UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
Investment Company Act File Number: 811- 04692
Emerging Markets Growth Fund, Inc.
(Exact Name of Registrant as specified in charter)
11100 Santa Monica Boulevard, 15th Floor
Los Angeles, California 90025
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 996-6000
Date of fiscal year end: June 30, 2004
Date of reporting period: December 31, 2003
Vincent P. Corti
Capital International, Inc.
11100 Santa Monica Boulevard, 15th Floor
Los Angeles, California 90025
(name and address of agent for service)
Copies to:
Rob Helm, Esq.
Dechert LLP
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
(Counsel for the Registrant)
ITEM 1 - Reports to Stockholders
[logo - Capital International(SM)]
EMERGING MARKETS GROWTH FUND(SM)
Seeks long-term growth of capital by investing in companies operating in
developing countries around the world
Semi-annual report for the six months ended December 31, 2003
DEAR SHAREHOLDERS:
Since we last reported to you, emerging markets equities made substantial gains
of more than 30%, supported by a combination of declining interest rates, solid
corporate earnings, a recovering global economy and market-friendly outcomes in
several elections. For the six-month period ending December 31, 2003, the
Emerging Markets Growth Fund rose 31.64% with dividends reinvested. The MSCI
Emerging Markets Index rose 34.45% with net dividends.
Emerging markets stocks continued to outpace their developed market
counterparts. The faster growth of several developing economies enabled many
domestically oriented emerging market companies to show substantial profit
increases. A rebound in the global economy contributed to the earnings growth of
export-dependent companies in areas like technology and materials. The
eradication of the SARS virus cleared the way for several Asian economies to
resume prior growth patterns. In Latin America, several resource-rich economies
were helped by strong global commodity prices.
MARKET REVIEW
Emerging markets performance varied widely by country, but all markets except
Venezuela and Sri Lanka had positive returns. A sustained recovery in the
developed economies and strong domestic demand in many emerging markets provided
a strong tailwind. In a sharply rising market, stocks of companies with
relatively stable earnings in sectors such as consumer staples and
telecommunications generally trailed the broader market. At the same time,
accelerating economic growth meant that shares of companies in the more cyclical
materials, energy, and consumer discretionary sectors generally paced the
markets.
[Begin Sidebar]
EMGF TOTAL RETURNS VS.
MSCI EMERGING MARKETS INDEX
for periods ended 12/31/03 (with distributions reinvested)
Emerging MSCI
Markets Emerging
Growth Fund Markets
(EMGF) Annualized Index* Annualized
6 months +31.6% -- +34.4% --
12 months +51.5 -- +55.8 --
3 years +31.8 +9.6% +42.4 +12.5%
5 years +61.8 +10.1 +64.4 +10.5
10 years +41.8 +3.6 +1.1 +0.1
Lifetime +1,464.6 +16.9 --+ --+
(since 5/30/86)
* Returns shown for the MSCI Emerging Markets Index reflect gross dividends
through December 31, 2000, and net dividends thereafter. The index is
unmanaged and does not reflect sales charges, commissions or expenses.
+ The MSCI Emerging Markets Index did not start until December 31, 1987.
[End Sidebar]
In the Asian region, the stock markets of India, China and Thailand had the
strongest results. In India, a bountiful monsoon boosted consumer confidence and
accelerated an already strong economy. China's economic engine went into high
gear after the spread of SARS ended in early 2003. China's gross domestic
product was estimated to grow at above 9% annualized as the country continued to
build communications infrastructure and industrial capacity at a breathtaking
pace. Although corporate profitability is muted and the banking system is
showing signs of strain due to the high level of non-performing loans, both
local and foreign investors have been attracted to Chinese companies. This has
propelled the stock market 59% higher. Several Chinese companies sold new
issues, including a $3 billion initial public offering from China Life Insurance
Co.
Stock markets in Taiwan and South Korea were supported by the solid performance
of select technology stocks. However, South Korean stocks trailed the broader
emerging markets as the country's economy was beset by union wage battles,
declining consumer spending and a severe typhoon in October. Financial shares
were hurt by a liquidity crunch faced by several credit card companies.
Meanwhile, renewed tensions between Taiwan and mainland China involving issues
relating to the island's sovereignty weighed on investor sentiment toward
Taiwan. In Thailand, easy access to low interest loans led to a boom in most
asset classes, including real estate and stocks.
Latin America showed the best results for the period with sharp gains by markets
in Brazil, Argentina, Peru and Chile. Strong global commodity prices helped
these resource-rich countries. Brazil took center stage in the region. President
Luiz Inacio Lula da Silva's persistence with fiscal reforms appeared to pay off.
Interest rates declined, the currency strengthened and bond yields dropped
significantly, allowing stocks to rise 64%. The government's major achievement
in the period was the December passage in congress of a social security bill
which is expected to make a contribution toward reducing the government deficit.
The Mexican economy started to improve toward the end of 2003, driven by rising
exports to the U.S. However, President Vicente Fox's inability to implement any
major legislative changes, including much-needed reforms to rejuvenate the power
sector, hobbled the country's industrial growth.
[Begin Sidebar]
10 LARGEST EQUITY HOLDINGS
Percent of gain/loss
for the 6 months
Percent of ended 12/31/03*
net assets (in U.S. dollars)
Samsung Electronics 7.3% 26.9%
Taiwan Semiconductor
Manufacturing 4.0 22.4
Reliance Industries 3.7 81.1
America Movil 3.2 45.9
LUKoil Holding 2.7 17.7
Infosys Technologies 2.3 73.4
Cia. Vale do Rio Doce 2.2 90.9
Kookmin Bank 2.2 24.3
Wal-Mart de Mexico 2.0 -2.5
Anglo American PLC 1.8 38.2
Total 31.4%
* 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]
Russian equity markets were roiled by a government investigation into alleged
tax evasion by YUKOS Oil and the arrest of its CEO, Mikhail Khodorkovsky. The
inquiry derailed a planned merger between YUKOS and Sibneft. The market
recovered toward year-end as investors saw the investigation as an isolated
event. On the political front, candidates backing President Vladimir Putin won a
clear majority in parliamentary elections, raising hopes for accelerated
economic reforms.
[Begin Sidebar]
WHERE THE FUND'S ASSETS ARE INVESTED
MSCI EM Market value
Percent of net assets Index(1) of holdings
12/31/03
12/31/02 6/30/03 12/31/03 6/30/03 12/31/03 (in thousands)
ASIA-PACIFIC
China 3.3% 2.6% 3.2% 6.8% 7.9% $641,626
Hong Kong .6 1.2 1.0 -- -- 191,613
India 12.2 10.5 13.7 4.5 5.7 2,736,195
Indonesia 2.6 3.0 3.0 1.4 1.5 592,309
Malaysia 3.1 2.4 3.2 5.3 4.6 630,793
Philippines 1.1 1.3 .6 .6 .5 124,039
Singapore -- -- -- -- -- 7,393
South Korea 17.1 18.6 18.5 19.4 18.2 3,689,404
Taiwan 5.9 6.7 10.3 12.5 12.2 2,058,398
Thailand 1.9 1.9 1.3 2.2 3.2 260,610
Vietnam -- -- .1 -- -- 9,078
47.8 48.2 54.9 52.7 53.8 10,941,458
LATIN AMERICA
Argentina .3 .8 .6 .6 .6 125,036
Brazil 10.8 11.1 11.0 7.7 9.2 2,191,123
Chile 1.6 1.5 1.0 1.9 2.0 203,393
Colombia .1 .4 .3 .1 .1 54,694
Guatemala -- -- -- -- -- 960
Mexico 16.5 14.2 9.3 7.7 6.5 1,845,438
Panama .1 .1 -- -- -- 6,119
Peru .5 .5 .5 .5 .6 91,546
Venezuela .2 .3 .3 .2 .1 62,923
30.1 28.9 23.0 18.7 19.1 4,581,232
EASTERN EUROPE
Bulgaria -- -- -- -- -- 871
Croatia .4 .4 .3 -- -- 66,203
Czech Republic .4 .3 .4 .5 .5 78,721
Hungary 2.2 1.5 1.1 1.0 1.0 208,723
Kazakhstan -- -- -- -- -- 1,829
Poland 1.4 1.3 .8 1.3 1.3 152,905
Russian Federation 6.0 5.5 6.0 5.8 4.8 1,198,030
Ukraine -- -- -- -- -- 5,363
10.4 9.0 8.6 8.6 7.6 1,712,645
OTHER MARKETS
Canada(2) -- .3 .7 -- -- 138,954
Dominican Republic -- -- -- -- -- 5,701
Egypt .2 .2 .2 .2 .2 47,516
Israel .3 .3 .5 4.3 3.3 104,614
Morocco .1 .1 -- .3 .2 6,898
Netherlands(2) -- -- -- -- -- 1,728
Nigeria .1 -- -- -- -- --
Portugal .1 -- -- -- -- --
South Africa 4.8 5.2 4.8 13.5 13.7 964,672
Turkey 2.0 2.0 2.0 1.3 1.7 398,994
United Kingdom(2) -- 1.2 2.3 -- -- 454,005
United States(2) -- .2 .1 -- -- 8,664
7.6 9.5 10.6 19.6 19.1 2,131,746
Multinational .5 .4 .4 74,498
Other(3) 1.6 .6 .8 165,992
Cash & equivalents 2.0 3.4 1.7 337,906
TOTAL 100.0% 100.0% 100.0% $19,945,477
(1) MSCI Emerging Markets Index also includes Jordan (0.2% at 6/30/03 and 0.2%
at 12/31/03) and Pakistan (0.2% at 6/30/03 and 0.2% at 12/31/03). A dash
indicates that the market is not included in the index. Source: MSCI Red
Book.
(2) Includes investments in companies incorporated in the region that have
significant operations outside the region.
(3) Includes stocks in initial period of acquisition.
[End Sidebar]
Turkish stocks rallied steadily as the economy showed significant improvement,
corporate earnings recovered and the central bank lowered interest rates;
inflation fell below 20%. South African stocks rose, with returns helped partly
by the 12.0% appreciation of the rand versus the U.S. dollar. South African
mining stocks climbed higher but lagged their global peers as the country's
strong currency hurt margins and profitability at these companies.
[Begin Sidebar]
PERCENT CHANGE IN KEY MARKETS(1)
Six months ended 12/31/03
Expressed in Expressed in
U.S. dollars local currency
ASIA-PACIFIC
China (Free)(2) 58.9% 58.2%
India 67.7 64.6
Indonesia (Free)(2) 30.4 33.2
Malaysia (Free)(2) 16.0 16.0
Pakistan 23.7 22.7
Philippines (Free)(2) 14.9 19.4
South Korea 25.5 25.2
Taiwan 26.5 24.1
Thailand (Free)(2) 76.5 66.3
LATIN AMERICA
Argentina 33.5 39.0
Brazil (Free)(2) 63.6 64.6
Chile 43.5 21.3
Colombia 31.6 29.9
Mexico (Free)(2) 15.0 24.0
Peru 68.7 68.4
Venezuela -16.5 48.9
EASTERN EUROPE
Czech Republic 30.0 21.4
Hungary 34.7 20.5
Poland 27.8 22.5
Russian Federation 20.1 --(3)
OTHER MARKETS
Egypt 48.1 50.8
Israel 4.7 6.1
Jordan 29.4 29.4
Morocco 15.0 6.8
South Africa 38.6 23.2
Turkey 80.1 78.4
Emerging Markets Growth Fund 31.6
(1) Including reinvestment of net dividends. All indexes are compiled by Morgan
Stanley Capital International and are unmanaged.
(2) The fund is invested in the "free" Brazilian, Chinese, Indonesian,
Malaysian, Mexican, Philippine and Thai stock markets, which consist of
securities than can be purchased by investors other than resident nationals.
(3) Index is quoted in U.S. dollars only.
[End Sidebar]
FUND OVERVIEW
Most of your fund's largest 10 holdings were also among its top performers.
Investments in India, where the fund has almost 2.5 times the exposure of the
index, were the largest contributors to returns. India's stock market rose 68%
during the period and was the best-performing major market, followed by Brazil
and China. India's large industrial conglomerate, Reliance Industries, and other
Indian holdings including Infosys Technologies, ICICI Bank and HDFC Bank all had
strong returns. Rising consumer demand, lower interest rates, and a strong
domestic economy helped earnings at the banks and at Reliance.
