N-CSR 1 emgf_ncsr.htm N-CSR

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

 

Date of reporting period: June 30, 2014

 

 

 

 

Laurie D. Neat

Capital International, Inc.

333 South Hope Street

Los Angeles, California 90071

(Name and Address of Agent for Service)

 

 

Copies to:

Rob Helm, Esq.

Dechert LLP

1900 K Street, N.W.

Washington, DC 20006-2009

(Counsel for the Registrant)

 

 
 

ITEM 1 – Reports to Stockholders

 

Emerging Markets Growth FundSM

 

Annual report
for the year ended
June 30, 2014

 

 

Emerging Markets Growth Fund seeks long-term growth of capital and invests primarily in common stock and other equity securities of issuers in developing countries.

 

Fund results shown in this report are for past periods and are not predictive of results for future periods. The results shown are before taxes on fund distributions and sale of fund shares. Current and future results may be lower or higher than those shown. 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, so they may lose value. For current information and month-end results, please call (800) 421-4989.

 

Investing in developing markets involves risks, such as significant currency and price fluctuations, political instability, differing securities regulations and periods of illiquidity, which are detailed in the fund’s prospectus. Investments in developing markets have been more volatile than investments in developed markets, reflecting the greater uncertainties of investing in less established economies. Individuals investing in developing markets should have a long-term perspective and be able to tolerate potentially sharp declines in the value of their investments.

 

Emerging Markets Growth Fund is a U.S.-domiciled open-end interval fund and redeems on a monthly basis, as more fully described in its prospectus.

 

Contents

 

  1   Letter to investors
  2   20 largest equity holdings
  8   Investment portfolio
16   Financial statements
18   Notes to financial statements

 

Fellow investors:

 

Emerging markets rallied as investors appeared to adjust to the reduction in the U.S. Federal Reserve’s quantitative easing program and markets such as India and China pressed ahead with reforms. For the reporting period, the value of Emerging Markets Growth Fund rose 12.69%, with distributions reinvested, while its benchmark, the unmanaged MSCI Emerging Markets Investable Market Index (IMI) gained 14.31%.

 

Market review

Emerging markets stocks overcame concerns about political instability in several markets to end the reporting period sharply higher. Indian stocks rallied 31%* amid investor enthusiasm surrounding the country’s new Prime Minister Narendra Modi, who won mid-May elections with the largest majority in 30 years, fueling hopes for change following years of political gridlock. India’s stock market bounced back from a mid-2013 rout that was spurred by concerns about a slowing economy, rising inflation, a deteriorating current account deficit and the depreciating rupee. Materials and infrastructure-related stocks recorded some of the strongest gains, lifted by expectations for better growth prospects and industry-specific reforms.

 

The MSCI China IMI climbed 16% despite worries about less robust economic growth, a slowing property market and potential defaults in the country’s shadow banking sector. Investors seemed to weigh the government’s ability to balance the economy after it unveiled an extensive reform package in November, including sweeping measures to encourage private investment in state-run enterprises, liberalize the financial sector and increase social benefits. In the first half of 2014, authorities announced targeted initiatives to help

 

* Unless otherwise noted, country and sector returns are based on MSCI IMI indices, expressed in U.S. dollars, and assume the reinvestment of dividends. Results reflect dividends net of withholding taxes.

 

Results at a glance

 

For periods ended June 30, 2014, with distributions reinvested

 

    Cumulative                
    total returns   Average annual total returns
    6 months   1 year   3 years   5 years   10 years   Lifetime1
                         
Emerging Markets Growth Fund     2.57 %       12.69 %       -2.84 %       6.97 %       12.15 %       14.77 %  
MSCI Emerging Markets IMI2,3      6.48         14.31         -.27         9.52         12.15         11.39 4  
MSCI Emerging Markets Index3,5      6.14         14.31         -.39         9.24         11.94         11.32 4  

 

 

1 Since May 30, 1986.
2 Returns for the MSCI Emerging Markets Investable Market Index (IMI) were calculated using the MSCI Emerging Markets Index with dividends gross of withholding taxes from December 31, 1987 to December 31, 2000, and with dividends net of withholding taxes from January 1, 2001 to November 30, 2007, and using the MSCI Emerging Markets IMI with dividends net of withholding taxes thereafter.
3 The indices are unmanaged and, therefore, have no expenses.
4 The MSCI Emerging Markets Index did not start until December 31, 1987. As a result, the International Finance Corporation (IFC) Global Composite Index was used in lieu of the MSCI Emerging Markets Index from May 30, 1986 to December 31, 1987.
5 Results reflect dividends gross of withholding taxes through December 31, 2000, and dividends net of withholding taxes thereafter.

 

The total annual fund operating expense ratio is 0.73% as of the most recent fiscal year-end, and is 0.77% including “Acquired Fund” fees and expenses.

 

Emerging Markets Growth Fund 1
 

loosen credit conditions, shore up falling home prices and support economic growth. Manufacturing showed signs of improvement by the end of the period, with the HSBC Purchasing Managers’ Index rising to 50.7 in June from a final reading of 49.4 in May — the first expansion since December 2013.

 

Technology stocks bolstered markets in South Korea and Taiwan, which climbed 24% and 20%, respectively. But worries about inflationary pressures in Indonesia and a record current account deficit hurt the country’s stock market. The MSCI Indonesia IMI fell 15%; rising political uncertainty ahead of July elections further weighed on equities. Meanwhile, Thai stocks ended slightly lower amid violent protests seeking to oust Prime Minister Yingluck Shinawatra; Thailand’s parliament was dissolved in December, followed by a military coup in May. Philippine stocks trailed the broader market, rising only 7% after the country was devastated by Typhoon Haiyan in early November.

 

Brazilian equities advanced 12% despite concerns about sluggish GDP growth and anxieties leading up to October elections. The central bank continued to raise the key Selic lending rate (to 11% in April), but indicated that the hike would most likely be the last in a tightening cycle that has lifted rates by 375 basis points since April 2013. Inflation in Brazil reached the upper limits of the central bank’s target, climbing above 6% by the end of June.

 

Russian stocks gained 7%. Tensions with Ukraine escalated in early 2014, with a rapid series of events rattling markets, including the ouster of Ukrainian Prime Minister Viktor Yanukovych in February. Russia’s subsequent annexation of Crimea in March further worried investors as it triggered economic sanctions by the U.S. and Europe. But the market recovered some momentum later in the period as Ukraine underwent successful elections in May, and Russia secured a landmark 30-year $400 billion gas agreement with China after almost a decade of negotiations. The Russian ruble lost 4% against the U.S. dollar during the 12-month reporting period. The situation in Ukraine remains fluid, with the Ukrainian military vying for control of territory held by pro-Russian separatists, and ongoing political tension between Russia and the U.S. and European Union.

 

Turkish stocks fell 4% as concerns about a corruption scandal involving President Erdogan’s cabinet erupted in December and the Turkish lira slid against the U.S. dollar. Turkey’s central bank surprised markets by lowering its key interest rate a total of 125 basis points in May and June in an effort to bolster the economy following emergency rate hikes earlier in the year.

 

20 largest equity holdings

 

    Percent of
net assets as
of 6/30/14		   Price change
for the
12 months ended
6/30/14*
Hyundai Mobis     2.2 %       17.4 %  
Samsung Electronics     2.1         10.9    
Bharti Airtel     2.0         14.1    
Yandex     1.9         29.0    
ICICI Bank     1.9         30.6    
Bangkok Bank     1.7         -9.6    
China Mengniu Dairy     1.5         29.3    
Hypermarcas     1.4         33.8    
China Overseas Land & Investment     1.4         -7.5    
MediaTek     1.4         45.5    
Melco Crown Entertainment     1.4         59.7    
AIA Group     1.3         18.7    
Beijing Enterprises     1.3         31.4    
Taiwan Semiconductor Manufacturing     1.3         14.4    
Oil Search     1.3         29.0    
China Pacific Insurance     1.3         10.6    
Samsonite International     1.3         36.9    
Delta Electronics     1.2         59.9    
Wynn Macau     1.2         44.9    
Infosys     1.2         28.7    
Total     30.3 %            

 

* The percent change is reflected in U.S. dollars. The actual gain or loss on the total position in the fund may differ from the percentage shown.

 

2 Emerging Markets Growth Fund
 

Where the fund’s assets were invested

 

          Percent of net assets         MSCI EM IMI1   Value of holdings
6/30/14
    6/30/12   6/30/13   12/31/13   6/30/14   6/30/14   (in thousands)
Asia-Pacific                                                
China     16.9 %     18.2 %     19.3 %     21.3 %     18.4 %   $ 1,389,074  
Hong Kong     3.7       3.5       7.0       7.5       —       487,042  
India     8.1       9.0       8.7       12.6       6.8       819,570  
Indonesia     2.3       2.0       1.4       1.8       2.6       116,567  
Malaysia     2.9       3.7       3.1       3.1       4.0       206,010  
Pakistan     .1       —       —       —       —       —  
Philippines     1.0       .9       .9       .8       1.0       53,282  
Singapore     .7       .7       .8       .9       —       58,244  
South Korea     11.3       10.0       9.9       9.2       15.6       602,890  
Taiwan     6.3       5.7       4.9       5.3       13.3       346,918  
Thailand     1.2       2.0       1.8       2.1       2.4       135,188  
      54.5       55.7       57.8       64.6       64.1       4,214,785  
                                                 
Latin America                                                
Argentina     —       —       —       .3       —       15,222  
Brazil     7.3       7.1       7.9       6.9       10.2       453,436  
Chile     .4       1.3       1.2       1.1       1.5       70,135  
Colombia     —       .4       —       —       .9       —  
Mexico     3.4       3.5       3.4       3.4       4.8       222,263  
Peru     .2       —       —       .1       .4       8,190  
      11.3       12.3       12.5       11.8       17.8       769,246  
                                                 
Eastern Europe and Middle East                                                
Czech Republic     .3       —       —       —       .2       —  
Greece     —       —       —       .3       .8       21,994  
Hungary     .2       —       —       —       .2       —  
Israel     .4       .7       .6       .6       —       35,965  
Oman     .3       .4       .5       .4       —       28,102  
Poland     1.4       .7       —       —       1.6       —  
Russia     7.9       7.0       6.9       6.8       4.8       441,184  
Saudi Arabia     1.2       .1       —       —       —       —  
Turkey     .7       .4       .4       —       1.7       —  
United Arab Emirates     .4       .2       .3       .3       .5       22,431  
Qatar     —       —       —       —       .5       —  
      12.8       9.5       8.7       8.4       10.3       549,676  
                                                 
