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, 2005
Date of reporting period: December 31, 2004
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 I Street, N.W.
Washington, DC 20006-2401
(Counsel for the Registrant)
ITEM 1 - Reports to Stockholders
[logo - Capital International(SM]
[cover: global map]
Emerging Markets Growth Fund(SM)
Seeking 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, 2004
DEAR SHAREHOLDERS:
Emerging markets equities posted solid gains in the six-month period, supported
by robust economic growth in many economies and solid corporate earnings. Stocks
rebounded from a slide in the second quarter of 2004. For the six-month period
ending December 31, 2004, the Emerging Markets Growth Fund rose 24.3% with
dividends reinvested. The MSCI Emerging Markets Index gained 26.8% with net
dividends reinvested.
Stock gains were broad-based, with only the technology and health care sectors
trailing the broad market. Shares of financial, consumer discretionary and
industrial companies did well across several markets. Banks, which typically are
closely linked to their local economies, saw shares rise.
From a regional perspective, Latin American stocks performed the best in the
six-month period, paced by rising oil and materials prices and stellar results
in the large markets of Brazil and Mexico. Asian markets were held back by weak
Chinese stocks. Markets in South Korea and Taiwan rose, but mixed results within
the technology sector weighed on them.
MARKETS REVIEW
Inflation-targeting regimes gained credibility across markets, including in
countries like Brazil and Turkey that have had a history of runaway inflation.
This contributed significantly to restraining long-term borrowing rates and
strengthening currencies. Currency appreciation accounted for about 35% of the
market's total return. Many governments shielded consumers from the full brunt
of high oil prices. Thanks to supportive macroeconomic policies, exports and
industrial production regained some momentum. The annualized GDP growth rate for
emerging markets was 6.5% in 2004, compared to 3.2% for developed markets,
according to figures compiled by J.P. Morgan Chase. Against this backdrop,
corporate profit growth was generally strong, supporting stock market gains. In
the aggregate, profits for the companies in the MSCI EM Index grew 26% in their
most recent fiscal year over the prior year.
[Begin Sidebar]
EMGF total returns vs. MSCI Emerging Markets Index for periods ended 12/31/04
(with distributions reinvested)
Emerging MSCI
Markets Emerging
Growth Fund Markets
(EMGF) Annualized Index* Annualized
6 months +24.3% --% +26.8% --%
12 months +20.7 -- +25.6 --
3 years +64.8 +18.1 +83.6 +22.4
5 years + 9.8 + 1.9 +24.0 + 4.4
10 years +73.9 + 5.7 +36.9 + 3.2
Lifetime +1,789.0 +17.1 --+ --+
(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]
[Begin Sidebar]
FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF RESULTS IN FUTURE
PERIODS. CURRENT AND FUTURE RESULTS MAY BE LOWER OR HIGHER THAN THOSE SHOWN.
SHARE PRICES AND RETURNS WILL VARY, SO INVESTORS MAY LOSE MONEY. INVESTING FOR
SHORT PERIODS MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR
ARE THEY DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY. FOR THE MOST
RECENT MONTH-END RESULTS, PLEASE CALL 800/421-0180, EXT. 96245. INVESTING
OUTSIDE THE UNITED STATES, ESPECIALLY IN DEVELOPING MARKETS, IS SUBJECT TO
ADDITIONAL RISKS. THESE INCLUDE CURRENCY FLUCTUATIONS, POLITICAL INSTABILITY,
MARKET VOLATILITY AND INVESTMENT RESTRICTIONS, WHICH ARE DETAILED IN THE FUND'S
PROSPECTUS.
[End Sidebar]
In Brazil, stocks rose 54%. GDP grew 6% in the third quarter over the same
period the prior year. The cyclical recovery and job expansion helped lift the
popularity of President Luiz Inacio Lula da Silva, who was able to push through
some reforms on pensions for public sector employees. The central bank remained
hawkish on inflation and began a new monetary tightening cycle in September.
Mexican equities rose 29%. The country's Congress made some progress toward
social security reform and the economy grew, supported by exports. Argentina's
negotiations with private creditors on its defaulted debt made some headway,
although the country's offer to pay 30 cents on the dollar has yet to receive
wide acceptance.
Asian economies were generally strong, but stock gains were mixed across the
region. Chinese equities rose 14% but trailed other major markets as the
government took steps to curtail credit growth in an attempt to prevent the
economy from entering an inflationary spiral. After raising capital reserve
requirements earlier in the year, China announced the first interest rate hike
in nine years. Investors questioned corporate profitability and the government's
ability to steer the economy, and repercussions were felt in materials and other
industries worldwide.
Indian equities staged an impressive rebound from a mid-year slide. Stocks rose
45% as the Congress Party-led coalition government set in place pro-market
policies after taking power in May. These included privatization, the
continuation of structural reforms begun by the previous regime and a
conservative monetary policy. Sustained economic growth and solid corporate
earnings reports also contributed to the stock rally. Information technology
stocks were strong, benefiting from robust revenue and profit growth.
[Begin Sidebar]
10 largest equity holdings
Percent of gain/loss
Percent of for the six months
net assets as ended 12/31/04*
of 12/31/04 (in U.S. dollars)
Samsung Electronics 6.1% 5.7%
America Movil 3.2 44.0
Sasol 2.0 39.1
Infosys Technologies 1.9 61.0
Kookmin Bank 1.8 25.7
Itausa 1.8 49.1
Hon Hai Precision 1.7 43.2
Taiwan Semiconductor 1.7 10.4
Unibanco 1.6 60.5
Telekomunikasi Indonesia 1.6 32.2
Total 23.4%
*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]
In South Korea, two interest rate cuts injected some life into a lackluster
economy. Industrial production and exports rose in November, although household
spending remained cautious. Bank shares climbed from depressed levels as their
low valuations and steady progress in slimming down bad loan portfolios
attracted investors. Telecommunications stocks were strong, while technology
shares lagged. Samsung Electronics and LG Electronics reported solid earnings,
but investors worried about sustainability of demand. A joint venture between LG
and Philips Electronics made a US$1 billion IPO.
[Begin Sidebar]
WHERE THE FUND'S ASSETS ARE INVESTED
MSCI EM Market value
Percent of net assets Index(1) of holdings
12/31/04
12/31/03 6/30/04 12/31/04 6/30/04 12/31/04 (in thousands)
Asia-Pacific
China 3.2% 3.4% 3.5% 8.5% 7.7% $ 565,918
Hong Kong 1.0 1.1 1.5 -- -- 234,577
India 13.7 10.6 10.2 4.9 5.7 1,638,321
Indonesia 3.0 3.0 2.6 1.7 1.9 421,636
Malaysia 3.2 5.4 5.4 4.5 3.9 874,356
Philippines .6 .4 .3 .5 .5 55,827
Singapore -- .1 .1 -- -- 14,597
South Korea 18.5 18.0 17.6 18.7 17.7 2,823,170
Taiwan 10.3 10.0 10.5 11.9 14.0 1,684,996
Thailand 1.3 .7 .6 2.7 2.5 102,594
Vietnam .1 .1 .1 -- -- 9,939
54.9 52.8 52.4 53.4 53.9 8,425,931
Latin America
Argentina .6 .6 .6 .5 .5 90,729
Brazil 11.0 9.8 11.8 8.0 9.6 1,901,605
Chile 1.0 1.4 1.2 1.9 1.9 187,527
Colombia .3 .3 .3 .1 .2 50,901
Ecuador -- -- -- -- -- 2,010
Mexico 9.3 9.8 8.7 6.3 6.4 1,397,302
Peru .5 .3 .1 .5 .5 23,756
Venezuela .3 .4 .4 .2 .2 69,075
23.0 22.6 23.1 17.5 19.3 3,722,905
Eastern Europe
Bulgaria -- -- -- -- -- 1,262
Croatia .3 .3 .2 -- -- 26,891
Czech Republic .4 .7 .9 .7 .8 145,711
Hungary 1.1 1.6 .9 1.3 1.6 144,511
Kazakhstan -- -- -- -- -- 3,553
Poland .8 .7 .4 1.4 2.0 70,656
Russia 6.0 6.4 3.2 4.5 3.5 509,944
Ukraine -- -- -- -- -- 636
8.6 9.7 5.6 7.9 7.9 903,164
Other markets
Canada(2) .7 .6 .8 -- -- 132,980
Dominican Republic -- -- -- -- -- 5,353
Egypt .2 .4 .3 .3 .4 52,215
Israel .5 .8 1.8 4.6 3.7 289,832
Morocco -- -- .1 .2 .3 8,827
South Africa 4.8 8.0 7.7 14.2 12.4 1,240,549
Sweden(2) -- -- .1 -- -- 21,906
Turkey 2.0 1.7 2.5 1.5 1.8 394,684
United Kingdom(2) 2.3 .4 .1 -- -- 8,357
United States of America(2) .1 .1 .1 -- -- 10,849
10.6 12.0 13.5 20.8 18.6 2,165,552
Multinational .4 .5 .4 60,559
Other(3) .8 .7 1.4 230,594
Cash & equivalents
less liabilities 1.7 1.7 3.6 571,317
Total net assets 100.0% 100.0% 100.0% $16,080,022
(1) MSCI Emerging Markets Index also includes Jordan (0.2% at 6/30/04 and
12/31/04) and Pakistan (0.2% at 6/30/04 and 0.1% at 12/31/04).
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]
Taiwan's market was hurt by its heavy weighting in technology shares, although
other areas did well on the back of a strengthening domestic economy. Opposition
parties won a majority in legislative elections. MSCI announced that it would
increase Taiwan's weighting in the MSCI EM Index to the full weighting of its
free float by May 2005.
[Begin Sidebar]
PERCENT CHANGE IN KEY MARKETS(1)
Six months
ended 12/31/04
Expressed Expressed
in U.S. in local
dollars currency
Asia-Pacific
China 14.2% 13.8%
India 45.2 37.3
Indonesia 49.3 47.4
Malaysia 11.3 11.3
Pakistan 12.1 14.6
Philippines 15.6 15.5
South Korea 20.8 8.2
Taiwan 12.2 5.7
Thailand 14.4 8.7
Latin America
Argentina 37.2 37.8
Brazil 54.5 32.5
Chile 32.6 15.8
Colombia 70.6 49.0
Mexico 29.3 25.0
Peru 13.3 8.8
Venezuela 16.5 15.5
Eastern Europe
Czech Republic 59.4 36.0
Hungary 48.3 30.0
Poland 44.6 17.1
Russia 2.3 --(2)
Other markets
Egypt 83.6 80.1
Israel 0.6 -2.5
Jordan 50.0 50.0
Morocco 11.5 1.8
South Africa 40.9 27.8
Turkey 54.3 40.2
Emerging Markets
Growth Fund 24.3
(1) Including reinvestment of net dividends. All indexes are compiled by Morgan
Stanley Capital International and are unmanaged.