Stocks in the metals and mining sector were another area of strong performance
for the fund, with Cia. Vale do Rio Doce (CVRD) in Brazil, Norilsk Nickel of
Russia and Canada's Ivanhoe Mines (with operations in Mongolia), ranking among
the top performers. We avoided investments in many Russian mining companies due
to our concerns about corporate governance. This decision worked to the fund's
benefit because many of these companies declined following the investigation
into YUKOS.
In the area of financials, the fund's Korean investments hurt results relative
to the benchmark, as a funding crisis for many credit card companies resulted in
Korean financial stocks performing badly. Our investment in LG Card was
detrimental, as the company had difficulty obtaining funding and the quality of
its loan portfolio was worse than previously disclosed. Overall, stock selection
in the financial sector was strong despite the setback in Korea, and the fund's
investments in banks in India, Brazil and Turkey contributed to results.
The fund's underexposure to China and South Africa detracted from results when
compared to the index. Holdings in the area of consumer staples were also a
drag, as these defensive stocks trailed the broader market rally. Chinese
domestically listed stocks were bid up by domestic investors, many of whom can
invest only in the local markets, and also by foreign institutional investors.
Since many of the Chinese-listed companies often have a poor record of corporate
governance, the fund has sought exposure to China's economy through other
avenues. This includes investments in companies with large exports to China,
such as CVRD, which exports more than half its iron ore to China; through Hong
Kong companies with manufacturing facilities and retail chains in mainland
China; and through Taiwanese technology companies with operations in China.
In South Africa, the fund added to investments in mining companies, utilizing
weakness in that sector's stock prices to build up positions. Nevertheless, the
fund still has fewer investments in the country, compared to the 14% weighting
in the index.
We took some profits in Mexico and Brazil during the period. In Mexico, the
reduction in holdings came primarily from eliminating our investment in
Telefonos de Mexico, the wireline operator that has seen a slowdown in revenue
growth. Brazilian stocks have recovered from the depressed valuations of 2002
and we have used the rebound as an opportunity to trim those holdings and
increase our exposure to other markets where we see better relative value.
OUTLOOK
The sharp rally has brought emerging markets stocks closer to the valuations of
developed market equities. Still, given the sustained increase in corporate
profits of many companies, emerging markets stocks at the end of 2003 traded
below developed market equity valuations.
But the case for emerging markets equities is not just one of valuations. The
quality of companies across the emerging markets universe has improved
significantly over the last few years, making many of them world-class
corporations competing on a global basis.
On a macroeconomic level, the dramatic decline in interest rates in many
developing economies has reduced the risk premium associated with emerging
markets equities. Moreover, many countries - from Thailand to Russia - that had
negative or very low foreign reserves during the 1998 financial crisis, now have
substantial foreign currency reserves. Additionally, most emerging markets
currencies are now floating rate, enabling economies to better absorb financial
shocks. So, although there is always the risk of an unforeseen event like SARS,
the risk of a major dislocation due to macroeconomic factors has been reduced
significantly. Governments in most countries, including India, Brazil, Russia,
South Korea and China, have espoused centrist and pro-market economic policies.
In India, state-owned enterprises are slowly but surely being auctioned off,
creating dynamic new forces within the economy. In Russia, the government is
attempting to bring a degree of transparency and accountability to companies run
by the so-called oligarchs.
Among potential flashpoints, we see some risk of a downturn in China from a
possible economic slowdown, although the government is taking preventive
measures to smooth out the credit cycle by raising bank reserve requirements and
attempting to sell non-performing loan portfolios.
In Thailand, cheap credit, made available due to policies promoted by the
government, has created a consumer-led economic boom that requires close
watching.
The fund has increased its exposure to financial stocks primarily through recent
purchases in Korean banks. We believe that stock prices reflected an overly
negative scenario and that most banks will benefit from consolidation in the
industry and the write-down of non-performing loans. The fund also has major
financial stock holdings in India and Brazil. In India, we see the growth in
mortgage and other consumer loans as providing additional areas of opportunity.
Brazilian banks have strong franchises that have provided a return on equity in
the high teens.
The emerging markets continue to provide many areas of opportunity. However,
given the recent rally that lifted almost every market, future returns are
likely to vary considerably among markets and stocks, making stock selection an
important factor in results.
We look forward to reporting to you in another six months.
Sincerely,
/s/ Robert Ronus
Robert Ronus
Chairman of the Board
/s/ Shaw B. Wagener
Shaw B. Wagener
President
January 30, 2004
Here are the cumulative total returns and average annual total returns with all
distributions reinvested for periods ended December 31, 2003: 10 years: 41.81%,
or 3.56% a year; 5 years: 61.85%, or 10.11% a year; 12 months: 51.51%.
FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE PERIODS. THE
RESULTS SHOWN ARE BEFORE TAXES ON FUND DISTRIBUTIONS AND SALE OF FUND SHARES.
CURRENT AND FUTURE RESULTS MAY BE LOWER OR HIGHER THAN THOSE SHOWN. BECAUSE
SHARE PRICES MAY DECLINE, THE VALUE OF YOUR HOLDINGS MAY DECREASE. 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, POLITICAL INSTABILITY, DIFFERING SECURITIES REGULATIONS AND
PERIODS OF ILLIQUIDITY, WHICH ARE DETAILED IN THE PROSPECTUS.
THE INVESTMENT LANDSCAPE
The geographic concentrations of assets found in Emerging Markets Growth Fund's
(EMGF) portfolio rarely reflect a predetermined decision to concentrate our
investment in a particular country or region. More often, these concentrations
result from buy and sell decisions made stock-by-stock, 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 our view of
the investment landscape in the fund's five largest areas of concentration for
the six-month period ended December 31, 2003. The five account for nearly two
thirds of net assets. (Percentage changes for markets and stock prices are in
U.S. dollars and are for the six-month period ended December 31, 2003, unless
otherwise noted.)
SOUTH KOREA (18.5% OF NET ASSETS)
South Korea's economy remained sluggish as the increase in the country's exports
and rising corporate capital investment did not entirely offset the sharp
deceleration in consumer spending. A funding crisis faced by several credit card
companies, and a corporate scandal involving SK Corp. further undermined
investor confidence. Even in this difficult environment, stocks rose more than
25%, but trailed the stronger results of the emerging markets benchmark.
Consumer demand declined steadily following a sharp reduction in loans made by
credit card companies seeking to comply with stricter rules on lending which
were enacted by government regulators in early 2003. The higher loan reserve
requirements and other measures called for by the new regulation ended a
three-year credit boom that had helped reinflate South Korea's economy after the
1998 Asian financial crisis. Greater investor and regulatory scrutiny of the
balance sheets of financial institutions also revealed a much higher than
expected level of non-performing loans at some credit card companies. These
revelations prompted the bond markets and other investors to turn more cautious
on lending to those companies. As a result, several credit card companies were
unable to renew the short-term loans they use to finance their business.
An ongoing consolidation in the financial industry meant most credit card
companies were absorbed either by affiliated companies or other financial
institutions. During the shakeout, LG Card had to be bailed out by a consortium
of banks led by a quasi-government entity, the Korea Development Bank. Shares of
financial companies had mixed results in this environment, with some stocks
making strong gains and others declining. The relatively low valuation of
financial company stocks on a historical basis attracted some investors.
Although consumer demand was tepid, industrial production continued to grow and
exports increased more than 20% over the corresponding period of the prior year.
Many corporations focused on cost-cutting, although the results of wage battles
were mixed and varied from industry to industry. A severe typhoon also hurt
economic activity in certain areas. A global increase in technology spending
supported revenue increases at companies like Samsung Electronics, and its stock
rose 27% during the period. But shares of domestically oriented companies,
including the telecommunication services providers, did not fare as well.
INDIA (13.7% OF NET ASSETS)
For the most recent six-month period, India was the sort of market that
investors cite when making a case for investing in emerging markets stocks:
there was rapid economic growth, an expanding consumer market, gradual
liberalization of the economy, privatization of state-owned assets, significant
infrastructure and power sector reform, and an improving political climate.
The economy accelerated in the fourth quarter following the positive impact of
the monsoons on the agricultural sector, which put money in the pockets of the
vast rural populace. GDP growth for the fiscal year ending March 2004 is
expected to be above 7%. With consumer spending on the rise, revenues and
profitability climbed for a host of companies. Meanwhile, shares of power
generation, industrial, and financial companies rose following legislation
permitting the privatization of the power sector and changes in bankruptcy laws
that made it easier for banks to foreclose on non-performing loans.
A range of measures - including cost-cutting and streamlining products and
operations - by many Indian corporations, has raised profitability. Indian
conglomerates like Reliance Industries benefited from the increasing demand for
petrochemicals. Additionally the global uptick in corporate spending on
technology services helped stabilize the prices that Indian IT companies like
Infosys Technologies could charge their global clients, allowing for better
margins. The expanded use of generic drugs in many Western markets helped Indian
pharmaceutical companies like Ranbaxy Laboratories and Dr. Reddy's Laboratories
increase overseas market share.
On the political front, the ruling Bharatiya Janata Party won three of four key
state elections in December, improving its prospects in parliamentary elections
that are likely to be held in the first half of 2004. Riding the positive
momentum of the state elections, Indian Prime Minister Atal Behari Vajpayee took
steps toward restoring normal diplomatic relations with Pakistan. This raised
hopes of a regional peace agreement that would allow both countries to focus
greater resources toward economic and social projects.
BRAZIL (11.0% OF NET ASSETS)
Brazilian stocks surged as the government, led by President Luiz Inacio Lula da
Silva, forged ahead with fiscal reforms despite opposition from factions within
its own party as well as the opposition. In addition, a significant decline in
interest rates, a stable currency and a substantial drop in bond yields created
a virtuous circle, allowing stocks to rise nearly 64% in the six-month period.
The government did achieve a major success with the Congress's December passage
of a social security bill aimed at saving the government more than $17 billion
over the next 20 years. The measure should help cut the social security deficit
which is currently estimated at nearly 3.8% of gross domestic product. Social
security is a major contributor to the country's nominal public sector deficit.
Although many more steps, including labor reform, are needed to make the economy
more efficient and globally competitive, investors have been encouraged by the
general direction of economic policies. The rating agency Standard & Poor's
raised the outlook on Brazil to positive from stable.
In December, Brazil received a 15-month extension of its $34 billion loan
agreement with the International Monetary Fund, along with $6.6 billion in new
funding. These developments are particularly impressive when one considers that,
in 2002, Brazil needed an emergency credit line from the IMF in order to shore
up waning investor confidence in the run-up to presidential elections. In return
for continued IMF financial support, Brazil promised to maintain a primary
budget surplus target equal to 4.25% of gross domestic product through 2004.
On the monetary front, with inflation at less than 10%, the central bank lowered
the key reference rate by a whopping 10 percentage points - from 26.0% to 16.0%
- - during the six months. This raised hopes that GDP growth would improve from
the estimated 1% rate recorded in 2003.
In the stock market, metals and mining stocks such as CVRD had the best results
during the period, benefiting from robust demand from China and strong global
commodity prices. Shares of utility companies also rose in anticipation of an
economic recovery and expectations that the government would propose a new
regulatory model for the sector.
TAIWAN (10.3% OF NET ASSETS)
Taiwan's economy picked up momentum on the back of a global recovery in
technology spending and strong demand from mainland China, where the island
sends an estimated 30% of its exports. Taiwanese domestic consumption grew,
unemployment started to decline and banks reported loan growth, all of which
seemed to indicate that the economy was picking up after three years of
declining or relatively flat GDP numbers. Taiwanese corporations regained some
pricing power and saw strong earnings growth.
Taiwanese stocks rose more than 26% but trailed the broader emerging markets as,
late in the year, investors took profits in technology stocks that had gained in
the second and third quarters. Technology shares represent over half the market
capitalization of the Taiwan market. Stocks in the semiconductor sector in
particular were subject to profit-taking. The fund continued to hold investments
in many Taiwanese technology companies on the view that capital expenditure on
technology upgrades has not yet happened on a broad scale. Moreover, the
semiconductor industry has not yet overbuilt capacity as it did in previous
cycles.
On the political front, the increase in rhetoric between Taiwan and China over
the issue of the island's sovereignty dampened market sentiment. Tensions rose
after Taiwan lawmakers, on the insistence of President Chen Shui-bian, passed a
bill allowing the island to hold a referendum on a measure which would enable
the government to take certain steps in the event of an external threat.
Although many political observers see the referendum as election-year
politicking by a Taiwanese leader locked in a tight race for the presidency -
elections are scheduled for March 2004 - investors have nonetheless stepped
back, apparently fearful of increased market volatility.