Africa                                                
Egypt     —       —       —       —       .3       —  
Morocco     .1       .1       —       —       —       —  
South Africa     2.6       1.2       1.1       1.9       7.5       125,166  
      2.7       1.3       1.1       1.9       7.8       125,166  
                                                 
Other markets2                                                
Australia     .9       1.1       1.0       1.3               84,821  
Austria     .2       .3       .4       .4               29,596  
Canada     .9       1.0       1.3       1.5               96,423  
Italy     .2       .2       .2       .2               16,521  
Luxembourg     —       .8       1.2       —               —  
Netherlands     .3       .6       .8       .7               43,767  
Switzerland     .1       —       .5       .6               36,536  
United Kingdom     3.8       3.5       3.1       2.6               171,711  
United States of America     1.6       3.1       2.5       2.3               148,427  
      8.0       10.6       11.0       9.6               627,802  
                                                 
Multinational     .3       .4       .3       .4               25,224  
Other3     4.8       4.9       4.9       —               —  
Other assets less liabilities (including short-term securities and forward currency contracts)     5.6       5.3       3.7       3.3               214,555  
Total net assets     100.0 %     100.0 %     100.0 %     100.0 %         $ 6,526,454  

 

1 A dash indicates that the market is not included in the index. Source: MSCI.
2 Includes investments in companies incorporated in the region that have significant operations in emerging markets.
3 Includes securities in initial period of acquisition.

 

Emerging Markets Growth Fund 3
 

Portfolio review*

The fund’s investments in the materials sector lifted returns. Shares of First Quantum Minerals jumped 44.18% as the diversified miner benefited from expectations for an improving global outlook. The company also continued to acquire new copper projects during the reporting period, following its purchase of Canadian metals producer Inmet Mining and its $6.4 billion Cobre Panama project in early 2013. Meanwhile, investments in several Indian steelmakers rose sharply amid hopes that the newly elected government would implement reforms in support of domestic manufacturing.

 

Stock selection in consumer companies further helped results. Hong Kong-listed gaming firms such as Melco Crown Entertainment and Wynn Macau rose substantially as mass-market revenues bolstered earnings for both companies. Shares of Melco Crown and Wynn Macau advanced 59.70% and 44.87%, respectively, despite worries about increased regulation and a slowdown in VIP revenues. Shares of Samsonite International climbed, with the global luggage maker further expanding its business in Asia; Samsonite has also benefited from increased travel demand as wealthier travelers from the emerging markets spend more time abroad. China Mengniu Dairy shares also rose sharply; the country’s largest dairy producer continued to expand its businesses in yogurt and baby formula via partnerships with developed-market firms.

 

The choice of industrials stocks had a positive impact on returns, with investments in China proving particularly helpful. Shares of gas distributor Beijing Enterprises rose, buoyed by strong profits; investors also seemed to anticipate that the firm would benefit from strong long-term gas demand in China amid rapid urbanization and an increased focus on anti-pollution policies. Fund investments in smaller globally oriented industrial firms in China and Taiwan helped as these companies expanded overseas business in areas such as plastics production and pneumatics used in machine tools in the automotive and electronics industries.

 

Investments in a few technology companies that supply parts for smartphone production and industrial automation also lifted results, but limited exposure to several Asian internet providers that rallied sharply held back relative returns.

 

Several investments in the financial sector declined, with Chinese real estate firms such as China Overseas Land & Investment and China Resources Land falling amid worries about weakness in the country’s property market. Rising political instability in Thailand weighed on Bangkok Bank.

 

The fund’s investments in a few smaller oil exploration and production firms, including Cobalt International Energy and Ophir Energy, fell. Several oil

 

* Securities mentioned in the portfolio review make up the following percent of net assets: First Quantum Minerals (1.06%), Cobalt International Energy (1.06%), China Resources Land (0.92%), Ophir Energy (0.39%). The percent of net assets for other securities listed can be found in the top 20 holdings chart.

 

    12 months ended 6/30/14   6 months ended 6/30/14
Percent change in key markets†  

Expressed in
U.S. dollars

   Expressed in
local currency		   Expressed in
U.S. dollars		   Expressed in
local currency
Asia-Pacific                                
China     15.7 %     15.6 %     -.6 %     -.6 %
India     31.1       32.7       24.6       21.1  
Indonesia     -14.9       1.6       20.6       17.5  
Malaysia     5.3       7.1       3.7       1.7  
Philippines     6.5       7.6       20.1       18.1  
South Korea     24.0       9.8       4.8       .5  
Taiwan     20.4       20.0       10.7       10.9  
Thailand     -0.3       4.3       17.5       16.1  
                                 
Latin America                                
Brazil     11.9       11.6       10.1       2.8  
Chile     -13.7       -5.5       -1.0       4.3  
Colombia     10.2       7.3       13.3       10.2  
Mexico     7.6       7.2       1.5       .6  
Peru     11.9       11.9       13.1       13.1  
                                 
Eastern Europe and Middle East                                
Czech Republic     22.1       22.5       7.8       8.8  
Hungary     -12.5       -12.7       -4.0       .7  
Poland     25.4       14.3       1.9       2.5  
Russia     7.5       10.7       -5.5       -2.7  
Turkey     -4.0       5.5       19.4       17.8  
Greece     59.4       51.4       6.2       6.9  
United Arab Emirates     57.6       57.5       15.2       15.2  
Qatar     25.1       25.2       12.4       12.4  
                                 
Africa                                
Egypt     65.7       68.6       18.0       21.2  
South Africa     20.8       29.4       9.3       11.0  
                                 
Emerging Markets Growth Fund     12.7 %             2.6 %        

 

Country returns are based on MSCI IMI data and reflect dividends net of withholding taxes.

 

† The market indices, compiled by MSCI, are unmanaged and, therefore, have no expenses.

 

4 Emerging Markets Growth Fund
 

equipment and services providers also declined amid concerns about reduced capital expenditures by large energy firms.

 

Outlook

Emerging markets stocks have regained momentum in recent months as several countries have begun to adopt reforms and the global economy has shown signs of strengthening. Economic growth in emerging markets should improve on the whole, with the International Monetary Fund forecasting GDP growth of 5.2% for developing economies in 2015 compared with a forecast of 4.6% for 2014. From an even longer term perspective, developing markets have less debt than developed markets and more ample foreign reserves — as well as the added benefit of younger populations, a burgeoning middle class and increased urbanization to help foster economic progress.

 

Several developing market countries still face elections in the upcoming year, and economic improvements are likely to proceed at an uneven pace. In general, investors seem more willing to reward markets where governments are adopting supportive longer term economic and fiscal policies, while avoiding those that face greater potential for geopolitical risk and appear less inclined to carry out significant change.

 

At the corporate level, return on equity for emerging markets continues to outpace that in the developed world, demonstrating that many companies are allocating capital effectively. Relatively low valuations also reflect concerns about slower-than-expected earnings growth and less rapid economic expansion in some emerging markets. We expect to see earnings improvements given the outlook for global growth and some acceleration in developing world economic activity. This environment is likely to provide a fertile hunting ground for investment opportunities.

 

The fund continues to have significant exposure to China and Hong Kong, which comprise nearly 30% of total net assets. China’s government seems to be managing the need to sustain reasonable levels of economic growth via targeted measures, while carrying on with longer term reforms to establish more of a consumer-led economy. Furthermore, the Shanghai and Hong Kong stock exchanges agreed to allow investors in Hong Kong and the mainland to buy and sell stocks on both exchanges beginning in October as part of a major move to open up China’s capital markets. Against this backdrop, managers believe that China offers a number of attractive company-specific opportunities in select areas of the market.

 

The fund emphasizes companies that stand to profit from cleaner energy and waste disposal along with other sectors that support a better quality of life for residents. Businesses that are poised to benefit from the rise of a more sophisticated Asian consumer, including several entertainment, auto and travel-related firms, also feature prominently. In addition, managers are investing in smaller export-oriented companies in the Chinese industrials sector that are likely to gain from better global growth.

 

Elsewhere in Asia, managers are finding more compelling opportunities in India. While the new government is likely to face substantial challenges in its efforts to execute new reform initiatives, the country appears likely to benefit from improved economic growth prospects, higher employment and robust infrastructure expansion. Managers are focusing on a few financial companies that should be helped by these developments. They are also finding value in firms that seem well positioned to reap the rewards of greater infrastructure spending and rising capital expenditures in industries such as steel, water treatment, power supply and engineering.

 

Brazil continues to face significant hurdles, including a sluggish economy, high inflation, political uncertainty ahead of October elections and investor concerns about policymaking. Fund holdings include a few stocks that are likely to provide strong long-term returns; among these are several banks that managers believe are poised to navigate a difficult environment, as well as select industrials and materials firms. In Russia, the fund emphasizes a few companies with robust growth prospects that are trading at attractive valuations.

 

From a broad sector perspective, financials stocks made up about 22% of the fund’s total net assets as of June 30; the fund emphasizes local banks that are growing as well as larger regional institutions in Asia. Economically sensitive sectors such as consumer discretionary and industrials have constituted a significant portion of total net assets, comprising 15% and 13%, respectively, by the end of the period. Among commodities stocks, managers have become more interested in a few attractively valued metals producers that should be supported by more promising demand and supply constraints in their respective industries. Investments in the technology and telecommunications sectors are focused on companies that supply cutting-edge components for smartphone production and industrial automation, as well as wireless and diversified telecom providers with compelling dividend yields.

 

We are enthusiastic about opportunities in the emerging markets and look forward to reporting to you in another six months.

 

Sincerely,

 

Victor D. Kohn

President

 

August 20, 2014

 

Emerging Markets Growth Fund 5
 

The value of a long-term investment

 

How a $100,000 investment has grown

 

While notable for their volatility in recent years, financial markets have tended to reward investors over the long term. Active management — bolstered by experience and careful research — can add even more value. This chart shows how a $100,0001 investment in Emerging Markets Growth Fund (EMGF) grew from December 31, 1987 — the inception of the MSCI Emerging Markets (EM) Index — through June 30, 2014, the end of the fund’s latest fiscal year.

