributed to the euphoria, with additional support from corporate
restructuring which was reflected in mergers and acquisitions and in stronger
earnings growth. Nor did the Euro turn out to be the disturbing influence
expected by some. The road toward a single currency was relatively smooth, and
promised further cuts in interest rates as part of the process of convergence.
The US formula for success hadn't changed very much: a robust economy, with few
signs of accelerating inflation; a steady Federal Reserve policy; abundant
liquidity from mutual fund and overseas investors; a strong dollar; and
generally positive earnings surprises. Asian uncertainty produced periods of
weakness and volatility, but this was more than offset by merger mania. Nor was
there much change in Japan's formula for failure: a stagnant economy; a fragile
financial system with an on-going credit crunch; inadequate policy initiatives;
bureaucracies that have lost their luster; and politics that are increasingly
divisive.
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Clemente Global Growth Fund, Inc.
LETTER TO SHAREHOLDERS - CONTINUED
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THE CLM PORTFOLIO RESPONDS TO HEIGHTENED RISK
Extreme caution continued to dominate our strategy toward Asia. The portfolio's
weighting in Japan was cut sharply. Exporters were sold because the impact of a
weaker yen was being undermined by slowing regional economies and by
depreciating ASEAN currencies, and domestic plays were not getting the support
needed from a strong fiscal stimulus. A 13.8% weight at the end of 1997 was down
to 7.3% by the end of the first quarter. The rest of the region faced an
extended period of nagging financial concerns and sub-par economic growth, but
positive, painful steps were being taken, and, while genuine stability was not
at hand, some currencies and equities had fallen to levels that made them
compelling investments. Impressed by South Korea's quick response to the present
crisis, and by their close collaboration with the IMF and international banks,
we made a modest investment in that country's exporters.
Europe remained our favorite region, particularly the banking, financial, and
telecommunications sectors where we added five new names. This was the largest
change in the portfolio, during the first quarter, and served to increase our
overall European weightings from 36.2% to 47.1%. A modest decline in North
America, from 37.7% to 35.5% was the result of reduced holdings in Canada where
the currency proved vulnerable, and profits were taken in two successful
holdings.
Emerging markets exposure fell from 12.5% at the start of the quarter to 10.2%
at the end. Asian entries replaced some of the Latin American positions that
were deemed vulnerable in the slower growth environment of 1998. The biggest
country weights at the end of the first quarter 1998: US (33.9%), Germany
(7.6%), Japan (7.3%), the Netherlands (6.9%), Spain (6.3%), and Switzerland
(5.0%). The largest changes involved reductions in Japan (-5.5%), Canada
(-3.4%), and Mexico (-2.5%), and increased weightings in South Korea (+3.0%),
France (+2.3%), the UK (+2.1%), and Spain (1.9%).
OPPORTUNITY AND RISK: NORMAL INGREDIENTS FOR AN INVESTMENT STRATEGY
There are a number of positive factors, including a favorable growth/inflation
environment, with good earnings growth momentum (except Asia/Pacific); and large
flows of funds into equities as a result of structural changes in pension
systems, and in the overall uses of savings.
But there are major risks, as well: a weak yen may induce another round of
currency instability in Asia; Asian contagion has abated, but new shocks cannot
be ruled out as painful policies create political and social tensions; ample
liquidity is inflating valuations, and may be creating a "bubble" in the
established equity markets of Europe and North America.
The above environment suggests the following investment strategy for the next
one or two quarters:
o Low allocations (3-5%) in Asia, ex Japan, focusing a very cautious interest on
China, South Korea, the Philippines and Thailand.
o Japan remains underweight, with a blend of blue-chip exporters and high
quality plays on policy-induced domestic recovery and reform.
o Latin America, bouncing back from Asian contagion, and with generally
attractive valuations, will keep its modestly overweight position.
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Clemente Global Growth Fund, Inc.
LETTER TO SHAREHOLDERS - CONTINUED
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o Europe is the most attractive place for equities despite valuations that are
historically high. Those markets are trailing the US cycle in both business
restructuring and economic activity, and companies and economies in Europe
should show gains through 1999.
o Valuations call for under-weighting the US market, but strong earnings and
ample liquidity suggest maintaining the present level of holdings (32-35%).
This strategy has yielded good results in the first half of the second quarter:
the CLM portfolio is up 16.9% for the year through May 14, 1998, the FT World
Index 14.6%. The portfolio has not been able to escape the volatility of the
markets, and the situation is not likely to improve any time soon. Our
protection must lie in our diversified holdings, and in the careful assessment
of risk and potential return for each and every stock in our portfolio. As we
have stressed in previous shareholder letters, the closed-end structure of this
Fund, by allowing us to implement our strategy in a patient, disciplined manner,
contributes mightily to the performance of the Fund.
We thank you for your support, and look forward to the next step in our global
quest for opportunity.