(2) Index is quoted in U.S. dollars only.
[End Sidebar]
Indonesian stocks rose 49%, partly buoyed by investor enthusiasm over the
election of opposition leader Susilo Yudhoyono as the country's new president.
Malaysia and Thailand lagged the broader markets. The powerful tsunami that hit
many countries in Southeast Asia in late December left death and destruction in
its wake. However, the financial damage was contained by the fact that
industrial areas are generally located away from the coast.
The small stock markets of Eastern Europe -- Hungary, Poland and the Czech
Republic -- made spectacular gains, with investors focusing on their higher
economic growth rates compared to old Europe, and entry into the European Union
in May 2004.
Investor sentiment in Russia was shaken by government actions against YUKOS Oil
that culminated in the December auction of Yukos' main oil producing unit,
Yuganskneftegaz, at a price that was widely viewed as far below the unit's
intrinsic market value. The government also assessed Yukos with back taxes and
penalties in excess of US$25 billion. Tax claims exceeded the company's total
revenue for some of the delinquent years. Investors and western governments saw
the Kremlin's sale of Yuganskneftegaz as a renationalization of key energy
assets.
South African stocks rose sharply, with domestically oriented companies rising
on the back of the improving domestic economy. Mining stocks were weak; their
profit margins were hurt by the strong rand, which appreciated 10% against the
U.S. dollar in the period and 19% for the whole of 2004. Harmony Gold Mining
made an unsolicited takeover bid for rival Gold Fields, a move that, if
successful, would create the world's largest gold producer. In Turkey, stocks
rose as optimism grew over Turkey's future entry into the European Union. On the
economic front, inflation dropped below 10%, and expectations rose that the
central bank might be able to steadily reduce interest rates by a substantial
margin in 2005.
PORTFOLIO REVIEW
The fund made strong gains in the six-month period but nevertheless lagged the
results of the benchmark. The fund benefited from investments in India, Mexico
and Turkey, while results were hurt by holdings in Russia, particularly our
investment in YUKOS Oil, and by not having enough exposure to South Africa.
Our large investments in banks and telecommunications services contributed to
returns. Our decision to hold large positions in the Indian technology services
area paid off, as these stocks rose 55%. However, shares of technology hardware
companies did not keep pace. The underexposure to materials was also
detrimental.
Given the strong performance of emerging markets over the last couple of years,
we have maintained the fund's large investments in sectors with more stable
earnings, including consumer staples and telecommunications. We acted on the
belief that, in addition to protection from a potential downturn, companies with
stable earnings growth are currently selling at historically attractive
valuations. For instance, we increased our investment in Bharti Tele-Ventures in
India.
We have also held on to our large exposure to technology companies, as we see
the share prices as attractive compared to their growth prospects. Many
technology companies in Asia, such as Samsung Electronics and Taiwan
Semiconductor Manufacturing, are leaders in their industries. We remain
underinvested in cyclical areas such as materials, as commodity prices have been
quite high. Also, China has accounted for a large part of incremental demand,
driving prices higher, and any slowdown in that economy would negatively impact
commodity prices.
These decisions produced mixed results for the recent six-month period. The
underexposure to materials hurt the fund's performance relative to the
benchmark, as materials stocks rose more than 30%. We did not invest in many
commodity and steel stocks, which saw share prices rise. We have been
underinvested in South Africa, where stocks of companies oriented to the
domestic economy rose substantially. Shares of South African mining companies
fared less well, as their profits were hurt by the appreciation of the rand. We
have been less optimistic about prospects for the South African economy, which
has grown at a less than 4% growth rate compared to the average 6.5% for
emerging markets in the aggregate.
The other factor that hurt results was our investment in YUKOS Oil, which was
the single-largest detractor to returns. Yukos was among the largest Russian oil
companies, with reserves that matched some of the major Western oil companies.
We had avoided Yukos for many years due to concerns about its management's focus
on short-term gains. However, we started investing in the company in 2003 after
a change in management. We believed that although the Russian government was
pressing charges to collect taxes owed for prior years, it would pursue its case
through the courts. Instead, authorities seized the main oil-producing unit of
Yukos and sold it very cheaply to a state-controlled company, essentially
re-nationalizing part of the company. We had believed that the Putin
administration, which had been following a more liberal economic agenda, would
not take private assets in a way that hurt minority shareholder rights. The
shares of Yukos fell precipitously in the period in response to the government's
actions, significantly reducing the value of our investment.
Among the positive contributors, the large exposure and stock selection in
telecommunications paid off handsomely. America Movil and Telekomunikasi
Indonesia were among the fund's top contributors. These companies have strong
balance sheets. We believe they also have good growth prospects as mobile phone
use in their markets of operation is in the early stages and is fast-expanding.
Within technology, shares of technology service companies in India surged, and
Infosys Technologies was the fund's top contributor for the period. However,
shares of hardware companies in South Korea and Taiwan had mixed results. Our
stock selection in the sector was strong, and many of our investments performed
well, including Hon Hai Precision, LG.Philips and ASUSTeK Computer.
Nevertheless, Samsung Electronics and Taiwan Semiconductor Manufacturing lagged
the broader markets, even though they both posted strong earnings.
Financials is another area in which we have recently built up a large exposure.
The fund has invested heavily in banks in India, Brazil, South Korea, Taiwan,
Turkey and Hungary. Most of our financial holdings had good results. Consumer
staples as a sector performed well, but some of our holdings had less than
stellar performance. The fund's investments in Brazilian beer producer AmBev,
Wal-Mart de Mexico and HM Sampoerna in Indonesia did well, but Wumart Stores in
China and a few other holdings did not.
On a country basis, the fund benefited from its large exposure to India, where
stocks rebounded from the mid-year slide in the wake of the elections, rising
45%. The large exposure to Mexico, where stocks benefited from an up-tick in the
economy, was also supportive. The underexposure to China helped. Stocks there
trailed the emerging markets composite by a wide margin as government attempts
to cool the economy tempered investor enthusiasm.
OUTLOOK
The positive backdrop of brisk U.S. economic growth, easy liquidity, moderate
inflation and high energy and commodity prices that have seen emerging markets
equities make substantial gains for two consecutive years is unlikely to last.
We expect that over the short term global economic growth will be sustained but
more modest than before, that U.S. monetary policy will be less accommodative
and the dollar could well weaken further. In the past, these conditions have led
to a decline in emerging markets equities, partly because many developing
countries have been heavily dependent on exports to the United States, and on
loans borrowed in international markets at interest rates linked to the United
States.
Since the Asian currency crisis of 1997-98, many of the macroeconomic imbalances
that often led to crises in the past have been addressed. Hence, emerging
markets are less vulnerable to the economic cycles of the United States and
other major economies. Many Asian countries have huge foreign exchange reserves
and floating currency regimes. Their borrowing needs are limited and are met
domestically due to the high savings rate of many Asian societies. The progress
in Latin America is more recent but nevertheless appears to be sustainable, and
has led to lower bond yields and more stable currencies. The growth of a middle
class has given domestic economies a lot of dynamism, lessening their dependence
on exports. Overall, these economies are growing at a much faster rate than
their developed peers. Not surprisingly, then, corporate earnings have been
quite strong in the aggregate in many markets as companies benefit from
sustained demand growth. South Korea was one of the few economies to suffer from
a decline in consumer demand following a consumer credit bubble.
Over the long term, emerging markets should be able to continue to advance, and
with fewer shock events. The volatility of returns is also likely be lower.
However, in the short term, a spike in inflation or substantially higher
interest rates could well lead to a tightening of global liquidity and increased
risk-aversion, hurting the emerging markets. A potential slowdown in China is
another risk. With this in mind, the fund continues to emphasize investments in
high-quality companies with strong cash flow, healthy balance sheets, rising
dividends, steady earnings and good growth prospects. We find many of these
companies in the consumer staples area, which remains our largest exposure
relative to the index, and also among telecommunications companies.
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
December 31, 2004
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, 2004. The five account for 59% 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, 2004, unless otherwise noted.)
SOUTH KOREA (17.6% of net assets)
South Korean stocks rose 21%. The central bank cut interest rates twice,
bringing the key rate down to 3.25% in an attempt to stimulate a lackluster
domestic economy that is still recovering from the aftereffects of a consumer
credit bubble. The monetary easing appeared to have some impact. Industrial
production and exports rose in November, although household spending remained
cautious.
South Korean President Roh Moo-hyun's position appeared stronger in recent
months after being reinstated by a Constitutional Court following his
impeachment. His party won seats in legislative elections and obtained a
majority.
Bank shares climbed from depressed levels as their low valuations and steady
progress in slimming down bad loan portfolios attracted investors. Among the
fund's holdings, Shinhan Financial shares advanced 55%, while Kookmin Bank
gained 26%. Several Western banks showed interest in Korean banks.
Technology shares lagged the Korean market. Samsung Electronics and LG
Electronics reported solid earnings, but investors questioned whether end demand
for semiconductors and other technology products could be sustained over the
next few years. Investors also worried about margin erosion in the flat-panel TV
business as several new factories were expected to come on stream in South Korea
and other parts of Asia. Nevertheless, a joint venture between LG and Philips
Electronics of the Netherlands made a US$1 billion IPO.
Utilities and materials shares had very strong results. Overall, at the
price-to-earnings (P/E) ratio of 8.2 as of December 31, 2004, the South Korean
market remained one of the cheapest in the emerging markets.
BRAZIL (11.8% of net assets)
A combination of positive macroeconomic policies and sustained earnings growth
at many companies lifted Brazilian stocks 54% in the period, making it the
second-best performing market in the region behind Colombia. The period saw an
overall reduction in Brazilian country risk, with the average yield on Brazilian
bonds declining from under 12% at the end of June to less than 9% at the end of
December. The real appreciated 17% against the U.S. dollar.