 

As you can see, the $100,000 would have grown to $3,449,204. This is significantly more than the $2,034,111 generated by the unmanaged MSCI EM Index.

 

 

Total returns

(with all distributions reinvested for periods ended June 30, 2014)   Cumulative total returns   Average annual total returns
1 year     12.69 %     12.69 %
5 years     40.04       6.97  
10 years     214.89       12.15  

 

Results are for past periods and are not predictive of results for future periods. The results shown are before taxes on fund distributions and sale of fund shares. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month-end results, please call (800) 421-4989.

 

1 The minimum initial investment for EMGF is $100,000.
2 Values are based on a $100,000 investment with distributions reinvested.
3 Returns for the MSCI Emerging Markets Index were calculated using the MSCI Emerging Markets Index with gross dividends from December 31, 1987 to December 31, 2000, and with net dividends from January 1, 2001 to November 30, 2007, and using the MSCI EM IMI with net dividends thereafter. The indices are unmanaged and, therefore, have no expenses.
4 For the period December 31, 1987 (inception of the MSCI EM Index), through June 30, 1988. EMGF began operations on May 30, 1986.

 

6 Emerging Markets Growth Fund
 

About the fund and its adviser

 

Emerging Markets Growth Fund was organized in 1986 by the International Finance Corporation (IFC), an affiliate of the World Bank, as a vehicle for investing in the securities of companies 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.

 

Capital International, Inc., the fund’s investment adviser, is part of The Capital Group Companies,SM Inc. one of the world’s most experienced investment advisory organizations, with roots dating back to 1931. The fund has been managed by Capital International or an affiliate since 1986. Capital Group employs a research-driven approach to investing and has a global investment research network spanning three continents. This network of analysts and portfolio managers travel the world scrutinizing thousands of companies and keeping a close watch on industry trends and government actions.

 

Capital Group has devoted substantial resources to the task of evaluating and managing investments in developing countries. It is an intensive effort that combines company and industry analysis with broader political and macroeconomic views. We believe that our extensive worldwide research capabilities and integrated global investment process continue to provide Emerging Markets Growth Fund with a competitive edge.

 

Emerging Markets Growth Fund 7
 

Investment portfolio June 30, 2014

 

Sector diversification unaudited

 

    Equity securities        
    Common stocks   Convertible stocks   Bonds & notes   Percent of net assets
Financials     21.8 %     — %     — %*     21.8 %
Consumer discretionary     14.9       —       — *     14.9  
Industrials     12.9       —       —       12.9  
Information technology     11.2       —       —       11.2  
Materials     8.6       —       —       8.6  
Consumer staples     6.8       —       — *     6.8  
Energy     6.4       —       —       6.4  
Telecommunication services     4.6       —       —       4.6  
Health care     3.6       — *     —       3.6  
Utilities     3.3       —       —       3.3  
Other     2.6       —       —       2.6  
      96.7 %     — %*     — %*     96.7  
                                 
Short-term securities                             2.7  
Other assets less liabilities (including forward currency contracts)         .6  
Net assets                             100.0 %

 

* Amount rounds to less than .1%.

 

Equity securities            
             
Asia-Pacific 64.6%   Shares     Value
(000)		  
China 21.3%                
Anhui Conch Cement Co. Ltd.     7,228,654     $ 18,314  
Anhui Conch Cement Co. Ltd. (Hong Kong)     2,507,000       8,604  
Bank of China Ltd. (Hong Kong)     158,438,724       70,936  
Baoxin Auto Group Ltd. (Hong Kong)     30,820,500       26,007  
Beijing Enterprises Holdings Ltd. (Hong Kong)     9,241,000       87,457  
China Everbright International Ltd. (Hong Kong)     35,934,000       51,371  
China High Speed Transmission Equipment Group Co., Ltd. (Hong Kong)1     39,390,600       26,225  
China Longyuan Power Group Corp., Ltd. (Hong Kong)     15,046,000       16,326  
China Mengniu Dairy Co. (Hong Kong)     21,146,000       97,812  
China Modern Dairy Holdings Ltd. (Hong Kong)1     72,872,000       28,677  
China Overseas Grand Oceans Group, Ltd. (Hong Kong)     9,390,100       5,815  
China Overseas Land & Investment Ltd. (Hong Kong)     37,058,000       89,891  
China Pacific Insurance (Group) Co., Ltd.     3,727,343       10,686  
China Pacific Insurance (Group) Co., Ltd. (Hong Kong)     20,652,800       72,881  
China Resources Land Ltd. (Hong Kong)     32,673,000       59,778  
China Shenhua Energy Co., Ltd.     392,200       919  
China Shineway Pharmaceutical Group Ltd. (Hong Kong)     3,765,000       6,607  
China Unicom Ltd. (Hong Kong)     39,451,836       60,982  
China Yongda Automobiles Services Holdings Ltd. (Hong Kong)     7,602,500       6,749  
CSR Corp. Ltd. (Hong Kong)     51,647,000       38,850  
EVA Precision Industrial Holdings Ltd. (Hong Kong)     55,058,000       12,645  

 

8 Emerging Markets Growth Fund
 
    Shares     Value
(000)		  
First Tractor Co. Ltd. (Hong Kong)     11,974,000     $ 7,848  
Fu Ji Food and Catering Services Holdings Ltd. (Hong Kong)1     1,019,572       166  
Goodbaby International Holdings Ltd. (Hong Kong)     26,428,000       13,026  
Guangdong Investment Ltd. (Hong Kong)     7,308,000       8,430  
Haitian International Holdings Ltd. (Hong Kong)     20,953,000       48,933  
Hefei Rongshida Sanyo Electric Co., Ltd.     5,399,904       11,296  
Honghua Group Ltd. (Hong Kong)     69,068,000       17,110  
Industrial and Commercial Bank of China Ltd.     10,092,300       5,514  
Industrial and Commercial Bank of China Ltd. (Hong Kong)     60,510,708       38,256  
Jiangsu Hengli Highpressure Oil Cylinder Co., Ltd.     7,316,586       10,919  
Jiangsu Hengrui Medicine Co., Ltd.     2,344,925       12,531  
Lenovo Group Ltd. (Hong Kong)     31,702,000       43,276  
Longfor Properties Co., Ltd. (Hong Kong)     35,380,000       43,595  
MicroPort Scientific Corp. (Hong Kong)1     11,374,000       7,338  
Mindray Medical International Ltd. (ADR)     483,100       15,218  
Minth Group Ltd. (Hong Kong)     25,130,000       48,831  
New Oriental Education & Technology Group, Inc. (ADR)     983,600       26,134  
Nine Dragons Paper (Holdings) Ltd. (Hong Kong)     10,885,300       7,402  
Sany Heavy Equipment International Holdings Co., Ltd. (Hong Kong)1     43,311,000       9,612  
Shandong Weigao Group Medical Polymer Co., Ltd. (Hong Kong)     7,661,800       7,483  
Shanghai Pharmaceutical (Group) Co., Ltd. (Hong Kong)     5,366,000       11,161  
Shenguan Holdings Group Ltd. (Hong Kong)     45,800,000       19,324  
Sino Biopharmaceutical Ltd. (Hong Kong)     19,544,000       15,836  
Sinofert Holdings Ltd. (Hong Kong)1     105,644,000       14,312  
Tencent Holdings Ltd. (Hong Kong)     363,500       5,544  
Want Want China Holdings Ltd. (Hong Kong)     4,527,000       6,507  
Weichai Power Co., Ltd. (Hong Kong)     14,211,040       54,916  
Zhongsheng Group Holdings Ltd. (Hong Kong)     42,784,000       55,754  
Zhuzhou CSR Times Electric Co., Ltd. (Hong Kong)1     8,316,500       25,270  
              1,389,074  
Hong Kong 7.5%                
AIA Group Ltd.     17,447,000       87,681  
ASM Pacific Technology Ltd.     1,290,000       14,098  
Cheung Kong Infrastructure Holdings Ltd.     6,089,000       41,992  
Chow Sang Sang Holdings International Ltd.     5,273,800       13,201  
Galaxy Entertainment Group Ltd.     5,533,000       44,262  
Hilong Holding Ltd.     12,984,000       6,450  
Jardine Matheson Holdings Ltd.     122,800       7,283  
Melco Crown Entertainment Ltd. (ADR)     2,480,500       88,579  
Samsonite International SA     25,161,900       82,949  
SJM Holdings Ltd.     5,085,000       12,741  
Stella International Holdings Ltd.     2,608,000       7,083  
VTech Holdings Ltd.     301,600       4,008  
Wynn Macau, Ltd.     19,558,400       76,715  
              487,042  

 

Emerging Markets Growth Fund 9
 
Equity securities (continued)            
Asia-Pacific (continued)   Shares     Value
(000)		  
India 12.6%            
Apollo Hospitals Enterprise Ltd.     1,715,286     $ 28,378  
Apollo Hospitals Enterprise Ltd. (GDR)2     239,100       3,956  
Bajaj Auto Ltd.     454,706       17,511  
Bharat Electronics Ltd.     380,971       13,626  
Bharti Airtel Ltd.1     23,244,588       130,204  
Cox and Kings Ltd. (GDR)     269,809       954  
CRISIL Ltd.     104,294       3,107  
Emami Ltd.     1,343,943       11,347  
Glenmark Pharmaceuticals Ltd.     4,045,616       38,347  
HDFC Bank Ltd.     4,592,698       62,734  
HDFC Bank Ltd. (ADR)     7,100       332  
Housing Development Finance Corp. Ltd.1     3,290,853       54,308  
ICICI Bank Ltd.1     2,004,666       47,268  
ICICI Bank Ltd. (ADR)     1,573,100       78,497  
Info Edge (India) Ltd.     868,557       9,733  
Infosys Ltd.     1,409,688       76,304  
ITC Ltd.     1,509,680       8,159  
Jain Irrigation Systems Ltd.     1,822,511       3,626  
Jain Irrigation Systems Ltd. (DVR)     342,509       475  
Kotak Mahindra Bank Ltd.     911,299       13,387  
Larsen & Toubro Ltd.     363,600       10,287  
Steel Authority of India Ltd.     20,960,118       33,089  
Sun Pharmaceutical Industries Ltd.     4,898,933       56,035  
Tata Steel Ltd.     7,415,494       65,148  
Tech Mahindra Ltd.     378,479       13,542  
Thermax Ltd.     331,403       5,174  
United Spirits Ltd.     206,824       8,239  
VA Tech Wabag Ltd.     1,168,663       25,803  
              819,570  
                 