Cordially yours,
/s/ Thomas Prapas /s/ E. Matthew Brown
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Thomas Prapas E. Matthew Brown
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Clemente Global Growth Fund, Inc.
SCHEDULE OF NET ASSETS (UNAUDITED) MARCH 31, 1998
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<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
---------------- -----
COMMON STOCK -- 97.8%
BRAZIL -- 3.7%
<S> <C> <C> <C>
Telecommunicacoes Telecommunications
Brasileiras S.A. ADR Services................... 6,000 $ 1,947,144
Uniao De Bancos Brasileiras
S.A. GDR Banking...................... 25,000 906,250
-----------
2,853,394
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CANADA -- 1.5%
Power Corporation of Canada Diversified Financial
Ltd. Services................... 29,700 1,149,673
-----------
FINLAND -- 3.6%
Nokia Corp. ADR Telecommunications
Equipment.................. 13,000 1,403,188
Sampo Insurance Co. Ltd. Insurance.................... 35,000 1,384,410
-----------
2,787,598
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FRANCE -- 4.2%
Alcatel Alsthom Compagnie Telecommunications
Services................... 10,500 1,970,967
AXA-UAP Insurance.................... 12,000 1,235,698
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3,206,665
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GERMANY -- 7.3%
Bayerische Vereinsbank AG Banking...................... 21,000 1,532,979
Porsche AG -- Preferred
Shares Autos........................ 990 2,237,663
SAP AG Computer Services............ 4,600 1,835,682
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5,606,324
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IRELAND -- 1.9%
Bank of Ireland Banking...................... 74,730 1,477,461
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ITALY -- 4.1%
Banca Commerciale Italiana* Banking...................... 375,000 1,871,019
Telecom Italia SpA Telecommunications
Services................... 163,000 1,284,778
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3,155,797
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JAPAN -- 7.4%
Honda Motor Co., Ltd. Autos........................ 50,000 1,799,761
Itochu Corp. Finance...................... 35,000 83,989
Nichiei Co., Ltd. Finance...................... 12,100 1,088,855
Obayashi Corp. Construction................. 185,000 908,692
Sanwa Bank, Ltd. Banking...................... 96,000 856,686
TDK Corp. Electronics.................. 13,000 1,004,116
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5,742,099
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</TABLE>
4
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Clemente Global Growth Fund, Inc.
SCHEDULE OF NET ASSETS (UNAUDITED) - CONTINUED MARCH 31, 1998
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<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
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<S> <C> <C> <C>
KOREA -- 3.1%
Daewoo Heavy Industries Ship Building................ 250,000 $ 1,281,626
Samsung Electro-Mechanics Electronics.................. 51,000 1,082,631
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2,364,257
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MEXICO -- 3.3%
Coca-Cola Femsa SA ADR Food & Beverages............. 72,000 1,471,500
Grupo Financiero Banorte SA
de CV* Banking...................... 680,000 1,101,693
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2,573,193
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NETHERLANDS -- 6.8%
Baan Co., N.V.* Computer Services............ 43,000 2,056,479
Koninklijke Ahold N.V. Retail....................... 45,000 1,452,741
Oce-Van Der Grinten N.V. Electrical Equipment......... 12,166 1,749,605
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5,258,825
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SPAIN -- 6.2%
Acs Actividades De
Construccion y Servicios Building/Heavy
SA Construction............... 54,000 1,956,941
Argentaria Corp. BC Banking...................... 7,119 589,433
Vallehermoso S.A. Real Estate.................. 59,000 2,280,933
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4,827,307
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SWEDEN -- 1.9%
Astra AB ADR Pharmaceutical............... 72,000 1,494,000
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SWITZERLAND -- 4.9%
Alusuisse-Lonza Holding AG Multi-Industry............... 1,200 1,456,234
Union Bank Swiss Bearer Banking...................... 560 914,673
Zurich
Versicherungsgesellschaft Insurance.................... 2,500 1,451,315
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3,822,222
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UNITED KINGDOM -- 4.7%
BAA PLC Business/Public Services..... 92,954 906,719
Lloyds TSB GRP Banking...................... 70,000 1,091,916
Orange PLC * Telecommunications
Services................... 71,000 452,399
Siebe PLC Machinery/Manufacturing...... 54,000 1,178,275
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3,629,309
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UNITED STATES -- 33.2%
Air Products and Chemicals,
Inc. Chemicals.................... 16,500 1,367,438
Airtouch Communications, Telecommunications
Inc.* Services................... 50,000 2,446,875
Baxter International, Inc. Medical Products............. 27,000 1,488,375
</TABLE>
5
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Clemente Global Growth Fund, Inc.