Investors have been impressed with the government's ability to reduce
vulnerability to external financial shocks, due in large part to the government
focusing on paying down foreign currency debt and making debt dynamics much less
vulnerable to swings in the foreign exchange rate. Exports have also been
rising, and the strong demand in commodities was only one component of the
growth in trade.
Brazil's central bank has gained credibility as being vigilant against
inflation. After keeping rates steady for most of the year, the central bank
began another monetary tightening cycle in September due to concerns over
incipient inflation, partly from higher oil prices.
Brazil's growth rate, estimated at 5.1% in 2004, was slower than many other
emerging markets, but many companies such as banks and commodity exporters have
managed to grow earnings in the double digits. As of the end of the year, the
market's overall valuation, at a P/E ratio of about 11 even after the recent
rally, makes it cheaper compared to the overall emerging markets. The economic
expansion and gradual job growth have lifted the popularity of President Luiz
Inacio Lula da Silva.
In the recent period, shares of banks and materials companies had among the best
results. Shares of Unibanco, a large fund holding, rose 61%, while shares of
iron ore exporter Cia Vale do Rio Doce, another large fund investment, climbed
86%. In corporate news, Unibanco announced it would sell its stake in Credicard,
Brazil's largest credit card issuer, to Banco Itau and Citigroup, the remaining
partners in the joint venture. The sale will help Unibanco shore up its capital
base.
TAIWAN (10.5% of net assets)
The heavy weighting of technology shares in the MSCI Taiwan Index held back
performance to some extent, although it still rose 12%. Shares of industrial and
materials companies, including manufacturers of plastics and metals, had strong
results as the domestic economy continued to grow.
Within technology, stocks had mixed results. Shares of some companies such as
VIA Technologies and Taiwan Semiconductor Manufacturing did not fare as well,
but other companies that have moved production to China made strong gains. These
included ASUSTeK Computer and Hon Hai Precision.
Domestically oriented firms benefited from a recovering economy. GDP growth in
2004 was 5.9%, buoyed by strong private investment. The banking system, which
was weighed down by bad loans three or four years ago, is looking a lot
healthier. The ratio of non-performing loans in the banking system fell to 3.5%
at the end of the year from 8.3% in 2001.
The political atmosphere remains turbulent. President Chen Shui-bian toned down
his rhetoric about formal independence from China, from which the island
separated in 1949. Opposition parties won seats in legislative elections,
underscoring the increasing unpopularity of the president's strident approach to
the issue of the Taiwan-China relationship. An agreement on charter flights for
the Lunar New Year holiday was, however, one positive sign of more pragmatic and
calmer relations between China and Taiwan.
On a valuation basis, as of December 31, 2004, Taiwanese equities were cheap at
a P/E ratio of 12.4, near a nine-year low. Meanwhile, MSCI announced it would
increase Taiwan's weighting in the MSCI EM Index in two stages to be completed
by May 2005, which drew some investor interest into the market.
INDIA (10.2% of net assets)
Indian markets enjoyed a strong six-month run, rising 45% in a rebound from the
mid-year slide in the wake of parliamentary elections. The Congress Party
coalition government led by Prime Minister Manmohan Singh, a former finance
minister and central bank governor, set out a broad policy agenda that took a
measured pace toward privatization. It persisted with many of the pro-market
economic policies of the previous Bharatiya Janata party regime, such as
electricity sector reform, which assured investors.
The Indian economy maintained cyclical momentum, growing at 6.6% in the second
quarter (July to September) of its fiscal year. Inflation dipped to below 6.5%
after having risen above 7% earlier in the year, and foreign exchange reserves
were at a record high of $131 billion.
The government sold a 10% stake in the National Thermal Power Corp., showing its
willingness to continue to reduce investments slowly in public sector
enterprises. It also put out tender offers for the modernization of the
country's major airports.
Technology, utility and financial stocks had among the best results for the
six-month period. Shares of technology companies were supported by revenue and
earnings growth of close to 50%. Utilities benefited from ongoing government
attempts at privatization and rationalization of the industry. Shares of Bharat
Heavy Electricals rose 61% in the period on investor optimism about prospects
for growth in the power generation area. Meanwhile, shares of financial
companies rose on what appeared to be a consensus view that bank earnings would
continue to be powered by expansion in consumer loans as well as increased
corporate borrowing on the one side and improved asset quality on the other.
Shares of ICICI Bank rose 61%, and those of HDFC Bank rose 57%.
MEXICO (8.7% of net assets)
The MSCI Mexico Index gained 29% during the six-month period. The Bolsa, the
domestic stock exchange, touched an all-time high in December.
The Mexican economy continued to improve in the second half of 2004, helped in
part by sustained growth in the United States and strong oil prices. Foreign
currency reserves are at a record high and the government has taken advantage of
the upswing in oil revenue to reduce foreign debt. Banco de Mexico, the
country's central bank, maintained a hawkish stance that reflected its concerns
about above-target inflation. It increased its "corto" monetary policy tool nine
times in 2004, which pushed interest rates on 28-day government paper from under
5% in 2003 to 9% at the end of 2004. Inflation peaked in November at 5.4% and
appears to be improving.
The government made some progress on social security reform. But by and large,
the country remained in political gridlock and the bounce in the economy eased
pressure for government action. The latest squabble between the opposition PRI
(Partido Revolucionario Institucional) and the PAN (Partido Accion Nacional) of
President Vicente Fox was over the federal budget. A number of expenditure items
in the budget were in limbo pending a decision by the Supreme Court on whether
the president has budget veto authority. No major political initiatives were
expected until after the presidential elections scheduled for July 2006.
Industrial stocks gained 41%, while telecommunications services shares rose 31%.
America Movil, Mexico's main wireless telecommunications operator and one of the
fund's largest holdings, rose 44%. The company's growth continued to outstrip
investor expectations. Grupo Televisa, another large fund holding, gained 32%.
The stock rose on strong earnings and investors anticipating an improving
advertising cycle in 2005. Wal-Mart de Mexico shares advanced 16%. The company
continued to benefit from rising domestic consumption, and earnings growth
remained strong. Improvements in distribution should help maintain
competitiveness and operating margins. Weak same-store sales growth, however,
kept the stock from keeping pace with the market.
ABOUT THE FUND AND ITS ADVISER
Emerging Markets Growth Fund was organized in 1986 by the International Finance
Corporation, 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 137
investment professionals based on three continents. They include analysts and
portfolio managers, born in over 27 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 35 analysts covering these countries, compared with four in
1986; 20 of these analysts also manage a portion of the fund. Most of its assets
are managed by seven portfolio managers, compared with two in 1986.
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 the Capital Group organization's family of companies -- and the funds
they manage, including Emerging Markets Growth Fund -- a competitive edge.
INVESTMENT PORTFOLIO
December 31, 2004 (unaudited)
Equity securities
SECTOR DIVERSIFICATION Common stocks Preferred stocks Convertible bonds
Financials 18.84% 2.56% - %