From a technical perspective, foreign investor demand for Taiwanese stocks could
grow in anticipation of changes to the MSCI Emerging Markets Index. MSCI has
announced that it will increase the weight of Taiwanese stocks in the benchmark
sometime in 2004.
MEXICO (9.3% OF NET ASSETS)
Mexican stocks rose 15% during the six-month period, but trailed the performance
of many other major emerging markets, held back by a sluggish economy that
started to show some vigor only toward the end of 2003. As inflation and
interest rates remained low, companies in many sectors had limited ability to
raise prices, which dampened the outlook for profit growth. The peso also lost
value versus the U.S. dollar during the period.
On the macro front, the government led by President Vicente Fox was weakened
further when the governing party lost seats in the July congressional elections.
As a result, political gridlock continued to hamper much-needed reforms,
especially in the electricity sector where inefficiency has held back output and
investment. Political intransigency also blocked the government's proposed
fiscal reforms, which were rejected by the Congress in December.
The country's appeal as a low-cost production base for U.S. companies is also
being undermined by lower-cost wages in Asia. Nevertheless, the steady recovery
in the U.S. economy has created some demand for Mexican goods and, according to
Mexican government estimates, the country's non-oil exports started to grow
toward the end of 2003.
Although overall stock market results have been lackluster compared with the
broader emerging markets, returns have varied substantially by company and
sector. America Movil, which consolidated its position as Latin America's
leading wireless services provider through acquisitions in Argentina, Ecuador,
Brazil and El Salvador, rose nearly 46%. Consumer stocks such as Kimberly-Clark
de Mexico and Wal-Mart de Mexico did not do as well and trailed the domestic
market. However, despite the slow economy, consumer companies such as Wal-Mart
de Mexico sustained double-digit profit growth through increased market share
and cost controls.
The fund trimmed its exposure to Mexico, primarily by eliminating its investment
in Telefonos de Mexico, which has seen a slowdown in both revenue and earnings
growth.
ABOUT THE FUND AND ITS ADVISER
Emerging Markets Growth Fund (EMGF) 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 based in developing countries. The
premise behind the formation of the fund was that rapid growth in these
countries could 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. Capital International 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. These companies have been
involved in international investing since the 1950s. Capital International
employs a value-oriented, research-driven approach. Capital International and
its institutional management affiliates maintain a global investment
intelligence network that continues to grow and currently employs more than 132
investment professionals based on three continents. They include analysts and
portfolio managers, born in over 25 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.
As EMGF has grown, its adviser has devoted increased resources to the task of
evaluating and managing investments in developing countries. Currently, the
organization has 28 analysts covering these countries, compared with four in
1986; these analysts also manage a portion of the fund. Most of its assets are
managed by nine portfolio managers, compared with two in 1986; both of the
original managers, incidentally, are still with the fund.
Capital International's research effort focuses heavily on regions as well as on
individual countries. It is an intensive effort that combines 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 -- a competitive edge.
EMERGING MARKETS GROWTH FUND
INVESTMENT PORTFOLIO, DECEMBER 31, 2003 (unaudited)
Equity Securities
--------------------------------------------------------
SECTOR DIVERSIFICATION Common stocks Preferred Convertible Bonds Percent of
stocks bonds net assets
Information technology 20.41% - - - 20.41%
Financials 15.33 2.14% .01% - 17.48
Telecommunication services 11.26 2.93 .01 .12% 14.32
Materials 10.41 1.75 - .01 12.17
Energy 10.12 .75 - .01 10.88
Consumer staples 8.24 1.17 - .04 9.45
Consumer discretionary 5.11 .05 - .02 5.18
Industrials 2.66 .10 - - 2.76
Utilities 2.22 - - - 2.22
Health care 1.26 - - - 1.26
Other .61 - - 1.57 2.18
87.63% 8.89% .02% 1.77% 98.31
Short-term securities 3.97
Excess of payables over cash and receivables (including foreign currency contracts) (2.28)
Net assets 100.00%
Shares or Market Percent
EQUITY SECURITIES principal value of net
(common and preferred stocks and convertible bonds) amount (000) assets
Argentina - 0.36%
BI SA (acquired 10/21/93, cost: $4,567,000) (1) (2) 4,952,159 $ 1,458 0.01 %
Grupo Financiero Galicia SA, Class B (2) 5 - -
Hidroneuquen SA (acquired 11/11/93, cost: $29,183,000) (1) (2) (3) 28,022,311 890 .00
Nortel Inversora SA, Class B, preferred (ADR) (2) 4,529,300 26,496 0.13
Telecom Argentina STET-France Telecom SA, Class B (ADR) (2) 4,906,346 42,931 0.22
71,775 0.36
Brazil - 10.66%
Aracruz Celulos SA, Class B, preferred nominative (ADR) 1,144,100 40,089 0.20
Banco Itau Holding Financeira SA, preferred nominative 1,503,671,800 149,327
Banco Itau Holding Financeira SA, preferred nominative (ADR) 240,000 11,705 0.81
Brasil Telecom Participacoes SA, ordinary nominative 435,079,900 2,747
Brasil Telecom Participacoes SA, preferred nominative 854,191,000 6,387
Brasil Telecom Participacoes SA, preferred nominative (ADR) 827,000 31,261 0.20
Cia. de Bebidas das Americas - AmBev, ordinary nominative 20,067,000 4,409
Cia. de Bebidas das Americas - AmBev, preferred nominative (ADR) 6,253,860 159,536 0.82
Cia. Vale do Rio Doce, ordinary nominative 444,000 26,041
Cia. Vale do Rio Doce, ordinary nominative (ADR) 2,722,146 159,246
Cia. Vale do Rio Doce, Class A, preferred nominative 233,600 11,898
Cia. Vale do Rio Doce, Class A, preferred nominative (ADR) 4,832,652 248,930 2.24
EMBRAER - Empresa Brasileira de Aeronautica SA, preferred nominative (ADR) 590,699 20,692 0.10
Embratel Participacoes SA, ordinary nominative (2) 4,136,429,000 20,181 0.10
Itausa - Investimentos Itau SA, preferred nominative 225,625,106 266,222 1.33
New GP Capital Partners, LP, Class B (acquired 1/28/94,
cost: $16,206,000) (1)(2)(3) 27,000 3,444 0.02
Petroleo Brasileiro SA - Petrobras, ordinary nominative 891,310 25,937
Petroleo Brasileiro SA - Petrobras, ordinary nominative (ADR) 2,023,600 59,170
Petroleo Brasileiro SA - Petrobras, preferred nominative 885,056 23,397
Petroleo Brasileiro SA - Petrobras, preferred nominative (ADR) 4,769,080 127,144 1.18
Tele Celular Sul Participacoes SA, ordinary nominative 4,388,760,565 4,601
Tele Celular Sul Participacoes SA, preferred nominative (ADR) 2,396,400 34,388 0.19
Tele Centro Oeste Celular Participacoes SA, preferred nominative 1,106,600,000 3,680
Tele Centro Oeste Celular Participacoes SA, preferred nominative (ADR) 4,423,338 43,570 0.24
Telecomunicacoes de Sao Paulo SA, ordinary nominative 94,300,000 1,191
Telecomunicacoes de Sao Paulo SA, preferred nominative 1,434,922,000 22,492 0.12
Telecomunicacoes Brasileiras SA, preferred nominative (ADR) 694,000 23,471 0.12
Tele Leste Celular Participacoes SA, ordinary nominative (2) 3,849,076,542 1,105
Tele Leste Celular Participacoes SA, preferred nominative (ADR) (2) 583,543 8,094 0.05
Telemar Norte Leste SA, Class A, preferred nominative 3,274,868,000 65,271 0.33
Telemig Celular Participacoes SA, ordinary nominative 1,489,281,349 3,973
Telemig Celular Participacoes SA, preferred nominative (ADR) 1,064,058 34,156 0.19
Telemig Celular SA, Class G, preferred nominative 385,295,000 5,599 0.03
Tele Nordeste Celular Participacoes SA, ordinary nominative 3,036,599,336 3,183
Tele Nordeste Celular Participacoes SA, preferred nominative (ADR) 1,300,174 36,327 0.20
Tele Norte Celular Participacoes SA, ordinary nominative (2) (3) 9,099,521,561 3,589
Tele Norte Celular Participacoes SA, preferred nominative (ADR) (2) (3) 395,642 4,320 0.04
Tele Norte Leste Participacoes SA, ordinary nominative 1,097,215,283 13,364
Tele Norte Leste Participacoes SA, preferred nominative 5,506,798,676 86,546
Tele Norte Leste Participacoes SA, preferred nominative (ADR) 2,481,400 38,288 0.69
Telesp Celular Participacoes SA, preferred nominative (ADR) (2) 14,256,600 93,808 0.47
Unibanco-Uniao de Bancos Brasileiros SA, units (GDS) 6,031,354 150,482 0.75
Usinas Siderurgicas de Minas Gerais SA, Class A, preferred nominatiive 4,028,298 47,322 0.24
2,126,583 10.66
Canada - 0.70%
Crew Development Corp. (2) 2,925,000 2,281 0.01
Ivanhoe Mines Ltd. (2) (3) 17,189,000 136,673 0.69
138,954 0.70
Chile - 1.02%
Banco Santander - Chile (ADR) 1,811,815 43,085 0.22
Cia. de Telecomunicaciones de Chile SA (ADR) 3,221,535 48,162 0.24
Embotelladora Andina SA, Class A, preferred nominative (ADR) (3) 3,610,050 37,906
Embotelladora Andina SA, Class B, preferred nominative (ADR) (3) 3,220,273 35,294 0.37
Enersis SA (2) 84,446,000 12,221
Enersis SA (ADR) (2) 3,631,100 26,725 0.19
203,393 1.02
China - 3.22%
BYD Co. Ltd. (Hong Kong) (3) 13,299,000 35,036 0.18
China International Marine Containers (Group) Co. Ltd., Class B (2) 10,069,645 19,277 0.10
China Life Insurance Co. Ltd. (Hong Kong) (2) 3,657,300 2,992
China Life Insurance Co. Ltd. (ADR) (2) 2,524,300 83,226 0.43