SCHEDULE OF NET ASSETS (UNAUDITED) - CONTINUED MARCH 31, 1998
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<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
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<S> <C> <C> <C>
Cisco Systems, Inc.* Computer Software............ 33,000 $ 2,256,375
Dresser Industries, Inc. Machinery/Manufacturing...... 27,000 1,297,688
Harris Corp. Office Automation &
Equipment.................. 32,800 1,709,700
Health Managment Assoc.,
Inc.* Healthcare................... 75,000 2,146,875
Home Depot, Inc. Retail....................... 31,500 2,124,281
Illinois Tool Works, Inc. Machinery/Manufacturing...... 27,600 1,787,100
Intel Corp. Semiconductors............... 14,500 1,131,906
Pepsico, Inc. Food & Beverages............. 18,500 789,719
Protective Life Corp. Insurance.................... 18,200 1,328,600
Sungard Data Systems, Inc.* Computer Services............ 60,000 2,208,750
Suntrust Banks, Inc.* Banking...................... 20,000 1,507,500
Worldcom, Inc.* Telecommunications
Services................... 48,400 2,084,225
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25,675,407
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TOTAL COMMON STOCK (COST $53,662,692)............. 75,623,531
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TIME DEPOSIT -- 0.8%
First National Bank
5.25% 04/01/98 (Cost
$574,000) ............................. 574,000 574,000
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TOTAL INVESTMENTS (Cost $54,236,692) -- 98.6%............... 76,197,531
OTHER ASSETS AND LIABILITIES, NET -- 1.4%................... 1,044,023
-----------
NET ASSETS -- 100% (applicable to 5,892,400 common shares
outstanding).............................................. $77,241,554
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NET ASSET VALUE PER SHARE ($77,241,554 divided by
5,892,400)................................................ $ 13.11
===========
</TABLE>
ADR American Depository Receipts
GDR Global Depository Receipts
* Non-Income Producing Security
** Summary of Total Investments:
COST VALUE
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Common Stock...................... $53,662,692 $75,623,531
Short-Term Instruments............ 574,000 574,000
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Total Investments................. $54,236,692 $76,197,531
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6
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SUMMARY OF GENERAL INFORMATION
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THE FUND
Clemente Global Growth Fund, Inc. is a closed-end investment company whose
shares trade on the New York Stock Exchange. The Fund seeks long-term capital
appreciation primarily through investment in equity securities of companies
located throughout the world. The Fund is managed by Clemente Capital, Inc. and
Wilmington Trust Company.
SHAREHOLDER INFORMATION
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transactions section of most newspapers under the designation
"ClemGlb". The Fund's New York Stock Exchange trading symbol is CLM. Net asset
value (NAV) and market price information about Clemente Global Growth Fund, Inc.
shares are published each Monday in The Wall Street Journal, The New York Times
and other newspapers. For general information visit us at our web site
http://www.clementecapital.com. For shareholder account inquiries call
1-800-937-5449.
DIVIDEND REINVESTMENT PLAN
Through its voluntary Dividend Reinvestment Plan, shareholders of Clemente
Global Growth Fund, Inc. may elect to receive dividends and capital gains
distributions in the form of additional shares of the Fund.
This report is transmitted to the shareholders of Clemente Global Growth Fund,
Inc. for their information. This is not a prospectus, circular or representation
intended for use in the purchase of shares of the Fund or any securities
mentioned in this report.
Notice is hereby given in accordance with Section
23(c) of the Investment Company Act of 1940 that the Fund may purchase at market
prices from time to time shares of its common stock in the open market.
CLEMENTE GLOBAL
GROWTH FUND, INC.
QUARTERLY REPORT
MARCH 31, 1998
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DIRECTORS AND OFFICERS
LILIA C. CLEMENTE, Chairman and Director
LEOPOLDO M. CLEMENTE, JR., President and Director
ADRIAN C. CASSIDY, Director
ROBERT J. CHRISTIAN, Director
THOMAS H. LENAGH, Director
+SAM NAKAGAMA, Director
+G. PETER SCHIEFERDECKER, Director
BARON J.G.A. SIRTEMA VAN GROVESTINS, Director
WILLIAM H. BOHNETT, Secretary
THOMAS J. PRAPAS, Treasurer
MARIA DISTEFANO, Assistant Secretary
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+Members of Audit Committee
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EXECUTIVE OFFICES --
152 W. 57th Street, New York, NY 10019
(For latest net asset vlue and market data,
please call 212-765-0700 or access our web
site at http://www.clementecapital.com.
For shareholder inquiries, please call
1-800-937-5449)
INVESTMENT ADVISERS --
Clemente Capital, Inc.
Wilmington Trust Company
ADMINISTRATOR --
PFPC Inc.
TRANSFER AGENT AND REGISTRAR --
American Stock Transfer & Trust Company
CUSTODIAN --
Brown Brothers Harriman & Co.
LEGAL COUNSEL --
Fulbright & Jaworski L.L.P.
INDEPENDENT ACCOUNTANTS --
Price Waterhouse LLP