Information technology 18.07 - -
Telecommunication services 12.67 2.55 -
Consumer staples 8.90 1.86 -
Materials 7.18 1.06 .03
Consumer discretionary 5.54 .09 -
Energy 4.83 .43 -
Industrials 3.95 .34 -
Utilities 2.99 .41 -
Health care 2.40 - -
Other .82 - -
86.19% 9.30% .03%
Short-term securities
Excess of cash and receivables over payables (including foreign
currency contracts)
Net Assets
SECTOR DIVERSIFICATION Bonds Percent of net assets
Financials .04% 21.44%
Information technology - 18.07
Telecommunication services .19 15.41
Consumer staples .02 10.78
Materials - 8.27
Consumer discretionary .02 5.65
Energy .02 5.28
Industrials - 4.29
Utilities .03 3.43
Health care - 2.40
Other .61 1.43
.93% 96.45%
Short-term securities 3.08
Excess of cash and receivables over payables (including foreign
currency contracts) .47
Net Assets 100.00%
EQUITY SECURITIES Value
(common and preferred stocks) Shares (000)
Argentina - 0.33%
BI SA (acquired 10/21/93, cost: $4,567,000) (1) (2) 4,952,159 $1,973
Grupo Financiero Galicia SA, Class B (2) 5 -
Hidroneuquen SA (acquired 11/11/93, cost: $29,239,000) (1) (2) (3) 28,022,311 875
IRSA Inversiones y Representaciones SA (GDR) (2) 405,900 4,566
Nortel Inversora SA, Class B, preferred (ADR) (2) 3,477,900 24,380
Telecom Argentina SA, Class B (ADR) (2) 1,950,046 21,373
53,167
Brazil - 11.72%
ALL - America Latina Logistica, preferred nominative (2) 1,196,000 35,587
ALL - America Latina Logistica, preferred nominative (GDR) (2) 218,900 12,915
Banco Bradesco SA, preferred nominative 999,000 24,168
Banco Bradesco SA, preferred nominative, rights, expire January 27, 2005 (2) 36,849 334
Banco Itau Holding Financeira SA, preferred nominative 422,602 63,510
Banco Itau Holding Financeira SA, preferred nominative (ADR) 230,100 17,297
Bradespar SA, preferred nominative (2) 599,250 19,749
Celular CRT SA, ordinary nominative 2,255,641 344
Celular CRT SA, Class A, preferred nominative 101,573,000 20,468
Centrais Eletricas Brasileiras SA - ELETROBRAS, ordinary nominative 268,720,000 3,897
Centrais Eletricas Brasileiras SA - ELETROBRAS, ordinary nominative (ADR) 231,980 1,609
Centrais Eletricas Brasileiras SA - ELETROBRAS, Class B, preferred nominative 1,971,531,300 29,109
Cia. de Bebidas das Americas - AmBev, preferred nominative (ADR) 8,737,010 247,520
Cia. Energetica de Minas Gerais - CEMIG, preferred nominative 1,286,072,000 31,437
Cia. Energetica de Minas Gerais - CEMIG, preferred nominative (ADR) 200,600 4,923
Cia. Vale do Rio Doce, ordinary nominative (ADR) 1,192,690 34,600
Cia. Vale do Rio Doce, Class A, preferred nominative (ADR) 5,726,056 139,601
GOL Linhas Aereas Inteligentes SA, preferred nominative (ADR) (2) 197,000 6,280
Itausa - Investimentos Itau SA, preferred nominative 165,392,722 286,556
LIGHT-Servicos de Eletricidade SA, ordinary nominative (2) 127,393,000 3,006
Natura Cosmeticos SA, ordinary nominative 1,133,000 33,073
New GP Capital Partners, LP, Class B (acquired 1/28/94, cost:
$14,762,000) (1) (2) (3) 27,000 7,650
Petroleo Brasileiro SA - Petrobras, ordinary nominative 791,310 31,742
Petroleo Brasileiro SA - Petrobras, preferred nominative 128,600 4,706
Petroleo Brasileiro SA - Petrobras, preferred nominative (ADR) 1,792,286 64,899
TIM Participacoes SA, ordinary nominative 8,376,415,124 12,210
TIM Participacoes SA, preferred nominative (ADR) 4,868,853 75,078
Tele Centro Oeste Celular Participacoes SA, ordinary nominative 14,962,504 73
Tele Centro Oeste Celular Participacoes SA, preferred nominative 5,061,882,438 16,644
Tele Centro Oeste Celular Participacoes SA, preferred nominative (ADR) 7,735,138 76,346
Telecomunicacoes Brasileiras SA, preferred nominative (ADR) 241,000 7,755
Telecomunicacoes de Sao Paulo SA, preferred nominative 32,273,000 616
Tele Leste Celular Participacoes SA, ordinary nominative (2) 3,858,906,532 770
Tele Leste Celular Participacoes SA, preferred nominative (ADR) (2) 705,223 8,568
Telemar Norte Leste SA, Class A, preferred nominative 2,935,968 74,699
Telemig Celular Participacoes SA, ordinary nominative 3,644,145,317 11,571
Telemig Celular Participacoes SA, preferred nominative (ADR) 1,015,658 28,672
Telemig Celular SA, Class G, preferred nominative 38,529 6,530
Tele Norte Celular Participacoes SA, ordinary nominative (2) (3) 9,214,930,561 2,221
Tele Norte Celular Participacoes SA, preferred nominative (ADR) (3) 453,978 4,145
Tele Norte Leste Participacoes SA, preferred nominative 741,313 12,397
Tele Norte Leste Participacoes SA, preferred nominative (ADR) 20,400 344
Telesp Celular Participacoes SA, preferred nominative (ADR) (2) 18,814,991 127,942
Unibanco-Uniao de Bancos Brasileiros SA, units 4,070,000 26,673
Unibanco-Uniao de Bancos Brasileiros SA, units (GDR) 7,389,054 234,381
Usinas Siderurgicas de Minas Gerais SA, Class A, preferred nominative 1,593,298 32,376
1,884,991
Canada - 0.83%
Crew Gold Corp. (2) 1,715,300 1,687
Ivanhoe Mines Ltd. (2) (3) 17,189,000 123,904
Telesystem International Wireless Inc. (2) 660,300 7,389
132,980
Chile - 1.17%
Banco Santander - Chile (ADR) 802,415 27,170
Cia. de Telecomunicaciones de Chile SA (ADR) 3,019,385 33,938
Comercial Siglo XXI SA 5,131,270 11,085
Distribucion y Servicio D&S SA 7,400,800 2,218
Embotelladora Andina SA, Class A, preferred nominative (ADR) 2,909,700 38,001
Embotelladora Andina SA, Class B, preferred nominative (ADR) 1,039,373 13,522
Enersis SA (2) 36,328,700 6,115
Enersis SA (ADR) (2) 6,519,200 55,478
187,527
China - 3.52%
Anhui Conch Cement Co. Ltd. (Hong Kong) (3) 40,197,000 43,700
BYD Co. Ltd. (Hong Kong) (3) 12,432,000 32,949
China Life Insurance Co. Ltd. (Hong Kong) (2) 94,419,500 63,167
China Life Insurance Co. Ltd. (ADR) (2) 1,519,400 40,173
China Mengniu Dairy Co. (Hong Kong) (2) 21,559,000 16,919
China Merchants Holdings (International) Co. Ltd. (Hong Kong) 11,466,014 21,611
China Mobile (Hong Kong) Ltd. 4,205,800 14,258
China Netcom Group Corp. (Hong Kong) Ltd. (2) 29,877,500 40,553
China Oilfield Services Ltd. (Hong Kong) 27,123,000 8,288
China Shipping Development Co. Ltd. (Hong Kong) 7,196,000 6,388
China Telecom Corp. Ltd. (Hong Kong) 103,939,800 38,111
Huaneng Power International, Inc. (Hong Kong) 17,862,400 13,329
Lianhua Supermarket Holdings Co. Ltd. (Hong Kong) 11,912,000 14,559
NetEase.com, Inc. (ADR) (2) 469,100 24,783
PetroChina Co. Ltd. (Hong Kong) 50,490,100 26,958
PICC Property and Casualty Co. Ltd. (Hong Kong) (2) 70,689,600 24,555
Semiconductor Manufacturing International Corp. (Hong Kong) (2) 119,817,000 26,052
Semiconductor Manufacturing International Corp. (ADR) (2) 642,800 6,923
Tong Ren Tang Technologies Co. Ltd. (Hong Kong) (3) 5,529,900 12,130
Tsingtao Brewery Co. Ltd. (Hong Kong) 27,397,100 27,670
UBS AG Call Warrants on Beijing Yanjing Brewery Co. Ltd., A Shares, expire
June 14, 2005 (acquired 6/15/04, cost: $28,510,000) (1) (2) 19,833,720 28,469
Weiqiao Textile Co. Ltd. (Hong Kong) 3,990,000 6,288
Wumart Stores, Inc. (Hong Kong) (2) (3) 6,735,000 10,831
Yanzhou Coal Mining Co. Ltd. (Hong Kong) 4,829,000 6,896
Zhejiang Expressway Co. Ltd. (Hong Kong) 15,048,000 10,358
565,918
Colombia - 0.23%
Cia. de Cemento Argos, SA 4,010,764 37,172
Croatia - 0.17%
PLIVA DD (GDR) 2,151,278 26,891
Czech Republic - 0.91%
CESKY TELECOM, AS 6,319,940 104,157
Komercni Finance BV 284,500 41,554
145,711
Egypt - 0.32%
Egyptian Company for Mobile Services S.A.E. 2,435,881 52,215
Hong Kong - 1.46%
China.com Corp., Class A (2) 2,963,600 13,662
China Power International Development Ltd. (2) 10,310,000 3,814
Clear Media Ltd. (2) 22,774,000 21,242
Hopewell Holdings Ltd. 30,770,000 78,977
Kingway Brewery Holdings Ltd. 30,631,300 8,966
Shangri-La Asia Ltd. 25,893,246 37,144
SINA Corp. (2) 1,642,700 52,665
Texwinca Holdings Ltd. 19,148,700 18,107
234,577
Hungary - 0.90%
Gedeon Richter Ltd. 5,300 664
Magyar Tavkozlesi Rt. 6,813,118 32,515
Magyar Tavkozlesi Rt. (ADR) 1,054,000 25,728
MOL Magyar Olaj- es Gazipari Rt., Class A 448,802 31,472
National Savings and Commercial Bank Ltd. 1,761,490 54,132
144,511
India - 10.17%
Bharat Electronics Ltd. 1,414,966 21,498
Bharat Heavy Electricals Ltd. 3,260,445 57,837
Bharat Petroleum Corp. Ltd. 1,529,600 16,250
Bharti Tele-Ventures Ltd. (2) 39,069,420 195,528
Cummins India Ltd. (3) 10,446,937 29,603
Dr. Reddy's Laboratories Ltd. 222,333 4,451
Grasim Industries Ltd. 39 1
HDFC Bank Ltd. 4,500,452 54,171