China Merchants Holdings (International) Co. Ltd. (Hong Kong) 18,502,000 24,431 0.12
China Mobile (Hong Kong) Ltd. 19,523,800 59,986
China Mobile (Hong Kong) Ltd. (ADR) 364,600 5,662 0.33
China Oilfield Services Ltd. (Hong Kong) 70,138,000 24,848 0.13
China Petroleum & Chemical Corp. (Hong Kong) 59,874,000 26,803 0.13
China Shipping Development Co. Ltd. (Hong Kong) 22,456,000 16,634 0.08
China Southern Airlines Co. Ltd. (Hong Kong) (2) 21,614,200 9,258 0.05
China Telecom Corp. Ltd. (Hong Kong) 140,277,800 57,828 0.29
Huaneng Power International, Inc. (Hong Kong) 41,442,000 71,806 0.36
Jiangsu Expressway Co. Ltd. (Hong Kong) 580,227 308 .00
Lianhua Supermarket Holdings Co. Ltd. (Hong Kong) (2) 11,034,000 11,656 0.06
PetroChina Co. Ltd. (Hong Kong) 70,046,100 40,155 0.20
Sinopec Shanghai Petrochemical Co. Ltd. (Hong Kong) 56,028,000 24,901 0.13
Tong Ren Tang Technologies Co. Ltd. (Hong Kong) (3) 5,529,900 9,724 0.05
Tsingtao Brewery Co. Ltd. (Hong Kong) 7,260,000 8,511 0.04
UBS AG Call Warrants on Baoshan Iron & Steel Co. Ltd., A Shares,
expire October 11, 2004 (2) 45,217,800 38,625 0.19
Yanzhou Coal Mining Co. Ltd. (Hong Kong) 47,049,000 47,579 0.24
Zhejiang Expressway Co. Ltd. (Hong Kong) 31,876,000 22,380 0.11
641,626 3.22
Colombia - 0.10%
Bancolombia SA (ADR) 3,695,521 19,734 0.10
Croatia - 0.33%
PLIVA DD (GDR) 4,061,556 66,203 0.33
Czech Republic - 0.39%
CESKY TELECOM, AS 6,942,540 78,721 0.39
Egypt - 0.24%
Egyptian Company for Mobile Services S.A.E. 3,870,000 47,516 0.24
Hong Kong - 0.96%
ASM Pacific Technology Ltd. 4,139,000 18,129 0.09
China.com Corp., Class A (2) 2,963,600 23,916 0.12
Clear Media Ltd. (2) 22,774,000 14,669 0.07
Fountain Set (Holdings) Ltd. 8,024,000 5,479 0.03
Global Bio-chem Technology Group Co. Ltd. 41,766,600 25,827 0.13
Harbin Brewery Group Ltd. (3) 60,993,000 24,554 0.12
Hopewell Holdings Ltd. 30,770,000 47,369 0.24
Texwinca Holdings Ltd. 43,510,700 31,670 0.16
191,613 0.96
Hungary - 1.05%
Magyar Tavkozlesi Rt. 16,913,287 64,001
Magyar Tavkozlesi Rt. (ADR) 1,537,100 28,759 0.46
MOL Magyar Olaj- es Gazipari Rt., Class A 603,202 18,246
MOL Magyar Olaj- es Gazipari Rt., Class A (GDR) 291,300 8,885 0.14
National Savings and Commercial Bank Ltd. (2) 6,932,890 88,832 0.45
208,723 1.05
India - 13.68%
Bajaj Auto Ltd. 1,220,295 30,509 0.15
Bharat Heavy Electricals Ltd. 7,749,645 86,133 0.43
Bharat Petroleum Corp. Ltd. 3,312,600 32,827 0.16
Bharti Tele-Ventures Ltd. (2) 11,614,620 26,858 0.14
BSES Ltd. (GDR) 1,431,100 47,226 0.24
Cummins India Ltd. (3) 10,446,937 29,307 0.15
Dr. Reddy's Laboratories Ltd. 1,365,156 42,925
Dr. Reddy's Laboratories Ltd. (ADR) 112,807 3,570 0.23
GlaxoSmithKline Consumer Healthcare Ltd. 1,262,700 8,899 0.04
Grasim Industries Ltd. 39 1 .00
HDFC Bank Ltd. 5,577,552 44,804
HDFC Bank Ltd. (ADR) 794,000 24,249 0.35
Hindustan Lever Ltd. 62,266,098 280,095 1.40
Housing Development Finance Corp. Ltd. (3) 19,593,306 278,294 1.40
I.T.C. Ltd. 906,531 19,617 0.10
ICICI Bank Ltd. (3) 13,193,690 85,766
ICICI Bank Ltd. (ADR) (3) 11,175,175 191,989 1.39
Infosys Technologies Ltd. (3) 3,697,638 452,723 2.27
Larsen & Toubro Ltd. 2,206,928 25,599 0.13
Maruti Udyog Ltd. (2) 554,800 4,580 0.02
Ranbaxy Laboratories Ltd. 3,480,687 83,877 0.42
Reliance Industries Ltd. 57,950,784 730,409
Reliance Industries Ltd. (GDR) 422,900 13,110 3.73
SET India Ltd. (acquired 5/15/00, cost: $34,131,000) (1) (2) 106,250 2,604 0.01
SET Satellite (Singapore) Pte. Ltd. (acquired 5/15/00,
cost: $73,162,000) (1) (2) 2,847,112 5,797 0.03
State Bank of India 5,840,100 69,073
State Bank of India (GDR) 406,259 13,203 0.41
Sun Pharmaceutical Industries Ltd. 1,480,000 19,396 0.10
Tata Power Co. Ltd. (2) 754,279 5,200 0.03
Wipro Ltd. 1,264,180 48,288
Wipro Ltd. (ADR) 213,455 10,289 0.29
Zee Telefilms Ltd. 3,407,727 11,247 0.06
2,728,464 13.68
Indonesia - 2.97%
PT Astra International Tbk 137,034,384 81,471 0.41
PT Gudang Garam 11,721,500 18,955 0.10
PT Hanjaya Mandala Sampoerna Tbk (3) 256,401,300 136,432 0.68
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk, Class B 431,705,351 346,494 1.74
PT Ramayana Lestari Sentosa Tbk 17,317,500 8,957 0.04
592,309 2.97
Israel - 0.52%
"Bezeq" The Israel Telecommunication Corp. Ltd. 41,352,700 47,497 0.24
Metalink Ltd. (2) 226,500 1,585 0.01
Nova Measuring Instruments Ltd. (2) 586,000 3,446 0.01
Orbotech Ltd. (2) (3) 2,177,525 52,086 0.26
104,614 0.52
Kazakhstan - 0.01%
OJSC Kazkommertsbank (ADR) (acquired 9/10/97, cost: $1,466,000) (1) (2) 72,877 1,829 0.01
Malaysia - 3.16%
Astro All Asia Networks PLC (2) 47,119,600 54,808 0.27
British American Tobacco (Malaysia) Bhd. 1,217,300 13,935 0.07
EON Capital Bhd. (2) 11,273,000 13,350 0.07
Genting Bhd. 6,847,600 29,913 0.15
Hong Leong Bank Bhd. 24,190,000 33,102 0.16
IJM Corp. Bhd. 16,512,714 20,250 0.10
IJM Plantations Bhd. (2) 6,605,085 1,947 0.01
IOI Corp. Bhd. 34,325,300 69,554 0.35
Malayan Banking Bhd. 43,273,450 109,892 0.55
Malaysian Pacific Industries Bhd. 473,800 2,120 0.01
Maxis Communications Bhd. 67,584,900 134,281 0.67
Resorts World Bhd. 5,925,600 15,750 0.08
Road Builder (M) Holdings Bhd. 23,013,000 21,560 0.11
S P Setia Berhad Group (3) 34,837,100 32,087 0.16
Tanjong PLC 13,061,800 37,123 0.19
UMW Holdings Bhd. (3) 25,827,796 41,121 0.21
630,793 3.16
Mexico - 9.19%
America Movil SA de CV, Series A 18,275,000 25,002
America Movil SA de CV, Series L 27,412,500 37,772
America Movil SA de CV, Series L (ADR) 20,945,200 572,642 3.19
America Telecom SA de CV, Series A1 (2) 1,831,300 2,368 0.01
Apasco, SA de CV 9,995,845 82,497 0.41
Cemex, SA de CV, ordinary participation certificates, units 2,319,659 12,146
Cemex, SA de CV, ordinary participation certificates, units (ADR) 518,295 13,579 0.13
Coca-Cola FEMSA, SA de CV, Series L (ADR) (2) 485,700 10,316 0.05
Consorcio International Hospital, SA de CV, convertible preferred,
units (acquired 9/25/97, cost: $4,827,000) (1) (2) 23,970 - -
Controladora Comercial Mexicana, SA de CV, units 24,883,500 25,061 0.13
Fomento Economico Mexicano, SA de CV (ADR) 4,533,180 167,184
Fomento Economico Mexicano, SA de CV, units 2,131,900 7,882 0.88
Grupo Financiero BBVA Bancomer, SA de CV, Series B (2) 137,025,400 117,241 0.59
Grupo Industrial Bimbo, SA de CV, Series A 6,540,375 12,294 0.06
Grupo Mexico SA de CV (2) 3,162,546 8,126 0.04
Grupo Televisa, SA, ordinary participation certificates (ADR) 4,997,232 199,190 1.00
Industrias Penoles, SA de CV 458,300 2,075 0.01
Kimberly-Clark de Mexico, SA de CV, Class A, ordinary participation certificates 45,975,300 118,011 0.59
Organizacion Soriana, SA de CV, Series B (2) 5,855,900 12,954 0.06
Wal-Mart de Mexico, SA de CV, Series C 34,588,933 92,669
Wal-Mart de Mexico, SA de CV, Series V 101,980,391 291,126
Wal-Mart de Mexico, SA de CV, Series V (ADR) 847,132 23,720 2.04
1,833,855 9.19
Morocco - 0.03%
Holcim (Maroc) SA, Class A 46,585 5,308 0.02
Societe des Brasseries du Maroc 12,332 1,590 0.01
6,898 0.03
Peru - 0.38%
Cia. de Minas Buenaventura SA 456,485 12,924
Cia. de Minas Buenaventura SA (ADR) 1,329,234 37,591 0.25
Credicorp Ltd. 1,970,562 26,307 0.13
76,822 0.38
Philippines - 0.57%
ABS-CBN Holdings Corp. (Philippine Deposit Receipts) (2) 27,285,750 12,298 0.06
Ayala Corp. 67,315,250 6,310 0.03
Ayala Land, Inc. 97,485,230 10,721 0.06
Bank of the Philippine Islands 833,200 698 .00
Bayan Telecommunications Holdings Corp., Class A (acquired 2/12/98,
cost: $1,850,000) (1) (2) 724,790 -
Bayan Telecommunications Holdings Corp., Class B (acquired 2/12/98,
cost: $616,000) (1) (2) 241,431 - -
GLOBE TELECOM, Inc. 678,048 10,512 0.05
International Container Terminal Services, Inc. 19,533,588 1,162 0.01
Philippine Long Distance Telephone Co. (2) 1,748,330 30,573
Philippine Long Distance Telephone Co. (ADR) (2) 992,286 17,286
Philippine Long Distance Telephone Co., convertible preferred shares,
Series III (GDS) 50,664 2,412 0.25
SM Prime Holdings, Inc. 186,666,700 21,874 0.11
113,846 0.57
Poland - 0.77%
Bank Polska Kasa Opieki SA 808,495 23,406 0.12
Bank Przemyslowo-Handlowy SA 236,299 22,487
Bank Przemyslowo-Handlowy SA (GDR) 420 19 0.11
Bank Zachodni WBK SA 2,003,085 40,647 0.21
Telekomunikacja Polska SA 16,336,834 66,346 0.33
152,905 0.77
Russian Federation - 5.55%
Baring Vostok Private Equity Fund (acquired 12/15/00,
cost: $13,087,000) (1) (2) (3) (4) 13,087,057 13,392 0.07
JSC MMC "Norilsk Nickel" (ADR) 4,900,170 325,861 1.63
LUKoil Holding (ADR) 5,817,059 541,568 2.72
New Century Capital Partners, LP (acquired 12/7/95,
cost: $5,486,000) (1) (2) (4) 5,250,000 2,282 0.01
OAO Gazprom (ADR) 2,010,304 52,067
OAO Gazprom (ADR) (acquired 10/21/96, cost: $5,646,000) (1) 363,900 9,425 0.31
OAO Moscow City Telephone Network 3,007,500 38,797 0.19
Wimm-Bill-Dann Foods (ADR) (2) 1,735,900 29,510 0.15
YUKOS Oil Co. (ADR) 2,229,422 93,636 0.47
1,106,538 5.55
Singapore - 0.04%
Noble Group Ltd. 3,923,000 7,393 0.04
South Africa - 4.84%
Anglo American Platinum Corp. Ltd. 1,128,072 49,328 0.25
Gold Fields Ltd. 3,237,609 46,381
Gold Fields Ltd. (ADR) 490,000 6,831 0.27
Harmony Gold Mining Co. Ltd. 4,961,000 80,745
Harmony Gold Mining Co. Ltd. (ADR) 1,049,800 17,038 0.49
Impala Platinum Holdings Ltd. 1,889,882 164,429 0.82
Nedcor Ltd. 9,430,053 87,747 0.44
Sappi Ltd. 2,502,045 34,155 0.17
Sasol Ltd. 22,081,093 314,673 1.58
South Africa Capital Growth Fund, LP, Class A (acquired 8/25/95,
cost: $893,000) (1) 2,180 331
South Africa Capital Growth Fund, LP, Class D (acquires 8/25/95,
cost: $5,387,000) (1) 13,650 2,073 0.01