Indonesia 1.8%                
PT Agung Podomoro Land Tbk     325,451,700       7,687  
PT Bank Mandiri (Persero) Tbk, Series B     28,659,592       23,510  
PT Bank Rakyat Indonesia (Persero) Tbk     32,355,700       28,180  
PT Elang Mahkota Teknologi Tbk     44,456,400       21,000  
PT Surya Citra Media Tbk     119,675,000       36,190  
              116,567  
                 
Malaysia 3.1%                
Bumi Armada Bhd.     41,637,600       44,088  
CIMB Group Holdings Bhd.     28,512,485       64,999  
Genting Bhd.     4,990,100       15,525  
Genting Bhd., warrants, expires 12/18/181     2,194,675       1,962  
IHH Healthcare Bhd.     22,237,700       30,334  
IJM Corp. Bhd.     19,773,354       41,259  
Naim Cendera Holdings Bhd.     4,742,000       6,335  
StemLife Bhd.     10,645,350       1,508  
              206,010  

 

10 Emerging Markets Growth Fund
 
    Shares     Value
(000)		  
Philippines 0.8%                
Bayan Telecommunications Holdings Corp., Class A (acquired 2/12/98, cost: $1,850,000)1,3     724,790     $ —  
Bayan Telecommunications Holdings Corp., Class B (acquired 2/12/98, cost: $616,000)1,3     241,431       —  
Energy Development Corp.     111,951,924       16,158  
International Container Terminal Services, Inc.     12,668,258       32,215  
Philippine Airlines, Inc. (acquired 3/31/97, cost: $0)1,3     68,631,450       —  
SM Investments Corp.     262,590       4,909  
              53,282  
Singapore 0.9%                
CapitaRetail China Trust     7,132,560       8,466  
KrisEnergy Ltd.1     10,391,000       6,750  
Olam International Ltd.     7,905,868       16,358  
Olam International Ltd., warrants, expires 1/29/181,2     433,783       278  
Yoma Strategic Holdings Ltd.     46,026,000       26,392  
              58,244  
South Korea 9.2%                
AMOREPACIFIC Corp.     10,564       15,912  
Daum Communications Corp.     231,200       26,735  
Hana Financial Group Inc.     1,103,790       40,909  
Hyundai Engineering & Construction Co., Ltd.     451,872       25,724  
Hyundai Mobis Co., Ltd.     514,353       144,373  
Hyundai Motor Co.     280,044       63,520  
Korea Electric Power Corp.     1,278,710       47,140  
LG Household & Health Care Ltd.     46,878       21,104  
LG Uplus Corp.     1,920,370       17,499  
OCI Co. Ltd.1     299,851       50,973  
Orion Corp.     11,369       10,416  
Samsung Electronics Co., Ltd.     21,062       27,519  
Samsung Electronics Co., Ltd. (GDR)2     171,928       111,066  
              602,890  
Taiwan 5.3%                
AirTAC International Group     2,779,810       29,932  
CTCI Corp.     19,302,000       33,422  
Delta Electronics, Inc.     10,588,348       77,131  
MediaTek Inc.     5,246,000       88,728  
Merida Industry Co., Ltd.     1,046,000       6,937  
Taiwan Cement Corp.     8,297,000       12,560  
Taiwan Semiconductor Manufacturing Co. Ltd.     20,246,568       85,779  
Yungtay Engineering Co., Ltd.     5,227,000       12,429  
              346,918  
Thailand 2.1%                
Advanced Info Service PCL     1,250,400       8,476  
Bangkok Bank PCL, nonvoting depository receipt     18,792,500       111,753  
Kasikornbank PCL, nonvoting depository receipt     2,379,800       14,959  
              135,188  

 

Emerging Markets Growth Fund 11
 

Equity securities (continued)

 

Latin America 11.8%   Shares     Value
(000)		  
Argentina 0.3%                
Grupo Financiero Galicia SA, Class B     5     $ —  
YPF Sociedad Anónima, Class D (ADR)     465,800       15,222  
              15,222  
                 
Brazil 6.9%                
Banco Bradesco SA, preferred nominative (ADR)     4,585,830       66,586  
Banco BTG Pactual SA, units     1,121,800       17,465  
BRF SA, ordinary nominative     202,175       4,886  
BRF SA, ordinary nominative (ADR)     580,900       14,122  
CCR SA, ordinary nominative     3,690,800       30,068  
Cia. Energética de Minas Gerais – CEMIG, preferred nominative (ADR)     577,000       4,610  
Gerdau SA (ADR)     7,538,000       44,399  
Hypermarcas SA, ordinary nominative1     10,333,800       90,032  
Itaú Unibanco Holding SA, preferred nominative (ADR)     4,585,614       65,941  
Mills Estruturas e Serviços de Engenharia SA, ordinary nominative     2,310,000       27,109  
Oi SA, ordinary nominative     82,536       78  
Oi SA, ordinary nominative (ADR)     254,256       246  
QGEP Participações SA, ordinary nominative     6,024,300       24,539  
TIM Participações SA, ordinary nominative     1,128,500       6,599  
TIM Participações SA, ordinary nominative (ADR)     71,900       2,087  
Usinas Siderúrgicas de Minas Gerais SA – Usiminas, Class A, preferred nominative1     4,006,000       13,743  
Vale SA, Class A, preferred nominative     394,700       4,707  
Vale SA, Class A, preferred nominative (ADR)     282,000       3,356  
Vale SA, ordinary nominative (ADR)     702,800       9,298  
Wilson Sons Ltd. (BDR)     1,334,100       21,133  
              451,004  
                 
Chile 1.1%                
Enersis SA     16,189,523       5,469  
Enersis SA (ADR)     1,941,550       32,715  
Inversiones La Construcción SA     1,948,202       23,526  
Ripley Corp SA     12,800,419       8,425  
              70,135  
                 
Mexico 3.4%                
CEMEX, SAB de CV, ordinary participation certificates, units (ADR)1     4,852,954       64,205  
Fibra Uno Administración, SA de CV     11,855,700       41,370  
Grupo Comercial Chedraui, SAB de CV, Class B     2,453,300       8,583  
Grupo Famsa, SAB de CV, Class A1     3,020,131       3,906  
Grupo Financiero Inbursa, SAB de CV     6,369,340       18,892  
Grupo Sanborns, SAB de CV, Series B1     8,522,500       15,713  
Impulsora del Desarrollo y el Empleo en América Latina, SA de CV, Series B-11     21,708,144       63,584  
Minera Frisco, SAB de CV, ordinary participation certificate, Series A11     3,019,466       5,949  
Urbi, Desarrollos Urbanos, SA de CV (Mexico)1     1,046,737       61  
              222,263  
                 
Peru 0.1%                
Graña y Montero SAA (ADR)     454,000       8,190  

 

12 Emerging Markets Growth Fund
 
Eastern Europe and Middle East 8.4%   Shares     Value
(000)		  
Greece 0.3%                
Eurobank Ergasias SA1     24,029,281     $ 12,141  
Jumbo SA1     601,638       9,853  
              21,994  
                 
Israel 0.6%                
Bezeq – The Israel Telecommunication Corp. Ltd.     14,725,664       27,593  
Shufersal Ltd.     2,567,201       8,372  
              35,965  
                 
Oman 0.4%                
bank muscat (SAOG)     15,444,678       27,279  
                 
Russia 6.8%                
Baring Vostok Private Equity Fund, LP (acquired 12/15/00, cost: $5,815,000)3,4,5,6     11,783,118       37,136  
Baring Vostok Private Equity Fund III, LP (acquired 3/30/05, cost: $18,114,000)3,4,5     23,512,961       41,966  
Baring Vostok Private Equity Fund IV, LP (acquired 4/25/07, cost: $17,957,000)1,3,4,5,6     19,872,252       21,857  
Baring Vostok Fund IV Supplemental Fund, LP (acquired 10/8/07, cost: $31,012,000)1,3,4,5,6     33,991,738       42,728  
Etalon Group Ltd. (GDR)     232,262       1,031  
Etalon Group Ltd. (GDR)2     301,420       1,337  
Globaltrans Investment PLC (GDR)     249,985       2,862  
New Century Capital Partners, LP (acquired 12/7/95, cost: $951,000)1,3,5     5,247,900       2,735  
OAO TMK (GDR)     445,005       4,317  
OJSC Alrosa1     37,574,769       46,229  
OJSC Magnit     29,300       7,641  
OJSC Magnit (GDR)     177,810       10,491  
OJSC MegaFon (GDR)1     74,300       2,340  
OJSC Moscow Exchange1     9,593,013       19,045  
OJSC Rosneft Oil Co. (GDR)1     5,141,100       37,607  
OJSC Rostelecom1     1,488,022       3,780  
OJSC Rostelecom (ADR)1     616,448       9,463  
OJSC Rostelecom, preference shares1     1,169,283       2,104  
OJSC Surgutneftegas1     8,674,425       7,149  
Sberbank of Russia1     5,018,180       12,481  
Yandex NV, Class A1     3,560,200       126,885  
              441,184  
                 
Turkey 0.0%                
Aktaş Elektrik Ticaret AŞ1     4,273       —  
                 
United Arab Emirates 0.3%                
DP World Ltd.     1,138,619       22,431  
                 
Africa 1.9%                
South Africa 1.9%                
Barloworld Ltd.     2,237,432       21,301  
Discovery Ltd.     407,623       3,724  
Mr Price Group Ltd.     188,285       3,201  
MTN Group Ltd.     1,154,320       24,312  
Naspers Ltd., Class N     225,748       26,576  

 

Emerging Markets Growth Fund 13
 

Equity securities (continued)

 

Eastern Europe and Middle East (continued)   Shares     Value
(000)		  
South Africa (continued)                
Shoprite Holdings Ltd.     2,707,900     $ 39,212  
Telkom SA SOC Ltd.1     1,591,800       6,840  
              125,166  
                 