Hindustan Lever Ltd. 16,931,594 56,164
Hindustan Petroleum Corp. Ltd. 817,723 7,596
Housing Development Finance Corp. Ltd. 12,001,044 213,496
I.T.C. Ltd. 906,531 27,486
ICICI Bank Ltd. 6,738,740 57,886
ICICI Bank Ltd. (ADR) 4,679,875 94,299
Indian Petrochemicals Corp. Ltd. 4,255,213 17,944
Infosys Technologies Ltd. 6,217,007 300,812
Larsen & Toubro Ltd. 203,434 4,633
Maruti Udyog Ltd. 3,367,800 35,984
Oil & Natural Gas Corp. Ltd. 1,353,206 25,666
Ranbaxy Laboratories Ltd. 5,872,474 169,959
Reliance Energy Ltd. 1,553,100 18,852
Reliance Energy Ltd. (acquired 3/4/04, cost: $42,028,000) (1) 2,972,200 35,176
Reliance Energy Ltd. (GDR) 624,400 22,915
Reliance Industries Ltd. 5,327,586 65,772
SET India Ltd. (acquired 5/15/00, cost: $34,131,000) (1) (2) 106,250 3,503
SET Satellite (Singapore) Pte. Ltd. (acquired 5/15/00, cost:
$73,162,000) (1) (2) 2,847,112 7,475
State Bank of India 915,728 13,811
Sun Pharmaceutical Industries Ltd. 2,960,000 38,042
Wipro Ltd. 1,264,651 21,905
Zee Telefilms Ltd. 4,091,902 16,238
1,634,953
Indonesia - 2.62%
PT Astra International Tbk 27,546,384 28,527
PT Bank Mandiri (Persero) Tbk 132,561,000 27,528
PT Bank Rakyat Indonesia 27,513,000 8,533
PT Hanjaya Mandala Sampoerna Tbk 127,023,300 91,122
Perusahaan Perseroan (Persero) PT Indonesian Satellite Corp. Tbk 7,000,500 4,342
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk, Class B 488,657,202 254,345
PT Ramayana Lestari Sentosa Tbk 86,587,500 7,239
421,636
Israel - 1.80%
Bank Hapoalim Ltd. 4,536,600 15,318
Bank Leumi le-Israel B.M. 5,063,328 13,835
"Bezeq" The Israel Telecommunication Corp. Ltd. (2) 41,352,700 48,224
Check Point Software Technologies Ltd. (2) 1,358,100 33,450
Orbotech Ltd. (2) 1,547,325 32,757
Partner Communications Co. Ltd. (ADR) (2) 2,308,600 19,785
Teva Pharmaceutical Industries Ltd. (ADR) 4,235,200 126,463
289,832
Kazakhstan - 0.02%
OJSC Kazkommertsbank (ADR) (acquired 9/10/97, cost: $1,466,000) (1) (2) 72,877 3,553
Malaysia - 5.41%
AMMB Holdings Bhd. 19,069,700 16,360
Astro All Asia Networks PLC (2) 47,119,600 66,959
CIMB Bhd. 2,042,000 2,875
Commerce Asset-Holding Bhd. 33,106,200 40,947
EON Capital Bhd. 11,273,000 17,206
Genting Bhd. 9,158,000 45,790
Hong Leong Bank Bhd. 24,190,000 35,012
IJM Corp. Bhd. 16,512,714 20,597
IOI Corp. Bhd. 11,920,900 29,802
Malakoff Bhd. 9,168,900 17,373
Malayan Banking Bhd. 42,540,350 132,099
Malaysian Pacific Industries Bhd. 473,800 1,870
Maxis Communications Bhd. 52,381,800 128,887
MK Land Holdings Bhd. 25,241,000 11,757
Public Bank Bhd. 32,516,800 65,034
Resorts World Bhd. 9,180,300 24,159
Road Builder (M) Holdings Bhd. 17,988,700 11,882
S P Setia Berhad Group (3) 34,837,100 39,604
Tanjong PLC 5,558,400 20,625
Telekom Malaysia Bhd. 23,150,900 70,671
Tenaga Nasional Bhd. 10,812,700 31,015
Transmile Group Bhd. 6,041,200 14,149
UMW Holdings Bhd. 18,781,596 25,207
869,880
Mexico - 8.64%
America Movil SA de CV, Series A 16,275,000 42,798
America Movil SA de CV, Series L 21,921,840 57,293
America Movil SA de CV, Series L (ADR) 8,010,600 419,355
Cemex, SA de CV, ordinary participation certificates, units 2,319,659 16,911
Cemex, SA de CV, ordinary participation certificates, units (ADR) 609,595 22,201
Coca-Cola FEMSA, SA de CV, Series L (ADR) 899,700 21,377
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 20,171,400 22,630
Desarrolladora Homex, SA de CV (ADR) (2) 120,850 2,858
Empresas ICA Sociedad Controladora, SA de CV (2) 63,345,100 24,447
Fomento Economico Mexicano, SA de CV (ADR) 4,056,580 213,417
Grupo IMSA, SA de CV, Series UBC, units 3,561,900 10,697
Grupo Industrial Saltillo, SA de CV 2,827,600 4,949
Grupo Modelo, SA de CV, Series C 4,692,000 12,911
Grupo Televisa, SA, ordinary participation certificates (ADR) 2,605,132 157,610
Kimberly-Clark de Mexico, SA de CV, Class A, ordinary participation certificates 31,161,300 107,675
Organizacion Soriana, SA de CV, Series B 3,554,300 12,754
Urbi Desarrollos Urbanos, SA de CV (2) 1,137,800 4,973
Wal-Mart de Mexico, SA de CV, Series V 66,854,930 229,750
Wal-Mart de Mexico, SA de CV, Series V (ADR) 157,232 5,393
1,389,999
Morocco - 0.05%
Holcim (Maroc) SA 46,585 6,594
Societe des Brasseries du Maroc 12,332 2,233
8,827
Peru - 0.13%
Credicorp Ltd. 1,275,162 20,160
Philippines - 0.31%
ABS-CBN Holdings Corp. (Philippine Deposit Receipts) 11,603,500 3,830
Ayala Corp. 114,253,700 13,454
Ayala Land, Inc. 82,485,230 10,743
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 11,553
International Container Terminal Services, Inc. (2) 19,533,588 2,056
SM Prime Holdings, Inc. 55,082,000 7,567
49,203
Poland - 0.44%
Bank Przemyslowo-Handlowy SA 39,799 6,727
Telekomunikacja Polska SA 9,742,754 63,929
70,656
Russia - 3.09%
Baring Vostok Private Equity Fund (acquired 12/15/00, cost:
$12,747,000) (1) (3) (4) 13,087,057 16,649
JSC MMC "Norilsk Nickel" (ADR) 2,854,670 158,434
LUKoil Holding (ADR) 1,386,259 169,817
New Century Capital Partners, LP (acquired 12/7/95, cost: $5,484,000) (1) (2) 5,247,900 2,253
OAO Gazprom (ADR) 617,904 21,936
OAO Gazprom (ADR) (acquired 10/21/96, cost: $5,646,000) (1) 363,900 12,918
OAO Moscow City Telephone Network 3,007,500 35,940
Sberbank (Savings Bank of the Russian Federation) 103,120 50,632
YUKOS Oil Co. (ADR) (2) 9,266,322 27,799
496,378
Singapore - 0.09%
Noble Group Ltd. 16,432,000 14,597
South Africa - 7.71%
Anglo American Platinum Corp. Ltd. 1,821,472 67,090
Anglo American Platinum Corp. Ltd. 6.38% convertible preferred May 31, 2009 212,268 4,344
Anglo American PLC 10,257,793 243,643
AVI Ltd. 2,990,800 12,240
Barloworld Ltd. 3,107,800 58,783
Gold Fields Ltd. 3,402,609 42,079
Gold Fields Ltd. (ADR) 880,700 10,991
Harmony Gold Mining Co. Ltd. 8,870,612 80,814
Harmony Gold Mining Co. Ltd. (ADR) 4,146,392 38,437
Impala Platinum Holdings Ltd. 535,005 45,599
Massmart Holdings Ltd. 1,867,900 15,053
Mvelaphanda Resources Ltd. (2) (3) 11,141,377 28,746
Nasionale Pers Beperk, Class N 1,426,200 19,033
Nedcor Ltd. 1,765,211 24,437
Sappi Ltd. 483,845 7,146
Sasol Ltd. 14,772,793 318,062
South Africa Capital Growth Fund, LP, Class A (acquired 8/25/95, cost:
$893,000) (1) (2) 2,180 270
South Africa Capital Growth Fund, LP, Class D (acquired 8/25/95, cost:
$5,387,000) (1) (2) 13,650 1,693
South African Private Equity Fund III, LP (acquired 9/23/98, cost:
$25,247,000) (1) (3) 29,008 43,522
South African Private Equity Fund III, Ltd. (acquired 10/6/00, cost:
$82,000) (1) 1,325 -
SPAR Group Ltd. (2) 3,415,000 13,065
Standard Bank Group Ltd. 8,697,414 101,831
Tiger Brands Ltd. 3,415,000 58,881
Truworths International Ltd. 1,574,400 4,790
1,240,549
South Korea - 17.56%
Baiksan OPC Co., Ltd. 560,100 3,138
Cheil Communications Inc. 142,870 20,773
CJ Home Shopping Co., Ltd. 52,679 3,028
Daewoo Heavy Industries & Machinery Co., Ltd. (2) 3,541,130 27,368
Hanaro Telecom, Inc. (ADR) (2) 2,021,671 5,964
Hankook Tire Co., Ltd. 3,798,420 37,430
Hynix Semiconductor Inc. (2) 2,400,180 27,014
Hyundai Development Co. 1,280,374 20,410
Hyundai Marine & Fire Insurance Co., Ltd. 1,634,250 6,126
Hyundai Motor Co. 3,458,374 185,431
Hyundai Motor Co., nonvoting preferred 500,730 13,980
INI Steel Co. 54,000 704
INI Steel Co. (GDS) 1,701,090 22,186
Kookmin Bank (2) 6,316,095 247,128
Kookmin Bank (ADR) (2) 1,135,144 44,361
Kook Soon Dang Brewery Co., Ltd. 881,800 10,904
Korea Electric Power Corp. 6,873,240 178,289
KT Corp. 1,047,000 41,977
KT Corp. (ADR) 125,400 2,735
KT&G Corp. 1,805,150 53,975
LG Cable Ltd. (3) 1,629,160 33,918
LG Electronics Inc. 216,520 13,408
LG Engineering & Construction Co., Ltd. 1,327,560 36,552
LG.Philips LCD Co., Ltd. (2) 186,900 7,042
LG.Philips LCD Co., Ltd. (ADR) (2) 5,748,100 103,408
Nong Shim Co., Ltd. 216,010 52,067
Pulmuone Co., Ltd. 227,550 11,431
Samsung Electronics Co., Ltd. 1,481,379 644,731
Samsung Electronics Co., Ltd. (GDS) 1,565,854 342,922
Samsung Fire & Marine Insurance Co., Ltd. 1,363,091 107,325
Samsung SDI Co., Ltd. 809,236 88,343
Samsung Securities Co., Ltd. 774,200 18,773
Shinhan Financial Group Co., Ltd. 10,516,430 237,740
Shinhan Financial Group Co., Ltd. (ADR) 190,950 8,717
SK Telecom Co., Ltd. 410,232 78,075
SK Telecom Co., Ltd. (ADR) 164,212 3,654
Woori Finance Holdings Co., Ltd. (2) 9,967,910 82,143
2,823,170
Sweden - 0.14%
Oriflame Cosmetics SA (2) 946,750 21,906
Taiwan - 10.48%
Advanced Semiconductor Engineering Inc. (2) 149,182,964 112,804