South African Private Equity Fund III, LP (acquired 9/23/98,
cost: $19,301,000) (1) (3) (4) 22,535 12,088 0.06
South African Private Equity Fund III, Ltd. (acquired 10/6/00,
cost: $7,556,000) (1) (4) 7,798 7,495 0.04
Standard Bank Group Ltd. 15,097,600 88,733 0.45
Telkom SA Ltd. 5,051,300 52,625 0.26
964,672 4.84
South Korea - 18.50%
Cheil Communications Inc. 171,750 24,948 0.13
CJ Home Shopping Co. Ltd. 185,959 8,244 0.04
Daewoo Shipbuilding & Marine Engineering Co., Ltd. (2) 2,279,300 29,281
Daewoo Shipbuilding & Marine Engineering Co., Ltd. (GDR) (2) 1,148,490 28,942 0.29
ENTERPRISEnetworks Inc. (acquired 5/18/00, cost: $21,675,000) (1) (2) 321,716 - -
Hanaro Telecom, Inc. (2) 2,021,671 5,542 0.03
Hankook Tire Co., Ltd. 6,052,370 45,736 0.23
Hyundai Development Co. (3) 4,443,274 46,074 0.23
Hyundai Marine & Fire Insurance Co., Ltd. 363,070 10,639 0.05
Hyundai Motor Co. 2,442,164 103,551
Hyundai Motor Co., nonvoting preferred 500,730 9,628 0.57
INI Steel Co. (GDS) 3,016,480 25,640 0.13
Kookmin Bank 10,125,055 379,583
Kookmin Bank (ADR) 1,457,154 55,139 2.18
KorAm Bank 537,100 6,314 0.03
Korea Electric Power Corp. 10,312,760 185,301 0.93
Korea Exchange Bank (2) 1,563,910 4,228 0.02
Korea Gas Corp. 2,691,370 55,929 0.28
KT Corp. 1,293,000 48,420
KT Corp. (ADR) 1,575,018 30,036 0.39
KT Freetel Co., Ltd. 649,776 10,420 0.05
LG Ad Inc. 136,700 2,399 0.01
LG Card Co., Ltd. 7,731,384 19,767
LG Card Co., Ltd. 3.00% convertible notes, January 21, 2009 KRW2,882,100,000 1,237 0.11
LG Electronics Inc. 3,051,630 150,147 0.75
LG Engineering & Construction Co., Ltd. (3) 2,589,070 38,803 0.20
Nong Shim Co., Ltd. 219,800 44,108 0.22
POSCO 588,115 80,489 0.40
Pulmuone Co., Ltd. 227,550 10,890 0.06
Samsung Electronics Co., Ltd. 2,307,459 873,773
Samsung Electronics Co., Ltd. (GDS) 3,045,994 572,647
Samsung Electronics Co., Ltd., nonvoting preferred (GDS) 1,380 139 7.25
Samsung Fire & Marine Insurance Co., Ltd. (3) 2,781,311 159,966 0.80
Samsung SDI Co., Ltd. 1,145,876 135,177
Samsung SDI Co., Ltd. (GDR) 621,500 18,396 0.77
Samsung Securities Co., Ltd. 1,635,400 35,015 0.18
Shinhan Financial Group Co., Ltd. 13,470,110 215,454
Shinhan Financial Group Co., Ltd. (ADR) 190,950 6,120 1.11
SK Telecom Co., Ltd. 652,120 108,960
SK Telecom Co., Ltd. (ADR) 2,637,990 49,199 0.79
Woori Finance Holdings Co., Ltd. 9,277,000 53,123 0.27
3,689,404 18.50
Taiwan - 10.32%
Advanced Semiconductor Engineering, Inc. (2) (3) 213,991,191 220,239 1.10
Ambit Microsystems Corp. 12,924,600 34,112 0.17
Asia Corporate Partners Fund, Class B (acquired 3/12/96, cost: $9,305,000) (1) 39,360 5,896 0.03
ASUSTeK Computer Inc. 19,034,125 42,098
ASUSTeK Computer Inc. (GDR) 234,356 527 0.21
AU Optronics Corp. (2) 19,239,000 22,524 0.11
Compal Electronics, Inc. 11,323,210 15,527
Compal Electronics, Inc. (GDS) 129,720 902 0.08
Delta Electronics, Inc. 25,442,655 32,638 0.16
Fubon Financial Holding Co., Ltd. 54,003,000 51,758 0.26
High Tech Computer Corp. 2,474,640 9,086
High Tech Computer Corp. (GDR) (2) 548,400 8,007 0.09
Hon Hai Precision Industry Co., Ltd. 24,749,064 97,434
Hon Hai Precision Industry Co., Ltd. (GDR) 2,162,893 17,195 0.58
Mediatek Incorporation 9,873,850 92,886 0.47
President Chain Store Corp. 39,171,217 60,068 0.30
Quanta Computer Inc. 91,897,395 226,288
Quanta Computer Inc. (GDR) (2) 1,877,100 22,713 1.25
Realtek Semiconductor Corp. 12,765,600 21,834 0.11
Seres Capital (Cayman) (acquired 3/12/96, cost: $12,000) (1) (3) 2 19
Seres Capital (Cayman), nonvoting (acquired 3/12/96, cost: $63,000) (1) (3) 8 93 .00
Siliconware Precision Industries Co., Ltd. (2) 76,508,000 78,516
Siliconware Precision Industries Co., Ltd. (ADR) (2) 165,800 854 0.40
SinoPac Holdings 75,739,000 38,417 0.19
Taiwan Hon Chuan Enterprise Co., Ltd. (3) 6,687,368 8,500
Taiwan Hon Chuan Enterprise Co., Ltd., rights, expire January 12, 2004 (2) (3) 567,132 119 0.04
Taiwan Semiconductor Manufacturing Co., Ltd. (2) 420,525,334 787,477 3.95
Test-Rite International Co., Ltd. 14,583,915 9,075 0.05
Tong Yang Industry Co., Ltd. (3) 21,298,340 31,718 0.16
United Microelectronics Corp. (2) 27,208,550 23,349 0.12
VIA Technologies, Inc. (3) 75,934,150 98,529 0.49
2,058,398 10.32
Thailand - 1.31%
Advanced Info Service PCL 25,580,400 54,605 0.28
BEC World PCL 3,260,900 18,617 0.09
Electricity Generating PCL 6,108,747 14,815
Electricity Generating PCL, nonvoting depositary receipts 10,384,600 23,610 0.19
PTT Exploration and Production PCL 978,800 6,528 0.03
Siam Cement PCL 2,794,800 19,486
Siam Cement PCL, nonvoting depositary receipts 13,632,290 87,473 0.54
Siam City Cement PCL 6,159,224 35,476 0.18
260,610 1.31
Turkey - 1.93%
Akbank Turk AS 7,024,550,800 36,826 0.19
Aktas Elektrik Ticaret AS (2) 4,273,718 - -
Anadolu Efes Biracilik ve Malt Sanayii AS (3) 7,461,336,666 94,198 0.47
Eregli Demir ve Celik Fabrikalari TAS (2) 407,040,241 12,049 0.06
Migros Turk TAS (3) 3,087,583,198 44,266 0.22
TUPRAS-Turkiye Petrol Rafinerileri AS 2,124,450,200 17,729 0.09
Turkcell Iletisim Hizmetleri AS (2) 783,171,722 7,821 0.04
Turkiye Garanti Bankasi AS (2) 6,321,010,194 18,485 0.09
Turkiye Is Bankasi AS, Class C (2) 24,464,369,624 99,463 0.50
Yapi ve Kredi Bankasi AS (2) 26,284,552,320 54,369 0.27
385,206 1.93
Ukraine - 0.01%
JKX Oil & Gas PLC 2,334,015 2,265 0.01
United Kingdom - 2.28%
Anglo American PLC 16,622,613 356,581 1.79
Antofagasta PLC 4,584,930 86,265 0.43
Oxus Gold PLC (2) 7,720,000 11,159 0.06
454,005 2.28
United States of America - 0.03%
AsiaInfo Holdings, Inc. (2) 936,540 6,256 0.03
Venezuela - 0.17%
Cia. Anonima Nacional Telefonos de Venezuela (CANTV), Class D (ADR) 2,174,589 33,184 0.17
Vietnam - 0.05%
Vietnam Enterprise Investments Ltd., Class C (acquired 8/25/03,
cost: $4,202,000) (1) (2) (3) 4,120,000 4,202
Vietnam Enterprise Investments Ltd., Redeemable (acquired 9/20/01,
cost: $4,230,000) (1) (2) (3) 4,392,828 4,876 0.05
9,078 0.05
Multinational - 0.37%
Capital International Global Emerging Markets Private Equity Fund, LP
(acquired 6/30/99, cost: $43,129,000) (1) (3) (4) 56,000 37,644 0.19
New Asia East Investment Fund Ltd., Class A (acquired 5/23/96,
cost: $1,061,000) (1) (3) (4) 293,600 689
New Asia East Investment Fund Ltd., Class B (acquired 5/23/96,
cost: $14,483,000) (1) (3) (4) 4,006,400 9,404 0.05
New Europe East Investment Fund Ltd., Class B (acquired 6/4/93,
cost: $22,790,000) (1) (2) (3) 436 21,386 0.11
Pan Asia Special Opportunities Fund (Cayman) (acquired 10/18/00,
cost: $5,914,000) (1) (2) (3) (4) 600,000 5,375 0.02
74,498 0.37
Miscellaneous - 0.83%
Equity securities in initial period of acquisition 165,992 0.83
Total equity securities (cost: $11,973,837,000) 19,254,675 96.54
Units or Market Percent
BONDS AND NOTES principal value of net
amount (000) (000) assets
Argentina - 0.27%
Multicanal SA:
9.25% February 1, 2002 (5) $ 2,609 $ 1,083
10.50% February 1, 2007 (6) 1,244 516
10.50% April 15, 2018 (6) 2,289 950
13.125% April 15, 2009 (6) 1,122 466 0.01 %
Republic of Argentina:
1.162% August 3, 2012 (7) 35,970 22,652
7.00%/15.50% December 19, 2008 (6) (7) 2,000 550
9.75% September 19, 2027 (6) 4,830 1,256
11.375% January 30, 2017 (6) 670 191
11.75% April 7, 2009 (6) 9,460 2,696
Payment-in-Kind Bonds:
12.00% June 19, 2031 (6) 5,877 1,484
12.25% June 19, 2018 (6) 589 150 0.15
Telecom Argentina STET-France Telecom SA:
0% July 7, 2003 Agent - Bank of Tokyo-Mitsubishi Trust Company/
Loan Participation Agreements (participation - Credit Suisse
First Boston International) (5) (8) 12,100 9,377
0% September 25, 2003 Agent - Bank of America, N.A./ Loan Participation
Agreements (participation- Credit Suisse First Boston International) (5) (8) 3,965 3,073
0% October 7, 2003 Agent - Bank of America, N.A./ Loan Participation Agreements 3,965 3,073
(participation- Credit Suisse First Boston International) (5) (8)
Series K, 7.25% July 1, 2002 (5) EUR 3,205 3,158
Series 1, 8.375% April 8, 2004 (6) 1,145 1,128
Series 2, 9.50% July 2, 2004 (6) 1,480 1,458 0.11
53,261 0.27
Brazil - 0.32%
Federal Republic of Brazil:
10.00% January 16, 2007 $ 550 619
10.00% August 7, 2011 14,050 15,596
10.25% June 17, 2013 1,500 1,691
11.00% August 17, 2040 18,605 20,559
Capitalization Payment-in-Kind Bond, 8.00% April 15, 2014 11,905 11,771
Debt Conversion Bond, Series L, 2.063% April 15, 2012 (7) 13,570 12,349
MYDFA Trust 2.00% September 15, 2007 (acquired 10/2/96,
cost: $1,387,000) (1) (7) 1,468 1,386
New Money Bond, Series L, 2.063% April 15, 2009 (7) 599 569 0.32
64,540 0.32
Bulgaria - 0.00%
Republic of Bulgaria 8.25% January 15, 2015 735 871 .00
Colombia - 0.18%
Republic of Colombia:
7.625% February 15, 2007 2,635 2,846
8.625% April 1, 2008 2,875 3,119
10.00% January 23, 2012 4,560 5,016
10.375% January 28, 2033 8,537 9,199
10.75% January 15, 2013 4,016 4,588
11.375% January 31, 2008 EUR 5,975 8,571
11.75% February 25, 2020 $ 1,340 1,621 0.18
34,960 0.18
Dominican Republic - 0.03%
Dominican Republic:
2.063% August 30, 2024 (7) 500 360
9.04% January 23, 2013 575 440
9.04% January 23, 2013 (acquired 1/16/03, cost: $2,400,000) (1) 2,400 1,836
9.50% September 27, 2006 1,322 1,117
9.50% September 27, 2006 (acquired 9/20/01, cost: $2,308,000) (1) 2,305 1,948 0.03
5,701 0.03
Guatemala - 0.00%
Republic of Guatemala 9.25% August 1, 2013 (acquired 8/6/03, cost: $867,000) (1) 865 960 .00
India - 0.04%
Hindustan Lever Ltd. 9.00% January 1, 2005 INR 55,599 7,731 0.04
Mexico - 0.06%
Innova, S de RL 12.875% Senior Notes due April 1, 2007 $ 235 240 .00
United Mexican States Government:
7.50% April 8, 2033 775 804
7.625% October 1, 2004 EUR 7,262 9,438
11.375% September 15, 2016 $ 775 1,101 0.06
11,583 0.06
Netherlands - 0.01%
Cellco Finance NV 12.75% August 1, 2005 1,550 1,728 0.01
Nigeria - 0.00%
Central Bank of Nigeria, warrants, 0% November 15, 2020 1 - -
Panama - 0.03%
Republic of Panama:
9.375% January 16, 2023 2,162 2,367
9.375% April 1, 2029 1,505 1,701
Interest Reduction Bond, 1.938% July 17, 2014 (7) 2,171 2,051 0.03
6,119 0.03
Peru - 0.07%
Republic of Peru:
9.125% February 21, 2012 5,816 6,514
9.875% February 6, 2015 7,047 8,210 0.07
14,724 0.07
Philippines - 0.05%
Republic of Philippines:
9.125% February 22, 2010 (acquired 10/22/03, cost: $736,000) (1) EUR 600 784
10.625% March 16, 2025 $ 8,420 9,409 0.05
10,193 0.05
Russian Federation - 0.46%
Russian Federation:
5.00% March 31, 2030 (7) 33,695 32,600
5.00% March 31, 2030 (acquired 8/25/00, cost: $25,259,000) (1) (7) 53,855 52,105
8.25% March 31, 2010 1,500 1,680
8.25% March 31, 2010 (acquired 8/25/00, cost: $3,529,000) (1) 4,559 5,107 0.46
91,492 0.46
Turkey - 0.07%
Republic of Turkey:
7.75% April 14, 2005 EUR 6535 8,542
9.50% January 15, 2014 $ 1,525 1,769
11.875% January 15, 2030 2,135 2,904
Treasury Bills:
0% March 3, 2004 (9) TRL352,040,000 241
0% August 18, 2004 (9) 540,000,000 332 0.07
13,788 0.07
Ukraine - 0.02%
Ukraine Government 7.65% June 11, 2013 (acquired 6/6/03, cost: $2,999,000) (1) $ 2,965 3,098 0.02
United States of America - 0.01%
Freeport-McMoRan Copper & Gold, Inc. 10.125% Senior Notes due February 1, 2010 2,080 2,408 0.01
Venezuela - 0.15%
Petrozuata Finance, Inc., Series B, 8.22% April 1, 2017 (acquired 4/12/02,
cost: $1,169,000) (1) 1,520 1,406 0.01
Republic of Venezuela:
9.25% September 15, 2027 23,270 21,292
10.75% September 19, 2013 (acquired 9/12/03, cost: $4,828,000) (1) 5,150 5,523
10.75% September 19, 2013 (acquired 10/16/03, cost: $1,345,000) (1) 1,415 1,518 0.14
29,739 0.15
Total bonds and notes (cost: $267,733,000) 352,896 1.77
Units or Market Percent
Short-term securities principal value of net
amount (000) (000) assets
Corporate short-term notes - 1.76%
ANZ (DE) Inc. 1.08% due 1/9/04 $ 4,900 $ 4,899 0.02 %
BNP Paribas Financing Inc. 1.01%-1.04% due 1/2-2/2/04 96,600 96,538 0.48
Ciesco L.P. 1.05% due 1/9/04 25,000 24,993 0.13
Dexia Delaware LLC 1.06%-1.07% due 1/8-1/26/04 47,058 47,027 0.24
HBOS Treasury Services PLC 1.08% due 1/2/04 50,000 49,997 0.25
International Business Machines Corp. 1.00% due 1/2/04 15,500 15,499 0.08
Pitney Bowes Inc. 1.05% due 1/5/04 15,000 14,998 0.07
Preferred Receivables Funding Corp. 1.09% due 1/22/04 26,500 26,482 0.13
UBS Finance Delaware LLC 1.03% due 1/2/04 41,400 41,398 0.21
USAA Capital Corp. 1.02%-1.04% due 1/8-1/9/04 29,000 28,993 0.15
350,824 1.76
Federal agency discount notes - 1.15%
Fannie Mae 1.03%-1.05% due 1/2/04 70,000 69,996 0.35
Federal Home Loan Bank Discount Corp. 1.04%-1.06% due 1/2/04 84,000 83,995 0.42
International Bank for Reconstruction and Development 0.93% due 1/2/04 75,000 74,996 0.38
228,987 1.15
U.S. government short-term obligations - 0.63%
U.S. Treasury Bills 0.89%-0.92% due 1/2/04 126,800 126,794 0.63
Certificates of deposit - 0.34%
Wells Fargo & Co. 1.07% due 1/2/04 68,000 68,000 0.34
Non-U.S. currency - 0.05%
Taiwan New Dollar TWD 319,012 9,408 0.05
Non-U.S. government short-term obligations - 0.04%
Turkish Government Bond 9.50% due 3/15/04 EUR 3,635 4,620
Turkish Government Treasury Bill 0% 1/28-12/15/04 (9) TRL6,808,720,000 4,113 0.04
8,733 0.04
Total short-term securities (cost: $792,077,000) 792,746 3.97
Total investment securities (cost: $13,033,647,000) 20,400,317 102.28
Net unrealized depreciation on foreign currency contracts (10) (9,869) (0.05)
Excess of payables over cash and receivables (444,971) (2.23)
Net assets $19,945,477 100.00 %
(1) Purchased in a private placement transaction (not including purchases of
securities that were publicly offered in the primary local market but were
not registered under U.S. securities laws); resale to the public may
require registration in the country where the primary market is located,
and no right to demand registration exists. As of December 31, 2003, the
total market value and cost of such securities were $228,363,000 and
$397,055,000 respectively, and the market value represented 1.14% of net
assets.
(2) Non-income-producing securities.
(3) This issuer represents investment in an affiliate as defined in the
Investment Company Act of 1940. This definition includes, but is not
limited to, issuers in which the fund owns more than 5% of the outstanding
voting securities. New Asia East Investment Fund Ltd., New Europe East
Investment Fund Ltd., and Capital International Global Emerging Markets
Private Equity Fund, LP are considered affiliates since these issuers have
the same investment adviser as the fund.
(4) Includes an unfunded capital commitment representing a binding commitment
made by the fund which may be paid in the future.
(5) Security is currently in default pending restructuring; no principal
payment received on the scheduled maturity date.
(6) Security is currently in default.
(7) Coupon rate may change periodically.
(8) Participation interests were acquired through the financial institution
indicated parenthetically.
(9) Represents a zero coupon bond that may convert to a coupon-bearing security
at a later date.
(10) As of December 31, 2003, the net unrealized foreign currency contracts
payable consists of the following:
Contract amount U.S. valuation at 12/31/2003
Unrealized
appreciation
Non-U.S. U.S. Amount (depreciation)
(000) (000) (000) (000)
SALES:
Czech Koruna to Euro expiring 3/3-12/10/04 CZK1,054,604/EUR32,792 $ 40,959 $ 40,787 $ 172
Hungarian Forint to Euro expiring 3/3-6/3/04 HUF20,805,906/EUR73,826 92,356 95,460 (3,104)
Mexican Peso to U.S. Dollar expiring 1/27-12/23/04 MXN1,449,225 124,702 125,265 (563)
Polish Zloty to Euro expiring 5/17/04 PLN53,979/EUR11,551 14,451 14,226 225
South African Rand to U.S. Dollar expiring 1/23-6/8/04 ZAR1,727,025 246,371 252,970 (6,599)
FOREIGN CURRENCY CONTRACTS ---NET $(9,869)
ABBREVIATIONS
Securities:
ADR = American Depositary Receipts
GDR = Global Depositary Receipts
GDS = Global Depositary Shares
Non-U.S. currency:
CZK- Czech Koruna
EUR - Euro
HUF - Hungarian Forint
INR - Indian Rupee
KRW - Korean Won
MXN - Mexican Peso
PLN - Polish Zloty
TRL - Turkish Lira
TWD - Taiwan New Dollar
ZAR - South African Rand
See Notes to Financial Statements
Equity securities added to the portfolio since June 30, 2003
Akbank Turk
Astro All Asia Networks
AU Optronics
"Bezeq" The Israel Telecommunication Corp.
BSES
China Life Insurance
China Shipping Development
CJ Home Shopping
Embratel Participacoes
Enersis
EON Capital
Fountain Set (Holdings)
Fubon Financial Holding
Genting
Grupo Financiero BBVA Bancomer
Grupo Mexico
Hanaro Telecom
Hankook Tire
Harbin Brewery Group
Hopewell Holdings
Huaneng Power International
INI Steel
I.T.C.
Korea Exchange Bank
Larsen & Toubro
LG Ad
Lianhua Supermarket Holdings
Maruti Udyog
Mediatek
Noble Group
Nong Shim
PT Gudang Garam
PT Ramayana Lestari Sentosa
Pulmuone
Resorts World
S P Setia Berhad Group
SinoPac Holdings
Sinopec Shanghai Petrochemical
Tata Power
Telemar Norte Leste
Tsingtao Brewery
TUPRAS-Turkiye Petrol Rafinerileri
UBS AG Call Warrants on Baoshan Iron & Steel
VIA Technologies
Woori Finance Holdings
Equity securities eliminated from the portfolio since June 30, 2003
Accton Technology
Bank Rozwoju Eksportu
Benq
CESKE RADIOKOMUNIKACE
Charoen Pokphand Feedmill
China National Aviation
China Unicom
Cia. de Petroleos de Chile (COPEC)
Cia. Energetica de Minas Gerais - CEMIG
Cipla
Compeq Manufacturing
Digital China Holdings
Dimension Data Holdings
Dusit Thani
Empresas CMPC
Gencor
HCL Technologies
ING Bank Slaski
Kumgang Korea Chemical
Largan Precision
Legend Holdings
Lenenergo
LG Petrochemical
MTN Group
Nestle (Malaysia)
Polski Koncern Naftowy "ORLEN"
PT Indofood Sukses Makmur
Quilmes Industrial
Samsung Electro-Mechanics
Shangri-La Asia
Sinopec Beijing Yanhua Petrochemical
Sociedad Minera El Brocal
Star Publications (Malaysia)
Surgutneftegas
Telefonos de Mexico
Turkiye Sise ve Cam Fabrikalari
Unified Energy System of Russia
United Bank for Africa
Universal Robina
Xstrata
Yageo
Yapi Kredi Koray
Yue Yuen Industrial
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
at December 31, 2003 (dollars in thousands, except per-share data)
ASSETS:
Investment securities at market:
Unaffiliated issuers (cost: $11,422,846) $17,957,502
Affiliated issuers (cost: $1,610,801) 2,442,815 $20,400,317
Cash 96
Receivables for--
Sales of investments 27,473
Sales of fund's shares 23,842
Dividends and interest 101,151
Non-U.S. taxes 14,393 166,859
20,567,272
LIABILITIES:
Payables for--
Purchases of investments 3,741
Unfunded capital commitments 30,150
Repurchases of fund's shares 487,814
Open forward currency contracts 9,869
Investment advisory fee 9,953
Other fees and expenses 3,203
Non-U.S. taxes 77,065
621,795
NET ASSETS AT DECEMBER 31, 2003 --
Equivalent to $61.09 per share on
326,489,555 shares of $0.01 par value
capital stock outstanding (authorized
capital stock -- 400,000,000 shares) $19,945,477
NET ASSETS CONSIST OF:
Capital paid in on shares of capital stock $16,679,620
Distributions in excess of net investment income (93,757)
Accumulated net realized loss (3,921,551)
Net unrealized appreciation 7,281,165
NET ASSETS AT DECEMBER 31, 2003 $19,945,477
See Notes to Financial Statements.