Other markets 9.6%                
Australia 1.3%                
Oil Search Ltd.     9,302,241       84,821  
                 
Austria 0.4%                
Vienna Insurance Group     552,924       29,596  
                 
Canada 1.5%                
Centerra Gold Inc.     4,354,000       27,461  
First Quantum Minerals Ltd.     3,224,633       68,962  
              96,423  
                 
Italy 0.2%                
Tenaris SA (ADR)     350,400       16,521  
                 
Netherlands 0.7%                
Fugro NV, depository receipts     764,398       43,767  
                 
Switzerland 0.6%                
Dufry AG1     200,991       36,536  
                 
United Kingdom 2.6%                
Anglo American PLC     109,917       2,690  
Glencore PLC1     7,541,352       42,016  
Global Ports Investments PLC (GDR)     716,349       7,701  
Global Ports Investments PLC (GDR)2     1,651,654       17,755  
Ophir Energy PLC1     6,702,262       25,269  
Petra Diamonds Ltd. (CDI)1     2,149,150       6,926  
PZ Cussons PLC     648,066       3,843  
SABMiller PLC     150,303       8,715  
Sedibelo Platinum Mines Ltd.1     16,963,500       10,966  
Standard Chartered PLC     1,540,682       31,481  
Tullow Oil PLC     982,318       14,349  
              171,711  
                 
United States of America 2.3%                
AES Corp.     913,256       14,201  
Arcos Dorados Holdings Inc., Class A     3,287,000       36,814  
Cobalt International Energy, Inc.1     3,752,793       68,864  
Ctrip.com International, Ltd. (ADR)1     135,773       8,695  
MercadoLibre, Inc.     208,100       19,853  
              148,427  
                 
Multinational 0.4%                
Capital International Private Equity Fund IV, LP (acquired 3/29/05, cost: $16,375,000)3,4,5,6     50,616,424       21,163  
International Hospital Corp. Holding NV, Class A (acquired 9/25/97, cost: $8,011,000)1,3,4     609,873       268  
International Hospital Corp. Holding NV, Class B, convertible preferred (acquired 2/12/07, cost: $3,504,000)1,3,4     622,354       274  
Pan-African Investment Partners II Ltd., Class A, preferred (acquired 6/20/08, cost: $8,068,000)1,3,4,5     3,800       3,519  
              25,224  
Total equity securities (cost: $4,938,275,000)             6,308,644  

 

14 Emerging Markets Growth Fund
 

Bonds & notes

 

Latin America 0.0%   Principal amount
(000)		     Value
(000)		  
Brazil 0.0%                
Marfrig Holdings (Europe) BV 8.375%, 5/9/18   $ 985     $ 1,052  
Marfrig Overseas Ltd. 9.50%, 5/4/20     1,272       1,380  
              2,432  
                 
Asia-Pacific 0.0%                
China 0.0%                
Fu Ji Food and Catering Services Holdings Ltd. 0.00% convertible, 10/18/207   CNY 93,400       —  
                 
                 
Eastern Europe and Middle East 0.0%                
Oman 0.0%                
bank muscat (SAOG) 4.50% convertible, 3/20/16   OMR 212       60  
bank muscat (SAOG) 4.50% convertible, 3/20/17     2,746       763  
              823  
                 
Total bonds & notes (cost: $2,613,000)             3,255  

 

Short-term securities

 

Corporate short-term notes 1.6%                
Jupiter Securitization Co. LLC 0.08% due 7/1/142   $ 17,035       17,035  
Sumitomo Mitsui Banking Corp. 0.07% due 7/7/142     45,100       45,099  
USAA Capital Corp. 0.06% due 7/2/14     45,600       45,600  
                 
Discount notes 1.1%                
Federal Home Loan Bank 0.09% due 12/10/14     29,850       29,842  
Federal National Mortgage Association 0.08% due 12/3-12/10/14     39,070       39,060  
Total short-term securities (cost: $176,629,000)             176,636  
                 
Total investment securities (cost: $5,117,517,000)             6,488,535  
Other assets less liabilities (including forward currency contracts)             37,919  
                 
Net assets           $ 6,526,454  

 

1 Security did not produce income during the last 12 months.
2 Acquired in a transaction exempt from registration under Rule 144A or section 4(2) of the Securities Act of 1933 (not including purchases of securities that were publicly offered in the primary local market but were not registered under U.S. securities laws). May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $196,526,000, which represented 3.01% of the net assets of the fund.
3 Acquired through a private placement transaction exempt from registration under the Securities Act of 1933. These securities, acquired at a cost of $112,273,000, may be subject to legal or contractual restrictions on resale. The total value of all such securities was $171,646,000, which represented 2.63% of the net assets of the fund.
4 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. Capital International Private Equity Fund IV, LP is also considered an affiliate since this issuer has the same investment adviser as the fund.
5 Cost and market value do not include prior distributions to the fund from income or proceeds realized from securities held by the private equity fund. Therefore, the cost and market value may not be indicative of the private equity fund’s performance. For private equity funds structured as limited partnerships, shares are not applicable and therefore the fund’s interest in the partnerships is reported.
6 Excludes an unfunded capital commitment representing an agreement which obligates the fund to meet capital calls in the future. Capital calls can only be made if and when certain requirements have been fulfilled; thus, the timing and the amount of such capital calls cannot readily be determined.
7 Scheduled interest and/or principal payment was not received.

 

Key to abbreviations

 

Securities:

 

  ADR — American Depositary Receipts
  BDR — Brazilian Depositary Receipts
  CDI — CREST Depository Interest
  DVR — Differential Voting Rights
  GDR — Global Depositary Receipts

 

Currency:

 

  CNY — Chinese renminbi
  OMR — Omani rial

 

See Notes to financial statements

 

Emerging Markets Growth Fund 15
 

Financial statements

 

Statement of assets and liabilities  
at June 30, 2014 (dollars in thousands, except per-share data)

 

Assets:                
Investment securities, at value:                
Unaffiliated issuers (cost: $5,008,661)   $ 6,319,624          
Affiliated issuers (cost: $108,856)     168,911     $ 6,488,535  
Cash             594  
Cash denominated in non-U.S. currency (cost: $2,781)             2,787  
Receivables for:                
Sales of investments     38,252          
Sales of fund’s shares     325          
Dividends and interest     24,087          
Non-U.S. taxes     2,112       64,776  
              6,556,692  
Liabilities:                
Unrealized depreciation on open forward currency contracts             1,782  
Payables for:                
Purchases of investments     22,510          
Investment advisory services     3,602          
Directors’ compensation     1,822          
Other accrued expenses     522       28,456  
              30,238  
Net assets at June 30, 2014:                
Equivalent to $7.97 per share on 819,248,383 shares of $0.01 par value capital stock outstanding (authorized capital stock – 2,000,000,000 shares)           $ 6,526,454  
                 
Net assets consist of:                
Capital paid in on shares of stock           $ 5,201,009  
Undistributed net investment income             17,760  
Accumulated net realized loss             (61,550 )
Net unrealized appreciation             1,369,235  
Net assets at June 30, 2014           $ 6,526,454  

 

See Notes to financial statements

 

16 Emerging Markets Growth Fund
 
Statement of operations  
for the year ended June 30, 2014 (dollars in thousands)

 

Investment income:                
Income:                
Dividends (net of non-U.S. withholding tax of $11,912; also includes $1,886 from affiliates)   $ 137,499      
Interest (net of non-U.S. withholding tax of $1; also includes $6 from affiliates)     1,036     $ 138,535  
Fees and expenses:                
Investment advisory services     56,216          
Custodian     2,779          
Registration statement and prospectus     27          
Auditing and legal     430          
Reports to shareholders     24          
Directors’ compensation     741          
Other     2,009          
Total fees and expenses             62,226  
Net investment income             76,309  
                 
Net realized gain and unrealized appreciation on investments, forward currency contracts, currency and in-kind redemptions:                
Net realized gain (loss) on:                
Investments (includes non-U.S. taxes of $(135) and $694 gain from affiliates)     90,450          
Forward currency contracts     (11,696 )        
Currency transactions     3,104          
In-kind redemptions     15,939       97,797  
Net unrealized appreciation (depreciation) on:                
Investments     886,913          
Forward currency contracts     (7,744 )        
Currency translations     224       879,393  
Net realized gain and unrealized appreciation on investments, forward currency contracts, currency and in-kind redemptions             977,190  
Net increase in net assets resulting from operations           $ 1,053,499  

 

Statements of changes in net assets  
  (dollars in thousands)

 

    Year ended June 30  
    2014     2013  
Operations:                
Net investment income   $ 76,309     $ 174,618  
Net realized gain on investments, forward currency contracts, currency transactions and in-kind redemption     97,797       506,288  
Net unrealized appreciation (depreciation) on investments, forward currency contracts and currency translations     879,393       (77,784 )
Net increase in net assets resulting from operations     1,053,499       603,122  
Dividends and distributions paid to shareholders:                
Dividends from net investment income     (114,887 )     (296,454 )
Distributions from net realized gain on investments     (344,660 )     (48,486 )
Total dividends and distributions paid to shareholders     (459,547 )     (344,940 )
Capital share transactions:                
Proceeds from shares sold: 53,493,672 and 51,896,923 shares, respectively     412,002       412,844  
Proceeds from shares issued in reinvestment of net investment income dividends and net realized gain distributions: 58,008,358 and 40,262,470 shares, respectively     447,825       322,502  
Cost of shares repurchased: 366,368,599 and 406,674,373 shares, respectively     (2,875,510 )     (3,245,702 )
Cost of shares repurchased in connection with in-kind redemption: 210,008,947 and 4,412,429 shares, respectively     (1,615,760 )     (35,255 )
Net decrease in net assets resulting from capital share transactions     (3,631,443 )     (2,545,611 )
                 
Total decrease in net assets     (3,037,491 )     (2,287,429 )
Net assets:                
Beginning of year     9,563,945       11,851,374  
End of year (including undistributed net investment income: $17,760 and $2,422, respectively)   $ 6,526,454     $ 9,563,945  

 

See Notes to financial statements

 

Emerging Markets Growth Fund 17
 

Notes to financial statements

 

1. Organization

 

Emerging Markets Growth Fund, Inc. (the “fund”) is registered under the Investment Company Act of 1940 as an open-end interval management investment company. As an open-end interval management investment company, the fund offers its shareholders the opportunity to purchase and redeem shares on a periodic basis. The fund seeks long-term growth of capital and invests primarily in common stock and other equity securities of issuers in developing countries.