Asia Corporate Partners Fund, Class B (acquired 3/12/96, cost: $5,019,000)(1)(2) 39,360 3,738
ASUSTeK Computer Inc. 21,763,237 57,939
AU Optronics Corp. 22,289,000 32,233
AU Optronics Corp. (ADR) 502,600 7,197
Cathay Financial Holding Co., Ltd. 28,906,000 59,196
Chinatrust Financial Holding Co., Ltd. 95,756,169 114,340
Delta Electronics Inc. 26,714,787 47,134
Fubon Financial Holding Co., Ltd. 175,406,000 179,606
High Tech Computer Corp. 5,601,888 27,003
Hon Hai Precision Industry Co., Ltd. 54,859,994 254,077
Hon Hai Precision Industry Co., Ltd. (GDR) 2,487,322 23,455
Hotai Motor Co., Ltd. 4,717,000 9,660
MediaTek Incorporation 24,496,673 166,707
Mega Financial Holding Co., Ltd. 84,247,000 58,129
President Chain Store Corp. 24,514,517 39,390
Quanta Computer Inc. 32,953,899 59,180
Quanta Computer Inc. (GDR) 1,046,233 9,155
Seres Capital (Cayman) (acquired 3/12/96, cost: $12,000) (1) (3) 2 14
Seres Capital (Cayman), nonvoting (acquired 3/12/96, cost: $63,000) (1) (3) 8 73
Siliconware Precision Industries Co., Ltd. 42,055,000 34,715
SinoPac Holdings 13,975,435 8,234
Taiwan Cement Corp. 41,731,000 27,479
Taiwan Hon Chuan Enterprise Co., Ltd. 5,794,150 5,239
Taiwan Semiconductor Manufacturing Co., Ltd. 157,895,533 251,220
Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) 2,194,100 18,628
Test-Rite International Co., Ltd. 14,736,642 9,286
Tong Yang Industry Co., Ltd. (3) 21,933,243 33,791
Vanguard International Semiconductor Corp. (2) 21,579,350 15,025
VIA Technologies Inc. (2) 37,120,150 20,349
1,684,996
Thailand - 0.64%
Advanced Info Service PCL 6,988,000 19,246
BEC World PCL 23,000,000 9,295
Electricity Generating PCL 6,108,747 11,793
Electricity Generating PCL, nonvoting depositary receipts 9,262,600 17,643
Siam Cement PCL 1,185,400 8,421
Siam Cement PCL, nonvoting depositary receipts 2,666,290 16,746
Siam City Cement PCL 3,096,924 19,450
102,594
Turkey - 2.41%
Akbank Turk AS 13,493,726,000 83,771
Aktas Elektrik Ticaret AS (2) 4,273,718 -
Anadolu Efes Biracilik ve Malt Sanayii AS 3,816,381,000 77,321
Koc Holding AS 1,372,336,000 8,979
Migros Turk TAS 5,744,676,000 47,837
Tansas Perakende Magazacilik Ticaret AS (2) 7,948,176,000 9,455
TUPRAS-Turkiye Petrol Rafinerileri AS 1,107,909,000 11,285
Turkcell Iletisim Hizmetleri AS 798,491,000 5,581
Turkiye Is Bankasi AS, Class C 13,545,053,000 75,027
Yapi ve Kredi Bankasi AS (2) 21,461,355,000 67,655
386,911
Ukraine - 0.00%
JKX Oil & Gas PLC 283,631 636
United Kingdom - 0.05%
Marakand Minerals Ltd. (2) 674,304 258
Oxus Gold PLC (2) 7,720,000 8,099
8,357
United States of America - 0.07%
AsiaInfo Holdings, Inc. (2) 936,540 5,582
Sohu.com Inc. (2) 297,400 5,267
10,849
Venezuela - 0.27%
Cia. Anonima Nacional Telefonos de Venezuela (CANTV), Class D (ADR) 1,936,189 43,351
Vietnam - 0.06%
Vietnam Enterprise Investments Ltd., Redeemable (acquired 9/20/01, cost:
$8,432,000) (1) (2) (3) 7,888,071 9,939
Multinational - 0.38%
Capital International Global Emerging Markets Private Equity Fund, LP
(acquired 6/30/99, cost: $32,825,000) (1) (3) (4) 56,000 31,025
New Asia East Investment Fund Ltd., Class A (acquired 5/23/96, cost:
$733,000 (1) (3) 279,240 502
New Asia East Investment Fund Ltd., Class B (acquired 5/23/96, cost:
$10,008,000) (1) (3) 3,810,369 6,844
New Europe East Investment Fund Ltd., Class B (acquired 6/4/93, cost:
$9,038,000) (1) (3) 436 16,885
Pan Asia Special Opportunities Fund (Cayman) (acquired 10/18/00, cost:
$5,914,000) (1) (2) (3) (4) 600,000 5,303
60,559
Miscellaneous - 1.43%
Equity securities in initial period of acquisition 230,594
Total equity securities (cost: $9,134,056,000) 15,359,745
Units or
Bonds and notes principal Value
amount (000) (000)
Argentina - 0.23%
Multicanal SA:
9.25% February 1, 2002 (5) $2,609 $1,187
10.50% February 1, 2007 (6) 1,244 566
10.50% April 15, 2018 (6) 2,289 1,041
13.125% April 15, 2009 (6) 1,122 511
Republic of Argentina:
1.98% August 3, 2012 (7) 1,424 1,201
9.75% September 19, 2027 (6) 4,830 1,618
15.50% December 19, 2008 (6) 2,000 670
Telecom Argentina 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 11,555
0% August 18, 2003 Agent- Bayerische Landesbank Girozentrale/Loan
Participation Agreements (participation - Credit Suisse First Boston
International) (5) (8) JPY 440,908 4,098
0% September 25, 2003 Agent- Bank of America, N.A./Loan Participation
Agreements (participation - Credit Suisse First Boston
International) (5) (8) $3,965 3,787
0% October 7, 2003 Agent- Bank of America, N.A./Loan Participation
Agreements (participation - Credit Suisse First Boston
International) (5) (8) 3,965 3,787
Series K, 7.25% July 1, 2002 (5) EUR 3,205 4,146
Series 1, 8.375% April 8, 2004 (5) 1,145 1,481
Series 2, 9.50% July 2, 2004 (5) 1,480 1,914
37,562
Brazil - 0.10%
Banco Bradesco SA 17.50% December 10, 2007 BRL 16,710 6,470
Federal Republic of Brazil:
11.00% August 17, 2040 $3,785 4,496
Capitalization Payment-in-Kind Bond, 8.00% April 15, 2014 318 325
Debt Conversion Bond, Series L, 3.125% April 15, 2012 (7) 5,559 5,323
16,614
Bulgaria - 0.01%
Republic of Bulgaria 7.50% January 15, 2013 EUR 750 1,262
Colombia - 0.09%
Republic of Colombia:
10.00% January 23, 2012 $5,140 5,962
10.375% January 28, 2033 1,755 2,036
10.75% January 15, 2013 3,335 4,002
11.75% February 25, 2020 1,340 1,729
13,729
Dominican Republic - 0.03%
Dominican Republic:
3.50% August 30, 2024 (7) 500 406
9.04% January 23, 2013 (acquired 1/16/03, cost: $2,400,000) (1) 2,400 1,998
9.50% September 27, 2006 820 774
9.50% September 27, 2006 (acquired 9/20/01, cost: $2,307,000) (1) 2,305 2,175
5,353
Ecuador - 0.01%
Republic of Ecuador 8.00% August 15, 2030 (7) 2,320 2,010
India - 0.02%
Hindustan Lever Ltd. 9.00% debenture January 1, 2005 23,754 units 3,368
Malaysia - 0.03%
Tenaga Nasional Bhd. 2.625% convertible debenture November 20, 2007 $3,979 4,476
Mexico - 0.05%
United Mexican States Government:
Series MI10, 8.00% December 19, 2013 MXN 494 3,973
Series M20, 8.00% December 7, 2023 471 3,330
7,303
Nigeria - 0.00%
Central Bank of Nigeria, warrants, 0% November 15, 2020 1,000 units -
Peru - 0.02%
Republic of Peru:
9.125% February 21, 2012 $934 1,093
9.875% February 6, 2015 2,035 2,503
3,596
Philippines - 0.04%
Republic of Philippines 10.625% March 16, 2025 6,176 6,624
Russia - 0.08%
Gaz Capital SA 8.625% April 28, 2034 (acquired 4/23/04, cost: $1,100,000) (1) 1,100 1,292
Russian Federation:
5.00% March 31, 2030 (7) 1,150 1,190
5.00% March 31, 2030 (acquired 8/25/00, cost: $3,474,000) (1) (7) 7,540 7,804
8.25% March 31, 2010 555 617
8.25% March 31, 2010 (acquired 8/25/00, cost: $1,914,000) (1) 2,396 2,663
13,566
Turkey - 0.05%
Republic of Turkey 20.00% October 17, 2007 TRL 9,775,000,000 7,773
Venezuela - 0.16%
Petrozuata Finance, Inc., Series B, 8.22% April 1, 2017 (acquired 4/12/02,
cost: $1,181,000) (1) $1,520 1,526
Republic of Venezuela:
9.25% September 15, 2027 19,495 20,616
10.75% September 19, 2013 2,985 3,582
25,724
Total bonds and notes (cost: $113,998,000) 148,960
Units or
Short-term securities principal Value
amount (000) (000)
U.S. government short-term obligations - 2.67%
U.S. Treasury Bills 1.87%-2.07% due 1/6-2/17/05 $429,500 428,872
Corporate short-term notes - 0.36%
BMW U.S. Capital Corp. 2.15% due 1/3/05 2,300 $2,300
Danske Corp., Delaware 2.29% due 1/7/05 20,670 20,661
Emerson Electric Co. 2.20% due 1/5/05 25,000 24,992
IXIS Commercial Paper Corp. 2.23% due 1/4/05 10,500 10,497
58,450
Non-U.S. currency - 0.05%
Taiwan New Dollar TWD 248,087 7,816
Total short-term securities (cost: $494,642,000) 495,138
Total investment securities (cost: $9,742,696,000) 16,003,843
Net unrealized depreciation on foreign currency contracts (9) (25,392)
Excess of cash and receivables over payables 101,571
Net assets $16,080,022
(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. securites 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, 2004, the total
market value and cost of such securities were $257,760,000 and
$375,064,000, respectively, and the market value represented 1.60% 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 also 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 or
interest payments received on the scheduled dates.
(6) Security is currently in default; no interest payments received on the
scheduled payment dates.
(7) Coupon rate may change periodically.
(8) Participation interests were acquired through the financial institution
indicated parenthetically.