STATEMENT OF OPERATIONS (Unaudited)
for the six months ended December 31, 2003 (dollars in thousands)
INVESTMENT INCOME:
Income:
Dividends (net of non-U.S. withholding tax of $26,221; $209,580
also includes $25,180 from affiliates)
Interest (net of non-U.S. withholding tax of $242) 20,728
$ 230,308
Fees and Expenses:
Investment advisory services 56,099
Custodian 7,760
Registration statement and prospectus 21
Auditing and legal 215
Reports to shareholders 16
Directors' compensation 203
Other 202 64,516
Net investment income 165,792
REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS:
Net realized gain before non-U.S. taxes (includes 796,162
$46,175 net loss from affiliates)
Non-U.S. taxes (385)
Net realized gain 795,777
Net change in unrealized appreciation on investment
securities 4,112,985
Net change in unrealized depreciation
on open forward currency contracts 26,845
Net change in unrealized appreciation 4,139,830
Non-U.S. taxes (72,745)
Net change in unrealized appreciation on
investments 4,067,085
Net realized gain and net change in unrealized
appreciation on investments 4,862,862
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 5,028,654
FINANCIAL STATEMENTS
STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands)
(unaudited)
Six months ended Year ended
December 31, June 30,
2003 2003
OPERATIONS:
Net investment income $ 165,792 $ 311,877
Net realized gain (loss) on investments 795,777 (1,718,672)
Net change in unrealized appreciation
on investments 4,067,085 2,368,758
Net increase in net assets
resulting from operations 5,028,654 961,963
DIVIDENDS AND DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Dividends from net
investment income (412,626) (180,200)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
7,813,808 and 19,286,400 shares, respectively 428,924 795,692
Proceeds from shares issued in
reinvestment of net investment
income dividends:
6,472,738 and 3,939,072 shares, respectively 378,267 164,417
Cost of shares repurchased:
28,551,399 and 45,350,474 shares, respectively (1,632,127) (1,845,514)
Net decrease in net assets
resulting from capital share
transactions (824,936) (885,405)
TOTAL INCREASE (DECREASE) IN NET ASSETS 3,791,092 (103,642)
NET ASSETS:
Beginning of period 16,154,385 16,258,027
End of period (including distributions in excess
of net investment income and undistributed net
investment income: $(93,757) and
$153,077, respectively) $19,945,477 $16,154,385
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Emerging Markets Growth Fund, Inc. (the "fund") is registered
under the Investment Company Act of 1940 as an open-end, interval investment
company ("open-end interval fund"). As an open-end interval fund, the fund
offers its shareholders the opportunity to purchase and redeem shares on a
periodic basis. The fund's investment objective is to seek long-term capital
growth by investing primarily in equity securities of issuers in developing
countries.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared to
comply with accounting principles generally accepted in the United States of
America. These principles require management to make estimates and assumptions
that affect reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies followed by the fund:
SECURITY VALUATION - Equity securities are valued at the official closing
price of, or the last reported sale price on, the principal exchange or
market on which such securities are traded, as of the close of business or,
lacking any sales, at the last available bid price. Bonds and notes are
valued at prices obtained from a pricing service. However, where the
investment adviser deems it appropriate, they will be valued at the mean
quoted bid and asked prices or at prices for securities of comparable
maturity, quality, and type. Short-term securities with original maturities
of one year or less maturing within 60 days are valued at amortized cost,
which approximates market value. 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.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions
are recorded by the fund as of the date the trades are executed with
brokers. Realized gains and losses from securities transactions are
determined based on the specific identified cost of the securities. In the
event a security is purchased with a delayed payment date, the fund will
segregate liquid assets sufficient to meet its payment obligations.
Dividend income is recognized on the ex-dividend date and interest income
is recognized on an accrual basis. Market discounts, premiums and original
issue discounts on bonds, notes, and short-term securities 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.
NON-U.S. CURRENCY TRANSLATION - Assets and liabilities denominated in
non-U.S. currencies are translated into U.S. dollars at the exchange rates
in effect at the end of the reporting period. Purchases and sales of
investment securities and income and expenses are translated into U.S.
dollars at the exchange rates on the dates of such transactions. In the
accompanying financial statements, the effects of changes in non-U.S.
exchange rates on investment securities and other assets and liabilities
are included with the net realized gain or loss and net change in
unrealized appreciation or depreciation on investments.
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 readily be 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 non-U.S. currencies on
specific future dates at predetermined rates. The fund enters into these
contracts to manage its exposure to changes in exchange rates arising from
its investments. Upon entering into these contracts, risks may arise 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. The face or contract
amount in U.S. dollars reflects the total exposure the fund has in that
particular contract. On a daily basis, the fund values forward currency
contracts based on the applicable exchange rates and records unrealized
gains or losses. The fund records realized gains or losses at the time the
forward contact is closed or offset by another contract with the same
broker for the same settlement date and currency.
2. NON-U.S. INVESTMENTS
INVESTMENT RISK - The risks of investing in securities of non-U.S. issuers 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.
TAXATION - Dividend and interest income is recorded net of non-U.S. taxes paid.
Gains realized by the fund on the sale of securities in certain countries are
subject to non-U.S. taxes. The fund records an estimated liability based on
unrealized gains to provide for potential non-U.S. taxes payable upon the sale
of these securities. As of December 31, 2003, accrued non-U.S. taxes on
unrealized gains were $76,367,000, which were included in the payable for
non-U.S. taxes.
The receivable for non-U.S. taxes includes $13,447,000 related to India capital
gains taxes that are currently in dispute and under appeal. Additional amounts
totaling $4,091,000 may be paid in the future involving the related issue. Based
upon the advice of outside counsel, management believes that it is likely that
this dispute will be resolved in favor of the fund. If this dispute is
ultimately resolved unfavorably, it will not have a material adverse effect on
the fund's financial position or results of operations.
CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends, interest,
withholding taxes reclaimable, forward contracts and other receivables and
payables, on a book basis, were $60,035,000 for the six months ended December
31, 2003.
3. FEDERAL INCOME TAXATION
The fund complies with the requirements under Subchapter M of the Internal
Revenue Code applicable to regulated investment companies and intends to
distribute substantially all of its net taxable income and net capital gains
each year. The fund is not subject to income taxes to the extent such
distributions are made.
Distributions are based on net investment income and net realized gains
determined on a tax basis, which may differ from net investment income and net
realized gains for financial reporting purposes. These differences are due
primarily to differing treatment for items such as non-U.S. currency gains and
losses, capital losses related to sales of securities within 30 days of
purchase, and unrealized appreciation or depreciation of certain investments in
non-U.S. securities. 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. The tax character of the distribution paid of $412,626,000
was ordinary income.
As of December 31, 2003, distributions in excess of net investment income and
currency losses on a tax basis were $41,054,000.
As of December 31, 2003, the accumulated net capital losses were $3,819,987,000.
Net capital loss carryforwards were $527,984,000, $240,316,000, $22,933,000,
$1,583,277,000 and $1,873,586,000 expiring in 2007, 2008, 2009, 2010 and 2011,
respectively. The capital loss carryforward will be used to offset any capital
gains realized by the fund in the current year or in subsequent years through
the expiration date. The fund will not make distributions from capital gains
while a capital loss carryforward remains.
As of December 31, 2003, the cost of investment securities, excluding forward
currency contracts, and cash denominated in non-U.S. currencies for federal
income tax reporting purposes was $13,210,559,000. Net unrealized appreciation
on investments, excluding forward currency contracts, aggregated $7,113,391,000,
net of accumulated deferred taxes totaling $76,367,000 of which $7,739,162,000
related to appreciated securities and $625,771,000 related to depreciated
securities.
4. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY SERVICES FEE - The Investment Advisory and Service Agreement
with Capital International, Inc. (CII) provides for monthly management service
fees, accrued weekly. CII is wholly owned by Capital Group International, Inc.,
which is wholly owned by The Capital Group Companies, Inc. These fees are 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.
TRANSFER AGENT FEE - The fund has an agreement with American Funds Service
Company (AFS), the transfer agent for the fund. AFS is a wholly owned indirect
subsidiary of The Capital Group Companies, Inc. Under this agreement, the fund
compensates AFS for transfer agency services including shareholder
recordkeeping, communications and transaction processing. Transfer agent fees
were $1,000 for the six months ended December 31, 2003.
DEFERRED DIRECTORS' FEES - Since the adoption of the deferred compensation plan
in 1998, Directors who are unaffiliated with CII may elect to defer the cash
payment of part or all of their compensation. These deferred amounts, which
remain as liabilities of the fund, are treated as if invested in shares of the
fund or the American Funds. These amounts represent general, unsecured
liabilities of the fund and vary according to the total returns of the selected
funds. Directors' compensation in the accompanying financial statements includes
the current fees (either paid in cash or deferred) and the net increase or
decrease in the value of the deferred amounts. Directors' compensation for the
six months ended December 31, 2003 was $203,000, representing $119,000 in
current fees (either paid in cash or deferred) and $84,000 in net increase in
the value of deferred compensation amounts. As of December 31, 2003, the
cumulative amount of these liabilities was $507,000. This amount is included
with other fees and expenses.
AFFILIATED OFFICERS AND DIRECTORS - Officers and certain Directors of the fund
are or may be considered to be affiliated with CII. No affiliated officers and
Directors received any compensation directly from the fund.
5. RESTRICTED SECURITIES
The fund has invested in certain securities for which resale may be limited (for
example, in the U.S., to qualified institutional buyers) or which are otherwise
restricted. These securities are identified in the investment portfolio. As of
December 31, 2003, the total value of restricted securities was $228,363,000,
which represents 1.14% of the net assets of the fund.
6. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding short-term
securities, of $3,672,880,000 and $4,678,720,000, respectively, during the six
months ended December 31, 2003.
The fund receives a reduction in its custodian fee equal to the amount of
interest calculated on certain cash balances held at the custodian bank. For the
six months ended December 31, 2003, the custodian fee of $7,760,000 is reported
net of an $11,000 reduction.
7. TRANSACTIONS WITH AFFILIATES
If the fund owns more than 5% of the outstanding voting securities of an issuer,
the fund's investment in that issuer represents an investment in an affiliate as
defined in the Investment Company Act of 1940. In addition, New Asia East
Investment Fund Ltd., New Europe East Investment Fund Ltd., and Capital
International Global Emerging Markets Private Equity Fund, LP are considered
affiliates since these issuers have the same investment adviser as the fund. A
summary of the fund's transactions in the securities of affiliated issuers
during the six months ended December 31, 2003 is as follows:
Beginning Purchases/ Sales/ Ending
Issuer shares additions reductions shares
AFFILIATED ISSUERS:
Advanced Semiconductor Engineering 206,961,992 35,458,199 28,429,000 213,991,191
Anadolu Efes Biracilik ve Malt Sanayii 3,837,732,296 4,797,165,370 1,173,561,000 7,461,336,666
BYD 13,299,000 - - 13,299,000
Cummins India 10,446,937 - - 10,446,937
Embotelladora Andina 6,830,323 - - 6,830,323
Harbin Brewery Group 28,832,000 32,161,000 - 60,993,000
Housing Development Finance 20,930,306 - 1,337,000 19,593,306
Hyundai Development 4,443,274 - - 4,443,274
ICICI Bank 29,308,965 - 4,940,100 24,368,865
Infosys Technologies 3,689,710 333,289 325,361 3,697,638
Ivanhoe Mines 18,100,000 - 911,000 17,189,000
LG Engineering & Construction 2,289,280 299,790 - 2,589,070
Migros Turk 4,665,319,198 - 1,577,736,000 3,087,583,198
Orbotech 2,365,525 - 188,000 2,177,525
PT Hanjaya Mandala Sampoerna 256,401,300 - - 256,401,300
S P Setia Berhad - 34,837,100 - 34,837,100
Samsung Fire & Marine Insurance 2,473,491 307,820 - 2,781,311
Taiwan Hon Chuan Enterprise 6,090,000 1,164,500 - 7,254,500
Tele Norte Celular Participacoes 9,099,917,203 - - 9,099,917,203
Tong Ren Tang Technologies 4,623,900 906,000 - 5,529,900
Tong Yang Industry 20,678,000 620,340 - 21,298,340
UMW Holdings 14,464,678 11,363,118 - 25,827,796
VIA Technologies - 75,934,150 - 75,934,150
AFFILIATED PRIVATE EQUITY FUNDS/PRIVATE PLACEMENTS:
Baring Vostok Private Equity Fund 13,087,057 - - 13,087,057
Capital International Global Emerging Markets
Private Equity Fund 56,000 - - 56,000
Hidroneuquen 28,022,311 - - 28,022,311
New Asia East Investment Fund 4,300,000 - - 4,300,000
New Europe East Investment Fund 436 - - 436
New GP Capital Partners 27,000 - - 27,000
Pan Asia Special Opportunities Fund 600,000 - - 600,000
Seres Capital 10 - - 10
South African Private Equity Fund III 22,535 - - 22,535
Vietnam Enterprise Investments 4,392,828 4,120,000 - 8,512,828
UNAFFILIATED ISSUERS (1):
AsiaInfo Holdings 3,133,450 - 2,196,910 936,540
Bank Zachodni WBK 2,326,206 - 323,121 2,003,085
China Oilfield Services 100,409,100 - 30,271,100 70,138,000
China.com 5,500,600 - 2,537,000 2,963,600
LG Card 6,113,084 1,618,300 - 7,731,384
Philippine Long Distance Telephone 9,697,150 - 6,905,870 2,791,280
PT Astra International 236,137,384 - 99,103,000 137,034,384
Yapi ve Kredi Bankasi 49,373,134,320 - 23,088,582,000 26,284,552,320
Yapi Kredi Koray 1,210,400,000 - 1,210,400,000 -
Market value of
Dividend of affiliates at
income 12/31/03
(000) (000)
AFFILIATED ISSUERS:
Advanced Semiconductor Engineering - $ 220,239
Anadolu Efes Biracilik ve Malt Sanayii - 94,198
BYD - 35,036
Cummins India $ 459 29,307
Embotelladora Andina 481 73,200
Harbin Brewery Group 110 24,554
Housing Development Finance 4,966 278,294
Hyundai Development 1,546 46,074
ICICI Bank 7,412 277,755
Infosys Technologies 1,205 452,723
Ivanhoe Mines - 136,673
LG Engineering & Construction 1,802 38,803
Migros Turk - 44,266
Orbotech - 52,086
PT Hanjaya Mandala Sampoerna 3,674 136,432
S P Setia Berhad 63 32,087
Samsung Fire & Marine Insurance - 159,966
Taiwan Hon Chuan Enterprise 209 8,619
Tele Norte Celular Participacoes - 7,909
Tong Ren Tang Technologies - 9,724
Tong Yang Industry 457 31,718
UMW Holdings 891 41,121
VIA Technologies 786 98,529
AFFILIATED PRIVATE EQUITY FUNDS/PRIVATE PLACEMENTS:
Baring Vostok Private Equity Fund - 13,392
Capital International Global Emerging Markets
Private Equity Fund 84 37,644
Hidroneuquen - 890
New Asia East Investment Fund - 10,093
New Europe East Investment Fund - 21,386
New GP Capital Partners - 3,444
Pan Asia Special Opportunities Fund - 5,375
Seres Capital 122 112
South African Private Equity Fund III - 12,088
Vietnam Enterprise Investments - 9,078
UNAFFILIATED ISSUERS (1):
AsiaInfo Holdings - -
Bank Zachodni WBK - -
China Oilfield Services 133 -
China.com - -
LG Card - -
Philippine Long Distance Telephone 89 -
PT Astra International 691 -
Yapi ve Kredi Bankasi - -
Yapi Kredi Koray - -
$25,180 $2,442,815
(1) Affiliated during the period but no longer affiliated at December 31, 2003
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED JUNE 30
DECEMBER 31,
2003 (1) (2) 2003 2002 2001 2000 1999
Net asset value, beginning of
period $47.41 $44.80 $48.21 $68.69 $55.53 $46.05
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .50 .92 .35 .68 .58 1.48
Net realized and unrealized
gain (loss) on investments 14.44 2.21 (3.07) (20.80) 13.56 8.00
Total income(loss) from
investment operations 14.94 3.13 (2.72) (20.12) 14.14 9.48
LESS DISTRIBUTIONS:
Dividends from
net investment income (1.26) (.52) (.69) (.36) (.98) ___
Net asset value, end of period $61.09 $47.41 $44.80 $48.21 $68.69 $55.53
Total return 31.64% (3) 7.14% (5.64)% (29.31)% 25.63% 20.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in millions) $19,945 $16,154 $16,258 $17,634 $22,639 $18,147
Ratio of expenses to average
net assets .70% (4) .70% .70% .68% .71% .73%
Ratio of net income to average
net assets 1.81% (4) 2.14% 1.27% 1.25% 1.11% 3.03%
Portfolio turnover rate 20.55% (3) 33.70% 26.22% 26.10% 35.86% 33.71%
(1) Unaudited.