 

2. Significant accounting policies

 

The fund is an investment company that applies the accounting and reporting guidance issued in Topic 946 by the U.S. Financial Accounting Standards Board. The fund’s financial statements have been prepared to comply with U.S. generally accepted accounting principles (“U.S. GAAP”). These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The fund follows the significant accounting policies described below, as well as the valuation policies described in the next section on valuation.

 

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 security 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 fixed-income securities are amortized daily over the expected life of the security.

 

Dividends and distributions to shareholders — Dividends and distributions to shareholders are recorded on the ex-dividend date.

 

Currency translation — Assets and liabilities, including investment securities, denominated in currencies other than U.S. dollars are translated into U.S. dollars at the exchange rates supplied by one or more pricing vendors on the valuation date. 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. The effects of changes in exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments in the fund’s statement of operations. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in currencies other than U.S. dollars are disclosed separately.

 

Shares issued and redeemed — The fund intends to issue shares in exchange for cash and redeem shares in cash, however, the investment adviser, at its discretion, may accept securities in exchange of fund shares or pay a redemption in whole or in part by a distribution of the fund’s portfolio securities. An issuance or redemption of shares “in-kind” is based upon the closing value of the securities as of the trade date. Realized gains/losses resulting from redemptions of shares in-kind are reflected separately in the statement of operations.

 

3. Valuation

 

Capital International, Inc., the fund’s investment adviser, values the fund’s investments at fair value as defined by U.S. GAAP. The net asset value of the fund is generally determined as of approximately 4:00 p.m. New York time on the last business day of each week and month except on any day on which the New York Stock Exchange is closed for trading.

 

Methods and inputs — The fund’s investment adviser uses the following methods and inputs to establish the fair value of the fund’s assets and liabilities. Use of particular methods and inputs may vary over time based on availability and relevance as market and economic conditions evolve.

 

Equity securities are generally valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market on which the security trades.

 

Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are generally valued at prices obtained from one or more pricing vendors. Vendors value such securities based on one or more of the inputs described in the following table. The table provides examples of inputs that are commonly relevant for valuing particular classes of fixed-income securities in which the fund is authorized to invest. However, these classifications are not exclusive and any of the inputs may be used to value any other class of fixed-income security.

 

18 Emerging Markets Growth Fund
 

Fixed-income class   Examples of standard inputs
All   Benchmark yields, transactions, bids, offers, quotations from dealers and trading systems, new issues, spreads and other relationships observed in the markets among comparable securities; and proprietary pricing models such as yield measures calculated using factors such as cash flows, financial or collateral performance and other reference data (collectively referred to as “standard inputs”)
Corporate bonds & notes; convertible securities   Standard inputs and underlying equity of the issuer
Bonds & notes of governments & government agencies   Standard inputs and interest rate volatilities

 

When the fund’s investment adviser deems it appropriate to do so (such as when vendor prices are unavailable or not deemed to be representative), fixed-income securities will be valued in good faith at the mean quoted bid and ask prices that are reasonably and timely available (or bid prices, if ask prices are not available) or at prices for securities of comparable maturity, quality and type.

 

Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are generally valued in the manner described for either equity or fixed-income securities, depending on which method is deemed most appropriate by the fund’s investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates fair value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days. Forward currency contracts are valued at the mean of representative quoted bid and ask prices, generally based on prices supplied by one or more vendors.

 

Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the fund’s investment adviser are fair valued as determined in good faith under fair valuation guidelines adopted by authority of the fund’s board of directors as further described. The investment adviser follows fair valuation guidelines, consistent with U.S. Securities and Exchange Commission rules and guidance, to consider relevant principles and factors when making fair value determinations. The investment adviser considers relevant indications of value that are reasonably and timely available to it in determining the fair value to be assigned to a particular security, such as the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions. In addition, the closing prices of equity securities that trade in markets outside U.S. time zones may be adjusted to reflect significant events that occur after the close of local trading but before the net asset value of the fund is determined. Fair valuations and valuations of investments that are not actively trading involve judgment and may differ materially from valuations that would have been used had greater market activity occurred.

 

Processes and structure — The fund’s board of directors has delegated authority to the fund’s investment adviser to make fair value determinations, subject to board oversight. The investment adviser has established a Joint Fair Valuation Committee (the “Fair Valuation Committee”) to administer, implement and oversee the fair valuation process, and to make fair value decisions. The Fair Valuation Committee regularly reviews its own fair value decisions, as well as decisions made under its standing instructions to the investment adviser’s valuation teams. The Fair Valuation Committee reviews changes in fair value measurements from period to period and may, as deemed appropriate, update the fair valuation guidelines to better reflect the results of back testing and address new or evolving issues. The Fair Valuation Committee reports any changes to the fair valuation guidelines to the audit committee with supplemental information to support the changes. The fund’s audit committee also regularly reviews reports that describe fair value determinations and methods.

 

The fund’s investment adviser has also established a Fixed-Income Pricing Review Group to administer and oversee the fixed-income valuation process, including the use of fixed-income pricing vendors. This group regularly reviews pricing vendor information and market data. Pricing decisions, processes and controls over security valuation are also subject to additional internal reviews, including an annual control self-evaluation program facilitated by the investment adviser’s compliance group.

 

Classifications — The fund’s investment adviser classifies the fund’s assets and liabilities into three levels based on the inputs used to value the assets or liabilities. Level 1 values are based on quoted prices in active markets for identical securities. Level 2 values are based on significant observable market inputs, such as quoted prices for similar securities and quoted prices in inactive markets. Certain securities trading outside the U.S. may transfer between Level 1 and Level 2 due to valuation adjustments resulting from significant market movements following the close of local trading. Level 3 values are based on significant

 

Emerging Markets Growth Fund 19
 

unobservable inputs that reflect the investment adviser’s determination of assumptions that market participants might reasonably use in valuing the securities. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. For example, U.S. government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. The following tables present the fund’s valuation levels as of June 30, 2014 (dollars in thousands):

 

    Investment securities  
    Level 1     Level 21     Level 31     Total  
Assets:                                
Equity securities:                                
Asia-Pacific   $ 4,184,072     $ 30,713     $ —     $ 4,214,785  
Latin America     766,753       —       61       766,814  
Eastern Europe and Middle East     402,431       —       146,422       548,853  
Other markets     742,002       —       36,190       778,192  
Bonds & notes     —       3,255       —       3,255  
Short-term securities     —       176,636       —       176,636  
Total   $ 6,095,258     $ 210,604     $ 182,673     $ 6,488,535  
                                 
    Other investments2  
    Level 1     Level 2     Level 3     Total  
Liabilities:                                
Unrealized depreciation on open forward currency contracts   $ —     $ (1,782 )   $ —     $ (1,782 )
                                 
1 Level 2 and Level 3 include investment securities with an aggregate value of $213,386,000, which represented 3.27% of the net assets of the fund, that were fair valued under guidelines adopted by authority of the fund’s board of directors.
2 Forward currency contracts are not included in the investment portfolio.

 

The following table reconciles the valuation of the fund’s Level 3 investment securities and related transactions during the year ended June 30, 2014 (dollars in thousands):

 

    Beginning
value at
7/1/2013		     Gross
transfers
into Level 33		     Purchases     Sales     Net
realized
gain/(loss)4		     Net
unrealized
appreciation4		     Gross
transfers out
of Level 33		     Ending
value at
6/30/2014		  
Private equity funds   $ 173,358     $ —     $ 4,093     $ (29,606 )   $ 17,437     $ 5,822     $ —     $ 171,104  
Other securities5     46,043       1,181       958       (26,013 )     (92,979 )     91,368       (8,989 )     11,569  
Total   $ 219,401     $ 1,181     $ 5,051     $ (55,619 )   $ (75,542 )   $ 97,190     $ (8,989 )   $ 182,673  
         
Net unrealized appreciation during the period on Level 3 investment securities held at June 30, 2014 (dollars in thousands):   $ 13,407  
         
3 Transfers into and out of Level 3 are based on the beginning market value of the quarter in which they occurred.
4 Net realized gain/(loss) and unrealized appreciation are included in the related amounts on investments in the statement of operations.
5 Represents less than 1% of portfolio securities as of June 30, 2014.

 

The fund owns an interest in multiple private equity funds, which are considered alternative investments and are classified as Level 3 investment securities. The private equity funds are fair valued using the net asset value based on the fund’s financial statements adjusted for known company or market events, updated market pricing for underlying securities, and/or fund transactions (i.e., drawdowns and distributions) and may include other unobservable inputs.

 

The other unobservable inputs used in the fair value measurements of the reporting entity’s private equity funds are directional adjustments based on relevant market data (such as significant movement of a country-specific exchange-traded fund or index after the financial statement date of the private equity fund). Significant increases (decreases) of these inputs could result in significantly higher (lower) fair value measurements. There were no other adjustments to significant unobservable inputs as of June 30, 2014.

 

20 Emerging Markets Growth Fund
 

The following table lists the characteristics of the alternative investments held by the fund as of June 30, 2014 (dollars in thousands):

 

Investment type   Investment strategy   Fair value   Unfunded commitment*   Remaining life†   Redemption terms
Private equity funds   Primarily private sector equity investments (i.e., expansion capital, buyouts) in emerging markets   $171,104   $11,041   ≤1 to 4 years   Redemptions are not permitted. These funds distribute proceeds from the liquidation of underlying assets of the funds.
                       
* 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.
† Represents the remaining life of the fund term or the estimated period of liquidation.

 

4. Risk factors

 

Investing in the fund may involve certain risks including, but not limited to, those described below.

 

Market conditions — The prices of, and the income generated by, the common stocks and other securities held by the fund may decline due to market conditions and other factors, including those directly involving the issuers of securities held by the fund.

 

Investing in growth-oriented stocks — Growth-oriented stocks may involve larger price swings and greater potential for loss than other types of investments. These risks may be even greater in the case of smaller capitalization stocks.