(9) As of December 31, 2004, the net unrealized foreign currency contracts
payable consists of the following:
Non-U.S. U.S. Amount Unrealized
depreciation
(000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------------------------
Sales
Czech Koruna to Euro expiring 2/28/05 CZK1,018,161/EUR31,893 $ 43,229 $ 45,418 $ (2,189)
South African Rand to U.S. Dollar
expiring 1/28-8/17/05 ZAR1,646,802 265,453 288,656 (23,203)
--------------
Foreign currency contracts ---net $(25,392)
=============
Abbreviations
Securities:
ADR = American Depositary Receipts
GDR = Global Depositary Receipts
GDS = Global Depositary Shares
Non-U.S. currency:
BRL - Brazilian Real
CZK - Czech Koruna
EUR - Euro
JPY - Japanese Yen
MXN - Mexican Peso
TRL - Turkish Lira
TWD - Taiwan New Dollar
ZAR - South African Rand
See Notes to Financial Statements
FINANCIAL STATEMENTS (Unaudited)
Statement of assets and liabilities
at December 31, 2004
(dollars in thousands, except per-share data)
Assets:
Investment securities at market:
Unaffiliated issuers (cost: $9,299,371) $15,469,020
Affiliated issuers (cost: $443,325) $534,823 $16,003,843
-------------------------
Cash 22,467
Receivables for--
Sales of investments 37,626
Sales of fund's shares 2,029
Dividends and interest 74,737
Non-U.S. taxes 17,684 132,076
-------------------------
------------------------
16,158,386
------------------------
Liabilities:
Payables for--
Purchases of investments 28,993
Unfunded capital commitments 12,188
Open forward currency contracts 25,392
Investment advisory fee 8,162
Other fees and expenses 2,593
Non-U.S. taxes 1,036
------------------------
78,364
------------------------
Net assets at December 31, 2004 --
Equivalent to $72.62 per share on
221,432,583 shares of $0.01 par value
capital stock outstanding (authorized
capital stock -- 400,000,000 shares) $16,080,022
==============
Net assets consist of:
Capital paid in on shares of capital stock $10,059,815
Distributions in excess of net investment income (107,133)
Accumulated net realized loss (110,325)
Net unrealized appreciation 6,237,665
------------------------
Net assets at December 31, 2004 $16,080,022
==============
See Notes to Financial Statements
Statement of operations (Unaudited)
for the six months ended December 31, 2004 (dollars in
thousands)
Investment income:
Income:
Dividends (net of non-U.S. withholding tax of $33,141; $205,689
also includes $12,046 from affiliates)
Interest (net of non-U.S. withholding tax of $22; 10,241 $ 215,930
also includes $58 from affiliates)
-------------------------
Fees and expenses:
Investment advisory services 48,180
Custodian 6,012
Registration statement and prospectus 16
Auditing and legal 294
Reports to shareholders 19
Directors' compensation 228
Other 178 54,927
----------------------------------------
Net investment income 161,003
------------------------
Realized gain and unrealized
appreciation on investments:
Net realized gain before non-U.S. taxes (includes 1,731,740
$7,624 net loss from affiliates)
Non-U.S. taxes (15,410)
-------------------------
Net realized gain on investments 1,716,330
Net change in unrealized appreciation on investment
securities and other assets and liabilities 1,448,308
Net change in unrealized depreciation
on open forward currency contracts 4,600
-------------------------
Net change in unrealized appreciation 1,452,908
Non-U.S. taxes 30,661
-------------------------
Net change in unrealized appreciation on
investments 1,483,569
------------------------
Net realized gain and net change in unrealized
appreciation on investments 3,199,899
------------------------
Net increase in net assets resulting
from operations $ 3,360,902
==============
Financial statements
Statement of changes in net assets
(dollars in thousands) (unaudited)
Six months ended Year ended
December 31, June 30,
2004 2004
----------------------------------------------------
Operations:
Net investment income $ 161,003 $ 299,844
Net realized gain on investments 1,716,330 2,818,559
Net change in unrealized appreciation
on investments 1,483,569 1,540,016
----------------------------- -------------
Net increase in net assets
resulting from operations 3,360,902 4,658,419
----------------------------- -------------
Dividends and distributions paid
to shareholders:
Dividends from net
investment income (236,317) (412,626)
----------------------------- -------------
Capital share transactions:
Proceeds from shares sold:
3,103,495 and 19,080,947 shares, respectively 193,367 1,152,989
Proceeds from shares issued in
reinvestment of net investment
income dividends:
3,152,874 and 6,472,738 shares, respectively 213,261 378,267
Cost of shares repurchased:
50,353,435 and 100,778,444 shares, respectively (3,209,439) (6,173,186)
----------------------------- -------------
Net decrease in net assets
resulting from capital share
transactions (2,802,811) (4,641,930)
----------------------------- -------------
Total increase (decrease) in net assets 321,774 (396,137)
Net assets:
Beginning of period 15,758,248 16,154,385
----------------------------- -------------
End of period
(including distributions in excess of net investment
income:($107,133) and ($31,819), respectively) $16,080,022 $15,758,248
============== ==============
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 an
independent 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. If significant
events occur after the close of markets outside the United States and
before the fund's net asset value is next determined, appropriate
adjustments to closing market prices may be made to reflect these
events. Events of this type may include, but are not limited to,
significant movements in the U.S. market, earthquakes and other
natural disasters, or unanticipated market closures. At December 31,
2004, out of the 396 securities in the fund's portfolio, 39 securities
were fair valued with an aggregate value of $242,986,000.
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. During the six months ended December 31, 2004, tax law
amendments in India resulted in the abolishment of long-term capital gain taxes
on sales transacted on recognized stock exchanges. As a result, the accrued
non-U.S. taxes on unrealized gains were reduced by $56,903,000 on September 30,
2004, the enactment date of the tax law amendments. As of December 31, 2004,
accrued non-U.S. taxes on unrealized gains were $34,000, which were included in
the payable for non-U.S. taxes.
The receivable for non-U.S. taxes includes $16,689,000 related to India capital
gains taxes that are currently in dispute and under appeal. Potential tax,
interest, and penalty amounts relating to this issue, if any, may be assessed in
the future. 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 $59,229,000 for the six months ended December
31, 2004.
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 $236,317,000
was ordinary income.
As of December 31, 2004, distributions in excess of net investment income and
currency losses on a tax basis were $55,137,000.
As of December 31, 2004, the fund had available a capital loss carryforward of
$34,272,000, expiring 2011. 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, 2004, the cost of investment securities, excluding forward
currency contracts, and cash denominated in non-U.S. currencies for federal
income tax reporting purposes was $9,893,892,000. Net unrealized appreciation on
investments, excluding forward currency contracts, aggregated $6,109,917,000,
net of accumulated deferred taxes totaling $34,000, of which $6,841,698,000
related to appreciated securities and $731,781,000 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, 2004.
DEFERRED DIRECTORS' COMPENSATION - 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, 2004 was $228,000, representing $194,000 in
current fees (either paid in cash or deferred) and $34,000 in net increase in
the value of deferred compensation amounts. As of December 31, 2004, the
cumulative amount of these liabilities was $536,000. This amount is included
with payables for 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, 2004, the total value of restricted securities was $257,760,000,
which represents 1.60% 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 $2,008,295,000 and $5,195,956,000, respectively, during the six
months ended December 31, 2004.
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, 2004, the custodian fee of $6,012,000 is reported
net of a $26,000 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, 2004 is as follows:
Beginning Purchases/ Sales/
Issuer shares additions reductions
Affiliated issuers:
Anhui Conch Cement 39,937,000 260,000 -
BYD 13,299,000 - 867,000
Cummins India 10,446,937 - -
Ivanhoe Mines 17,189,000 - -
LG Cable 1,629,160 - -
Mvelaphanda Resources 9,142,000 1,999,377 -
S P Setia Berhad 34,837,100 - -
Tele Norte Celular Participacoes 9,215,384,539 - -
Tong Ren Tang Technologies 5,529,900 - -
Tong Yang Industry 21,298,340 634,903 -
Wumart Stores 6,460,000 275,000 -
Affiliated private equity funds/private placements:
Baring Vostok Private Equity Fund 13,087,057 - -
Capital International Global Emerging Markets Private Equity Fund 56,000 - -
Hidroneuquen 28,022,311 - -
New Asia East Investment Fund 4,089,609 - -
New Europe East Investment Fund 436 - -
New GP Capital Partners 27,000 - -
Pan Asia Special Opportunities Fund 600,000 - -
Seres Capital 10 - -
South African Private Equity Fund III, LP 29,008 - -
Vietnam Enterprise Investments 7,888,071 - -
Unaffiliated issuers:(1)
Advanced Semiconductor Engineering 195,145,191 10,374,773 56,337,000
Embotelladora Andina 6,429,023 - 2,479,950
Housing Development Finance 16,637,984 - 4,636,940
Hyundai Development 4,443,274 - 3,162,900
LG Engineering & Construction 2,589,070 - 1,261,510
Shanghai Forte Land 55,154,000 - 55,154,000
UMW Holdings 25,827,796 - 7,046,200
Dividend
and interest
Ending income Value
Issuer shares (000) (000)
Affiliated issuers:
Anhui Conch Cement 40,197,000 $ - $43,700
BYD 12,432,000 - 32,949
Cummins India 10,446,937 454 29,603
Ivanhoe Mines 17,189,000 - 123,904
LG Cable 1,629,160 1,306 33,918
Mvelaphanda Resources 11,141,377 - 28,746
S P Setia Berhad 34,837,100 396 39,604
Tele Norte Celular Participacoes 9,215,384,539 - 6,366
Tong Ren Tang Technologies 5,529,900 - 12,130
Tong Yang Industry 21,933,243 896 33,791
Wumart Stores 6,735,000 - 10,831
Affiliated private equity funds/private placements:
Baring Vostok Private Equity Fund 13,087,057 96 16,649
Capital International Global Emerging Markets Private Equity Fund 56,000 130 31,025
Hidroneuquen 28,022,311 - 875
New Asia East Investment Fund 4,089,609 3 7,346
New Europe East Investment Fund 436 - 16,885
New GP Capital Partners 27,000 - 7,650
Pan Asia Special Opportunities Fund 600,000 - 5,303
Seres Capital 10 58 87
South African Private Equity Fund III, LP 29,008 386 43,522
Vietnam Enterprise Investments 7,888,071 - 9,939
Unaffiliated issuers:(1)
Advanced Semiconductor Engineering 149,182,964 - -
Embotelladora Andina 3,949,073 348 -
Housing Development Finance 12,001,044 4,920 -
Hyundai Development 1,280,374 718 -
LG Engineering & Construction 1,327,560 1,383 -
Shanghai Forte Land - 85 -
UMW Holdings 18,781,596 925 -
$12,104 $534,823
(1) Affiliated during the period but no longer affiliated at December 31, 2004.