(2) Starting with the six months period ended December 31, 2003, the per-share
data is based on average shares outstanding.
(3) Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
(4) Annualized.
BOARD OF DIRECTORS AND DIRECTOR EMERITUS
"NON-INTERESTED" DIRECTORS
Year first
elected
a Director
Name and age of the fund (1) Principal occupation(s) during past five years
COLLETTE D. CHILTON, 46 1999 President and Chief Investment Officer,
Lucent Asset Management Corp.
KHALIL FOULATHI, 52 1996 Executive Director,
Abu Dhabi Investment Authority
BEVERLY L. HAMILTON, 57 1991 Investment management adviser;
retired President, ARCO Investment
Management Company
DAVID F. HOLSTEIN, 48 2001 Managing Director, Global Equities,
General Motors Investment
Management Corporation
RAYMOND KANNER, 50 1997 Director, Global Equity Investments,
IBM Retirement Funds
HELMUT MADER, 61 1986 Former Director, Deutsche Bank AG
WILLIAM ROBINSON, 65 1986 Director, Deutsche Asset
Management Australia Limited
GERRIT RUSSELMAN, 58 2001 Advisor to the Managing Director Investments,
Pensioenfonds PGGM
AJE K. SAIGAL, 47 2000 Director, Investment Policy and
Strategy, Government of Singapore
Investment Corporation Pte. Limited
"NON-INTERESTED" DIRECTORS
Number of
boards within
the fund
complex (2)
on which
Name and age Director serves Other directorships (3) held by Director
COLLETTE D. CHILTON, 46 1 None
KHALIL FOULATHI, 52 1 Thuraya Telecommunications Company
BEVERLY L. HAMILTON, 57 1 MassMutual Services and Institutional Funds; Oppenheimer Funds
DAVID F. HOLSTEIN, 48 1 None
RAYMOND KANNER, 50 1 None
HELMUT MADER, 61 1 None
WILLIAM ROBINSON, 65 1 Southern Mining Corporation
GERRIT RUSSELMAN, 58 1 Industri Kapital Limited
AJE K. SAIGAL, 47 1 None
"INTERESTED" DIRECTORS (4)
Year first
elected a
Director or Principal occupation(s) during past five years
Name, age and officer and positions held with affiliated entities or the
position with fund of the fund (1) principal underwriter of the fund
ROBERT RONUS, 61 2003 Vice Chairman of the Board, Capital Guardian
Chairman of the Board Trust Company (5); Non-Executive Chair, The
Capital Group Companies, Inc. (6)
NANCY ENGLANDER, 59 1991 Senior Vice President, Capital International, Inc.
Vice Chairman of the Board
DAVID I. FISHER, 64 1986 Chairman of the Board, Capital Group
Vice Chairman of the Board International, Inc. (5)
SHAW B. WAGENER, 44 1997 Chairman of the Board, Capital International, Inc.
President
VICTOR D. KOHN, 46 1996 President and Director, Capital International, Inc.
Executive Vice President
"INTERESTED" DIRECTORS (4)
Number of
boards within
the fund
complex (2)
Name, age and on which
position with fund Director serves Other directorships (3) held by Director
ROBERT RONUS, 61 1 None
Chairman of the Board
NANCY ENGLANDER, 59 1 None
Vice Chairman of the Board
DAVID I. FISHER, 64 1 None
Vice Chairman of the Board
SHAW B. WAGENER, 44 1 None
President
VICTOR D. KOHN, 46 1 None
Executive Vice President
DIRECTOR EMERITUS
WALTER P. STERN
Chairman Emeritus
OTHER OFFICERS
Year first
elected Principal occupation(s) during past five years
Name, age and an officer and positions held with affiliated entities or
position with fund of the fund (1) the principal underwriter of the fund
HARTMUT GIESECKE, 66 1993 Chairman of the Board and Director, Capital
Senior Vice President International K.K. (5); Senior Vice President and Director,
Capital International, Inc.
NANCY J. KYLE, 53 1996 Senior Vice President and Director, Capital Guardian
Senior Vice President Trust Company (5)
MICHAEL A. FELIX, 43 1993 Senior Vice President and Director, Capital
Vice President and Treasurer International, Inc.
PETER C. KELLY, 45 1996 Senior Vice President, Senior Counsel and Director,
Vice President Capital International, Inc.
ROBERT H. NEITHART, 38 2000 Executive Vice President and Research Director of
Vice President Emerging Markets, and Director, Capital International
Research, Inc. (5)
ABBE G. SHAPIRO, 44 1997 Vice President, Capital International, Inc.
Vice President
LISA B. THOMPSON, 38 2000 Vice President and Research Director of Emerging
Vice President Markets, and Director, Capital International Research, Inc. (5)
VINCENT P. CORTI, 47 1986 Vice President-- Fund Business Management
Secretary Group, Capital Research and Management Company (5)
VALERIE Y. LEWIS, 47 1999 Fund Boards Specialist,
Assistant Secretary Capital Research and Management Company (5)
JEANNE M. NAKAGAMA, 46 2000 Vice President, Capital International, Inc.
Assistant Treasurer
LEE K. YAMAUCHI, 41 2000 Vice President, Capital International, Inc.
Assistant Treasurer
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT FUND DIRECTORS. THE ADDRESS FOR ALL DIRECTORS AND OFFICERS OF THE FUND IS
11100 SANTA MONICA BOULEVARD, LOS ANGELES, CA 90025, ATTENTION: FUND SECRETARY.
CAPITAL INTERNATIONAL, INC. (CII) VOTES THE PROXIES OF SECURITIES HELD IN THE
FUND ACCORDING TO CII'S PROXY VOTING POLICY AND PROCEDURES WHICH HAVE BEEN
ADOPTED BY THE FUND'S BOARD OF DIRECTORS.
A COPY OF THE FUND'S SAI AND PROXY VOTING POLICY AND PROCEDURES IS AVAILABLE
FREE OF CHARGE UPON REQUEST BY DIALING 800/421-0180, EXT. 96245. THE SAI, WHICH
INCLUDES THE PROXY VOTING POLICY AND PROCEDURES, IS ALSO AVAILABLE ON THE U.S.
SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT WWW.SEC.GOV.
(1) Directors and officers of the fund serve until their resignation, removal
or retirement.
(2) Capital International, Inc. serves as investment adviser for Emerging
Markets Growth Fund, Inc., an open-end "interval" fund, and does not act as
investment adviser for other U.S. registered investment companies.
(3) This includes all directorships (other than those in Emerging Markets
Growth Fund, Inc.) that are held by each Director as a director of a public
company or a U.S. registered investment company.
(4) "Interested persons" within the meaning of the 1940 Act on the basis of
their affiliation with the fund's investment adviser, Capital
International, Inc. or affiliated entities.
(5) Company affiliated with Capital International, Inc.
(6) Capital International, Inc.'s parent company.
OFFICES OF THE FUND AND OF THE
INVESTMENT ADVISER
Capital International, Inc.
11100 Santa Monica Boulevard, 15th Floor
Los Angeles, CA 90025-3302
135 South State College Boulevard
Brea, CA 92821-5823
CUSTODIAN OF ASSETS
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
COUNSEL
Dechert LLP
1775 I Street, N.W.
Washington, D.C. 20006-2401
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
350 South Grand Avenue
Los Angeles, CA 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.
THE CAPITAL GROUP COMPANIES
Capital International
Capital Guardian
Capital Research and Management
Capital Bank and Trust
American Funds
Lit. No. MFGESR-915-0204(NLS)
Litho in USA TAG/CG/9099
(C) 2004 Emerging Markets Growth Fund, Inc.
ITEM 2 - Code of Ethics
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 3 - Audit Committee Financial Expert
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 4 - Principal Accountant Fees and Services
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 5 - Audit Committee of Listed Registrants
Not applicable.
ITEM 6 - Reserved
ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 8 - Reserved
ITEM 9 - Controls and Procedures
(a) The officers providing the certifications in this report in accordance
with rule 30a-2 under the Investment Company Act of 1940 have concluded,
based on their evaluation of the Registrant's disclosure controls and
procedures (as such term is defined in such rule), that such controls and
procedures are adequate and reasonably designed to achieve the purposes
described in paragraph (c) of such rule.
(b) There were no changes in the Registrant's internal controls over
financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) that occurred during the Registrant's last
fiscal half-year (the Registrant's second fiscal half-year in the case
of an annual report) that has materially affected, or is reasonably likely
to materially affect, the Registrant's internal control over financial
reporting.
ITEM 10 - Exhibits
(a) The Code of Ethics - not applicable for filing of Semiannual Reports
to Shareholders.
(b) The certifications required by Rule 30a-2 of the Investment Company
Act of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley
Act of 2002 are attached as exhibits hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Emerging Markets Growth Fund, Inc.
By /s/ Shaw B. Wagener
Shaw B. Wagener, President and PEO
Date: March 9, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Shaw B. Wagener
Shaw B. Wagener, President and PEO
Date: March 9, 2004
By /s/ Michael A. Felix
Michael A. Felix, Treasurer
Date: March 9, 2004