 

Investing outside the United States — Securities of issuers domiciled outside the United States, or with significant operations outside the United States, may lose value because of political, social, economic or market developments in the countries or regions in which the issuer operates. These securities may also lose value due to changes in foreign currency exchange rates against the U.S. dollar and/or currencies of other countries. Securities markets in certain countries may be more volatile and/or less liquid than those in the United States. Investments outside the United States may also be subject to different settlement and accounting practices and different regulatory, legal and reporting standards, and may be more difficult to value, than those in the United States. The risks of investing outside the United States may be heightened in connection with investments in developing countries.

 

Investing in developing countries — Investing in countries with developing economies and/or markets may involve risks in addition to and greater than those generally associated with investing in developed countries. For instance, developing countries may have less developed legal and accounting systems than those in developed countries. The governments of these countries may be less stable and more likely to impose capital controls, nationalize a company or industry, place restrictions on foreign ownership and on withdrawing sale proceeds of securities from the country, and/or impose punitive taxes that could adversely affect the prices of securities. In addition, the economies of these countries may be dependent on relatively few industries that are more susceptible to local and global changes. Securities markets in these countries can also be relatively small and have substantially lower trading volumes. As a result, securities issued in these countries may be more volatile and less liquid, and may be more difficult to value, than securities issued in countries with more developed economies and/or markets. Additionally, there may be increased settlement risks for transactions in local securities.

 

Management — The investment adviser to the fund actively manages the fund’s investments. Consequently, the fund is subject to the risk that the methods and analyses employed by the investment adviser in this process may not produce the desired results. This could cause the fund to lose value or its investment results to lag relevant benchmarks or other funds with similar objectives.

 

5. Certain investment techniques

 

Forward currency contracts — The fund has entered into over-the–counter (“OTC”) forward currency contracts, which represent agreements to exchange currencies on specific future dates at predetermined rates. The fund’s investment adviser uses forward currency contracts to manage the fund’s exposure to changes in exchange rates. 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 exchange rates.

 

Emerging Markets Growth Fund 21
 

On a daily basis, unrealized appreciation or depreciation for open forward currency contracts is recorded in the fund’s statement of assets and liabilities. Realized gains or losses are recorded at the time the forward currency contract is closed or offset by another contract with the same broker for the same settlement date and currency. Closed forward currency contracts that have not reached their settlement date are included in the respective receivables or payables for closed forward currency contracts in the fund’s statement of assets and liabilities. Net realized gains or losses from closed forward currency contracts and net unrealized appreciation or depreciation from open forward currency contracts are recorded in the fund’s statement of operations and statements of changes in net assets.

 

As of June 30, 2014, the fund had open OTC forward currency contracts to sell currencies, as shown in the following table. The average notional amount of open OTC forward currency contracts was $222,344,000 over the prior 12-month period.

 

        Notional amount
(000)		     U.S. valuation
(000)		  
    Counterparty   Non-U.S.   U.S.     Amount     Unrealized
depreciation		  
Sales:                                
Brazilian real to U.S. dollar expiring 7/16/2014   Citibank N.A.   BRL86,558   $ 38,510     $ 39,009     $ (499 )
British pound to U.S. dollar expiring 7/21/2014   Bank of New York Mellon   GBP30,353     51,417       51,938       (521 )
Euro to U.S. dollar expiring 7/21/2014   Bank of America   EUR29,796     40,346       40,803       (457 )
Euro to U.S. dollar expiring 7/21/2014   Bank of America   EUR11,209     15,281       15,349       (68 )
Mexican peso to U.S. dollar expiring 7/16/2014   Bank of New York Mellon   MXN443,708     33,969       34,163       (194 )
Mexican peso to U.S. dollar expiring 7/16/2014   JPMorgan Chase   MXN109,526     8,390       8,433       (43 )
Forward currency contracts — net                           $ (1,782 )

 

Rights of offset — The fund has entered into enforceable master netting agreements with certain counterparties for forward currency contracts, where amounts payable by each party to the other in the same currency with the same settlement date and with the same counterparty are settled net of each party’s payment obligation. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to netting arrangements in the statement of assets and liabilities.

 

The following table presents the fund’s forward currency contracts by counterparty, including those that are subject to potential offset on the statement of assets and liabilities as of June 30, 2014 (dollars in thousands):

 

              Gross amounts not offset in the statement
of assets and liabilities and subject
to a master netting agreement		  
    Counterparty   Gross amounts
recognized in
the statement of
assets and liabilities		     Available
to offset		     Non-cash
collateral*		     Cash
collateral		     Net
amount		  
Liabilities                                          
Forwards                                          
    Bank of America   $ (525 )   $ —     $ —     $ —   $ (525 )
    Bank of New York Mellon     (715 )     —       —       —     (715 )
    Citibank N.A.     (499 )     —       —       —     (499 )
    JPMorgan Chase     (43 )     —       —       —     (43 )
        $ (1,782 )   $ —     $ —     $ —   $ (1,782 )

 

* Non-cash collateral is shown on a settlement basis.

 

6. Taxation and distributions

 

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. Therefore, no federal income tax provision is required.

 

22 Emerging Markets Growth Fund
 

As of and during the year ended June 30, 2014, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any interest or penalties.

 

The fund is not subject to examination by U.S. federal tax authorities for tax years before 2010, by state authorities for tax years before 2009 and by tax authorities outside the U.S. for tax years before 2007.

 

Non-U.S. taxation — Dividend and interest income are 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. When the fund is taxed on either realized and/or unrealized capital gains, the fund will accrue for non-U.S. taxes as applicable. As of June 30, 2014, the fund did not accrue any liabilities for non-U.S. taxes on realized and unrealized gains.

 

Distributions — Distributions paid to shareholders 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 different treatment for items such as currency gains and losses; short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; cost of investments sold; unrealized appreciation of certain investments in securities outside the U.S; and income on certain investments.

 

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 for financial reporting purposes. For the year ended June 30, 2014, the tax character of distributions paid to shareholders were ordinary income and long-term capital gain in the amounts of $114,887,000 and $344,660,000, respectively. For the year ended June 30, 2013, the tax character of distributions paid to shareholders were ordinary income and long-term capital gain in the amounts of $296,454,000 and $48,486,000, respectively.

 

During the year ended June 30, 2014, the fund reclassified $61,635,000 from accumulated net realized gain to undistributed net investment income and $7,719,000 from undistributed net investment income and $17,851,000 from accumulated net realized gain to capital paid in on shares of capital stock to align financial reporting with tax reporting.

 

As of June 30, 2014, the tax basis components of distributable earnings were as follows (dollars in thousands):

 

Undistributed ordinary income   $ 70,540  
Undistributed long-term capital gain     3,217  

 

As of June 30, 2014, the tax basis unrealized appreciation (depreciation) and cost of investment securities were as follows (dollars in thousands):

 

Gross unrealized appreciation on investment securities   $ 1,772,470  
Gross unrealized depreciation on investment securities     (519,027 )
Net unrealized appreciation on investment securities     1,253,443  
Cost of investment securities     5,235,092  

 

7. Fees and transactions with related parties

 

Capital International, Inc. (the “Adviser”) is the fund’s investment adviser. American Funds Distributors®, Inc. (“AFD”), the fund’s principal underwriter, is affiliated with the Adviser. The Adviser and AFD are considered related parties to the fund.

 

Investment advisory services — The fund has an Investment Advisory and Service Agreement with the Adviser that provides for monthly management fees accrued weekly. The Adviser is wholly owned by Capital Group International, Inc., which is wholly owned by The Capital Group Companies,sm 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 assets in excess of $400 million but not exceeding $1 billion; 0.70% of assets in excess of $1 billion but not

 

Emerging Markets Growth Fund 23
 

exceeding $2 billion; 0.65% of assets in excess of $2 billion but not exceeding $4 billion; 0.625% of assets in excess of $4 billion but not exceeding $6 billion; 0.60% of assets in excess of $6 billion but not exceeding $8 billion; 0.58% of assets in excess of $8 billion but not exceeding $11 billion; 0.56% of assets in excess of $11 billion but not exceeding $15 billion; 0.54% of assets in excess of $15 billion but not exceeding $20 billion; and 0.52% of assets in excess of $20 billion.

 

Distribution services — The fund has a principal underwriting agreement with AFD. AFD does not receive compensation for any sale of the fund’s shares.

 

Directors’ compensation — Directors who are unaffiliated with the Adviser 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 fund’s statement of operations includes $709,000 in current fees (either paid in cash or deferred) and a net increase of $32,000 in the value of the deferred amounts.

 

Affiliated officers and directors — Officers and certain directors of the fund are or may be considered to be affiliated with the Adviser. No affiliated officers or directors received any compensation directly from the fund.

 

8. Investment transactions and other disclosures

 

The fund made purchases and sales of investment securities, excluding short-term securities, of $3,358,012,000 and $7,061,792,000, respectively, during the year ended June 30, 2014.

 

The fund receives an expense reduction in its custodian fee equal to the amount of interest calculated on certain cash balances held at the custodian bank. For the year ended June 30, 2014, the custodian fee of $2,779,000 was reduced by less than one thousand dollars.

 

9. Investments in 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, Capital International Private Equity Fund IV, LP is considered an affiliate since this issuer has the same investment adviser as the fund. A summary of the fund’s transactions in the securities of affiliated issuers during the year ended June 30, 2014, is as follows (dollars in thousands):

 

Issuer   Beginning
 shares		     Purchases/
 Additions		     Sales/
Reductions		     Ending
shares		     Dividend
and interest
income		     Value  
Affiliated private equity funds/private placements:                                                
Baring Vostok Private Equity Fund*     11,783,118       —       —       11,783,118     $ 323     $ 37,136  
Baring Vostok Private Equity Fund III*     23,126,061       386,900       —       23,512,961       284       41,966  
Baring Vostok Capital Partners IV*     50,603,377       3,260,613       —       53,863,990       —       64,585  
Capital International Private Equity Fund IV*     50,451,941       164,483       —       50,616,424       230       21,163  
International Hospital     1,232,227       —       —       1,232,227       —       542  
Pan-African Investment Partners II     3,800       —       —       3,800       —       3,519  
                                                 
Unaffiliated issuers†:                                                
Daum Communications Corp.     803,173       —       571,973       231,200       755          
StemLife     12,497,850       —       1,852,500       10,645,350       119          
VA Tech Wabag     1,584,552       —       415,889       1,168,663       181          
                                    $ 1,892      $ 168,911  

 

* For private equity funds structured as limited partnerships, shares are not applicable and therefore the fund’s interest in the partnerships is reported.
 † Affiliated during the period but no longer affiliated at June 30, 2014.