FINANCIAL HIGHLIGHTS
Six months Year ended June 30(1)
ended
December 31, 2004(1),(2) 2004 2003 2002 2001 2000
Net asset value, beginning of
period $59.35 $47.41 $44.80 $48.21 $68.69 $55.53
Income from investment
operations:
Net investment income .67 .96 .92 .35 .68 .58
Net realized and unrealized
gain (loss) on investments 13.66 12.24 2.21 (3.07) (20.80) 13.56
Total income(loss) from
investment operations 14.33 13.20 3.13 (2.72) (20.12) 14.14
Less distributions:
Dividends from
net investment income (1.06) (1.26) (.52) (.69) (.36) (.98)
Net asset value, end of period $72.62 $59.35 $47.41 $44.80 $48.21 $68.69
Total return 24.27%(3) 27.89% 7.14% (5.64)% (29.31)% 25.63%
Ratios/supplemental data:
Net assets, end of period
(in millions) $16,080 $15,758 $16,154 $16,258 $17,634 $22,639
Ratio of expenses to average
net assets 0.70%(4) .70% .70% .70% .68% .71%
Ratio of net income to average
net assets 2.06%(4) 1.64% 2.14% 1.27% 1.25% 1.11%
Portfolio turnover rate 13.28%(3) 35.36% 33.70% 26.22% 26.10% 35.86%
(1) Starting with the year ended June 30, 2004, the per-share data is based on
average shares outstanding.
(2) Unaudited.
(3) Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
(4) Annualized.
See Notes to Financial Statements
EXPENSE EXAMPLE
As a shareholder of the fund, you incur ongoing costs, including investment
advisory services fees and other expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the fund so you can
compare these costs with the ongoing costs of investing in other funds. The
example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (July 1, 2004 through December 31, 2004).
ACTUAL EXPENSES:
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses paid during period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES:
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Beginning account Ending account Expenses paid Annualized
value 7/1/2004 value 12/31/2004 during period(1) expense ratio
Actual return $ 1,000.00 $1,242.75 $3.96 .70%
Hypothetical 5% return before expenses 1,000.00 1,021.68 3.57 .70
(1) Expenses are equal to the fund's annualized expense ratio of .70%,
multiplied by the average account value over the period, multiplied by the
number of days in the period (184), and divided by 365 (to reflect the
one-half year period).
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, 47 1999 President and Chief Investment Officer, Lucent Asset Management Corp.
Khalil Foulathi, 53 1996 Executive Director, Abu Dhabi Investment Authority
Beverly L. Hamilton, 58 1991 Retired President, ARCO Investment Management Company
David F. Holstein, 49 2001 Managing Director, Global Equities, General Motors Investment
Management Corporation
Raymond Kanner, 51 1997 Director, Global Equity Investments, IBM Retirement Funds
Helmut Mader, 62 1986 Former Director, Deutsche Bank AG
William B. Robinson, 66 1986 Director, Deutsche Asset Management Australia Limited
Gerrit Russelman, 59 2001 Adviser to the Managing Director, Investments, Pensioenfonds PGGM
Aje K. Saigal, 48 2000 Director, Investment Policy and Strategy, Government of Singapore
Investment Corporation Pte. Limited
"NON-INTERESTED" DIRECTORS
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX(2)
OVERSEEN BY
NAME AND AGE DIRECTOR OTHER DIRECTORSHIPS(3) HELD BY DIRECTOR
Collette D. Chilton, 47 1 None
Khalil Foulathi, 53 1 None
Beverly L. Hamilton, 58 1 Oppenheimer Funds
David F. Holstein, 49 1 None
Raymond Kanner, 51 1 None
Helmut Mader, 62 1 None
William B. Robinson, 66 1 None
Gerrit Russelman, 59 1 None
Aje K. Saigal, 48 1 None
"INTERESTED" DIRECTORS(4)
YEAR FIRST
ELECTED A
DIRECTOR OR PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND
NAME, AGE AND OFFICER OF POSITIONS HELD WITH AFFILIATED ENTITIES OR THE PRINCIPAL
POSITION WITH FUND THE FUND(1) UNDERWRITER OF THE FUND
Robert Ronus, 62 2003 Senior Vice President, Capital International, Inc.;
Chairman of the Board Director, Capital Group International, Inc.;(5) Vice Chairman of the
Board, Capital Guardian Trust Company;(5) Senior Vice President,
Capital International Limited;(5) Director, The Capital Group
Companies, Inc.(6)
David I. Fisher, 65 1986 Vice Chairman of the Board, Capital International,
Vice Chairman of the Board Inc.; Chairman of the Board, Capital Group International, Inc.;(5)
Director, Capital Group Research, Inc.;(5) Chairman of the Board,
Capital Guardian Trust Company;(5) Vice Chairman of the Board,
Capital International Limited;(5) Director, Capital International
Research, Inc.;(5) Director, The Capital Group Companies, Inc.(6)
Shaw B. Wagener, 45 1997 Chairman of the Board, Capital International, Inc.;
President Senior Vice President and Director, Capital Group International,
Inc.;(5) Director, Capital Guardian Trust Company;(5) Director, The
Capital Group Companies, Inc.(6)
Victor D. Kohn, 47 1996 President and Director, Capital International, Inc.;
Executive Vice President Senior Vice President, Capital International Research, Inc.(5)
"INTERESTED" DIRECTORS(4)
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX(2)
NAME, AGE AND OVERSEEN BY
POSITION WITH FUND DIRECTOR OTHER DIRECTORSHIPS(3) HELD BY DIRECTOR
Robert Ronus, 62 1 None
Chairman of the Board
David I. Fisher, 65 1 None
Vice Chairman of the Board
Shaw B. Wagener, 45 1 None
President
Victor D. Kohn, 47 1 None
Executive Vice President
DIRECTOR EMERITUS
Walter P. Stern
Chairman Emeritus
OTHER OFFICERS
YEAR FIRST
ELECTED AN PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND
NAME, AGE AND OFFICER OF POSITIONS HELD WITH AFFILIATED ENTITIES OR THE PRINCIPAL
POSITION WITH FUND THE FUND(1) UNDERWRITER OF THE FUND
Hartmut Giesecke, 67 1993 Senior Vice President and Director, Capital
Senior Vice President International, Inc.; Chairman of the Board, Capital International
K.K.;(5) Director, Capital Group International, Inc.;(5) Senior Vice
President, Capital International Research, Inc.(5)
Nancy J. Kyle, 54 1996 Vice Chairman of the Board, Capital Guardian Trust
Senior Vice President Company(5)
Michael A. Felix, 44 1993 Senior Vice President and Director, Capital
Vice President and Treasurer International, Inc.; Senior Vice President, Treasurer and Director,
Capital Guardian Trust Company(5)
Peter C. Kelly, 46 1996 Senior Vice President, Senior Counsel, Secretary
Vice President and Director, Capital International, Inc.; Secretary, Capital Group
International, Inc.;(5) Senior Vice President, Senior Counsel and
Director, Capital Guardian Trust Company(5)
Robert H. Neithart, 39 2000 Executive Vice President and Research Director of
Vice President Emerging Markets, and Director, Capital International
Research, Inc.;(5) Vice President, Capital Strategy Research5
Abbe G. Shapiro, 45 1997 Vice President, Capital International, Inc.; Vice
Vice President President, Capital Guardian Trust Company(5)
Lisa B. Thompson, 39 2000 Executive Vice President and Research Director of
Vice President Emerging Markets, and Director, Capital International
Research, Inc.(5)
Vincent P. Corti, 48 1986 Vice President -- Fund Business Management
Secretary Group, Capital Research and Management Company(5)
Jeanne M. Nakagama, 47 2000 Vice President, Capital International, Inc.; Vice
Assistant Treasurer President, Capital Guardian Trust Company(5)
Lee K. Yamauchi, 42 2000 Vice President, Capital International, Inc.; Vice
Assistant Treasurer President, Capital Guardian Trust Company(5)
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, PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING
RECORD FOR THE 12 MONTHS ENDED JUNE 30, 2004 IS AVAILABLE FREE OF CHARGE ON THE
U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) WEBSITE AT WWW.SEC.GOV OR UPON
REQUEST BY CALLING 800/421-0180, EXT. 96245.
Emerging Markets Growth Fund files a complete list of its portfolio holdings
with the SEC for the first and third quarters of each fiscal year on Form N-Q.
Forms N-Q are available free of charge on the SEC website. You may also review
or, for a fee, copy the forms at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be obtained
by calling 800/SEC-0330.
(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
company with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934 or subject to the requirements of Section
15(d) of the Securities Exchange Act of 1934 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) Parent company of Capital International, Inc.
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 REGISTERED PUBLIC ACCOUNTING FIRM
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.
Lit. No. MFGESR-915-0205P(NLS)
Litho in USA TAG/WS/9099-S2229
(C) 2005 Emerging Markets Growth Fund, Inc.
ITEM 2 - Code of Ethics
This Registrant has adopted a Code of Ethics that applies to its Principal
Executive Officer and Principal Financial Officer. The Registrant undertakes to
provide to any person without charge, upon request, a copy of the Code of
Ethics. Such request can be made by dialing 800/421-0180, extension 96245 or by
writing to the Secretary of the Registrant, 11100 Santa Monica Boulevard, 15th
Floor, Los Angeles, California 90025-3302.
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 - Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 10 - Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's Board of Directors since the Registrant
last submitted a proxy statement to its shareholders. The procedures are as
follows. The Registrant has a Committee on Directors (formerly the Nominating
Committee) comprised solely of persons who are not considered "interested
persons" of the Registrant within the meaning of the Investment Company Act of
1940, as amended. The Committee periodically reviews such issues as the Board's
composition, responsibilities, committees, compensation and other relevant
issues, and recommends any appropriate changes to the full Board of Directors.
While the Committee normally is able to identify from its own resources an ample
number of qualified candidates, it will consider shareholder suggestions of
persons to be considered as nominees to fill future vacancies on the Board. Such
suggestions must be sent in writing to the Committee of the Registrant, c/o the
Registrant's Secretary, and must be accompanied by complete biographical and
occupational data on the prospective nominee, along with a written consent of
the prospective nominee for consideration of his or her name by the Committee.
ITEM 11 - Controls and Procedures
(a) The Registrant's Principal Executive Officer and Principal Financial
Officer have concluded, based on their evaluation of the Registrant's
disclosure controls and procedures (as such term is defined in Rule 30a-3
under the Investment Company Act of 1940), 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 second fiscal quarter of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control
over financial reporting.
ITEM 12 - Exhibits
(a) The Code of Ethics that is the subject of the disclosure required by Item 2
is attached as an exhibit hereto.
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 10, 2005
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 10, 2005
By /s/ Michael A. Felix
- -----------------------------------------------------------
Michael A. Felix, Treasurer and PFO
Date: March 10, 2005