 

10. Subsequent event

 

On July 31, 2014, the board of directors approved the conversion of the fund to an open-end, daily valued fund, as well as updates to or elimination of certain other investment policies of the fund. The proposals for the conversion and other changes to the investment policies are subject to shareholder approval at a meeting of shareholders currently scheduled for October 22, 2014.

 

24 Emerging Markets Growth Fund
 

Financial highlights

 

    Year ended June 30
    2014     2013     2012     2011     2010  
Net asset value, beginning of year   $ 7.45     $ 7.39     $ 9.93     $ 8.13     $ 6.72  
Income (loss) from investment operations*:                                        
Net investment income     .07       .12       .17       .16       .15  
Net realized and unrealized gain (loss) on investments     .86       .19       (2.33 )     1.81       1.39  
Total income (loss) from investment operations     .93       .31       (2.16 )     1.97       1.54  
                                         
Less dividends and distributions:                                        
Dividends from net investment income     (.10 )     (.21 )     (.12 )     (.17 )     (.13 )
Distributions from net realized gains     (.31 )     (.04 )     (.26 )     —       —  
Total dividends and distributions     (.41 )     (.25 )     (.38 )     (.17 )     (.13 )
Net asset value, end of year   $ 7.97     $ 7.45     $ 7.39     $ 9.93     $ 8.13  
Total return     12.69 %     3.95 %     (21.69 )%     24.29 %     22.83 %
                                         
Ratios/Supplemental data:                                        
Net assets, end of year (in millions)   $ 6,526     $ 9,564     $ 11,851     $ 16,827     $ 12,878  
Ratio of expenses to average net assets     .73 %     .73 %     .68 %     .68 %     .71 %
Ratio of net investment income to average net assets     .88 %     1.55 %     2.02 %     1.65 %     1.86 %
Portfolio turnover rate     40.65 %     40.99 %     39.30 %     40.66 %     49.38 %
                                         
* The per-share data is based on average shares outstanding.
   
Emerging Markets Growth Fund 25

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Shareholders of Emerging Markets Growth Fund, Inc.

 

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Emerging Markets Growth Fund, Inc. (the “Fund”) at June 30, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at June 30, 2014 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

PricewaterhouseCoopers LLP

 

Los Angeles, California

August 20, 2014

 

26 Emerging Markets Growth Fund
 
Expense example unaudited

 

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 six-month period (January 1, 2014 through June 30, 2014).

 

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 value
1/1/2014		     Ending
account value
6/30/2014		     Expenses
paid during
period*		     Annualized
expense
ratio		  
Actual return   $ 1,000.00     $ 1,025.74     $ 3.62       .72 %
Hypothetical 5% return before expenses     1,000.00       1,021.22       3.61       .72  

 

* The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period, and divided by 365 (to reflect the six-month period).

 

Emerging Markets Growth Fund 27
 

Approval of renewal of Investment Advisory and Service Agreement

 

The fund’s board of directors has approved the renewal of the fund’s Investment Advisory and Service Agreement (the agreement) with Capital International, Inc. (the investment adviser) for an additional one-year term through June 20, 2015, following the recommendation of the fund’s Contracts Committee (the committee), which is composed of all of the fund’s independent directors. The information, material factors and the conclusions that formed the basis for the committee’s recommendation and the board’s subsequent approval are described here.

 

1. Information received

Materials reviewed

During the course of each year, the independent directors receive a wide variety of materials relating to the services provided by the investment adviser, including reports on the fund’s investment results, portfolio composition, sales, redemptions and shareholder services, reports from the fund’s Chief Compliance Officer, as well as other information relating to the nature, extent and quality of the services provided by the investment adviser to the fund. In addition, supplementary information requested and reviewed by the committee included extensive materials regarding the fund’s investment results, advisory fee and expense comparisons, financial and consolidated profitability information regarding parent companies of the investment adviser, descriptions of compliance monitoring services and portfolio trading practices, and information about the personnel providing investment management and administrative services to the fund.

 

Review process

The committee received assistance and advice regarding legal and industry standards from independent legal counsel to the independent directors. The committee discussed the renewal of the agreement with representatives of the investment adviser and in a private session with independent counsel at which no investment adviser representatives were present. In deciding to recommend renewal, the committee did not identify any specific piece of information or any single factor that was controlling. This summary describes the most important factors, but not all of the matters considered.

 

2. Nature, extent and quality of services

Investment adviser, its personnel and its resources

The board and the committee considered the depth and quality of the investment adviser’s investment management process, including its global research capabilities and the experience, capability and integrity of its senior management and other personnel. The board and the committee considered the investment adviser’s commitment to research, noting that it continues to expend considerable effort to enhance its investment process and research coverage.

 

Other services

The board and the committee considered that the investment adviser has adopted policies, procedures and systems designed to comply with applicable laws and regulations and noted the investment adviser’s commitment to compliance; its efforts to keep the directors informed through regular reporting to the board; and its attention to matters that may involve conflicts of interest with the fund. The board and the committee also considered the nature, extent, quality and cost of administrative and shareholder services provided by the investment adviser to the fund under the agreement and other agreements, including information technology, legal and fund accounting functions. The board and the committee concluded that they were satisfied with the nature, extent and quality of the investment advisory services to be provided to the fund by the investment adviser under the agreement.

 

28 Emerging Markets Growth Fund
 

3. Investment results

The board and the committee reviewed the investment results of the fund as of December 31, 2013, and compared them to those of the fund’s benchmark, as well as to those of a selected group of funds with a similar investment mandate. The board and the committee reviewed the fund’s short-term and long-term investment results, both in absolute terms and relative to its benchmark and the selected funds. The board and the committee noted that the fund had outperformed its benchmark in the one-year period and in longer term periods, and had underperformed in the three- and five-year periods. The board and the committee also noted that the fund’s one-year and longer term performance has generally been in line with or exceeded the average one-year and longer term performance of the selected funds, while the fund’s three- and five-year performance generally lagged behind the performance of the selected funds in those periods. The board and the committee noted management’s assessment of the fund’s recent performance. The board and the committee concluded that although performance has lagged in certain prior periods, it has improved during the recent period and long-term performance has generally been satisfactory. The board and the committee concluded that they remain confident in the investment adviser’s ability to achieve superior long-term results over time.

 

4. Advisory fees and total expenses

The board and the committee compared the advisory fees and total expenses of the fund (as a percentage of average net assets) with the fees and expenses of comparable investment companies managed by the investment adviser and other comparable third-party funds, as well as emerging market equity investment management fees charged to separate accounts advised by the investment adviser and other managers. This information allowed the board and the committee to compare the fund’s advisory fees with advisory fees charged to both retail and institutional investors in emerging market equity mandates. The board and the committee also discussed information obtained from third-party sources regarding advisory fee rates for emerging market equity mandates. The board and the committee considered these materials, as well as their personal knowledge of advisory fee rates charged by other emerging market equity funds. The board and the committee concluded that the fees charged under the agreement are significantly lower than fees charged by other comparable retail mutual funds with emerging market equity mandates, and are reasonable when compared with the fees institutional investors are typically charged in emerging market equity mandates.

 

Emerging Markets Growth Fund 29
 

5. Investment adviser costs, level of profits and economies of scale

The board and the committee reviewed information regarding the investment adviser’s costs of providing services to the fund and its other institutional clients, and also reviewed the economics of the relationship between the investment adviser and the fund and any resulting level of profits to the investment adviser. The board and the committee considered the current and historic financial stability of the investment adviser’s parent company. The board and the committee also considered that pursuant to the fee schedule charged under the agreement, fees decline as the fund’s assets increase, reflecting economies of scale in the cost of operations that are shared with investors. The board and the committee also noted that long-term economies of scale are reflected in the fund’s expense ratio, which has historically decreased as assets under management have grown, and vice versa. The board also considered the investment adviser’s reinvestment in its business over time and the investment adviser’s portfolio manager compensation practices. The board and the committee concluded that the investment adviser’s profitability from its relationship with the fund over the long term was reasonable, and that the fund’s fee and expense levels reflect economies of scale that benefit investors.

 

6. Ancillary benefits

The board and the committee considered the benefits received by the investment adviser and its affiliates from their relationship with the fund, and possible ancillary benefits received by the fund in connection with the activities of the investment adviser or its affiliates that are not directly related to the fund. The board and the committee also reviewed the investment adviser’s portfolio trading practices, noting that while the investment adviser receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, the investment adviser has represented to the Board that it has not committed to direct any specific dollar amounts of brokerage to these broker-dealers in exchange for such research, and does not give preference to broker-dealers that have sold shares of investment companies advised by it or its affiliates.

 

7. Conclusions

Based on their review, including their consideration of each of the factors referred to above, the board and the committee concluded that the agreement should be continued for another one-year period.

 

30 Emerging Markets Growth Fund
 
Tax information unaudited

 

We are required to advise you of the federal tax status of certain distributions received by shareholders during the fiscal year. The fund hereby designates the following amounts for the fund’s fiscal year ended June 30, 2014:

 

Foreign taxes   $0.02 per share
Foreign source income   $0.22 per share
Qualified dividend income   $80,982,000

 

Individual shareholders should refer to their Form 1099-DIV or other tax information, which will be mailed by February 15, 2015, to determine the calendar year amounts to be included on their 2014 tax returns. Shareholders should consult their tax advisors.

 

Emerging Markets Growth Fund 31
 

Board of directors and other officers

 

“Independent” directors1

 

Name, age and
position with fund		   Year first
elected
a director
of the fund2 		  Principal occupation(s) during past five years   Number of
portfolios in fund
complex3 overseen
by director 		  Other directorships4
held by director
Paul N. Eckley, 59
Chairman of the Board
(Independent and Non-Executive)		   2005   Senior Vice President, Investments, State Farm Insurance Companies   1   None
Beverly L. Hamilton, 67   1991   Retired President, ARCO Investment Management Company   1   Oppenheimer Funds (director for 38 portfolios in the fund complex)
Raymond Kanner, 61   1997   Managing Director and Chief Investment Officer, IBM Retirement Funds   1   None
L. Erik Lundberg, 54
Vice Chairman of the Board
(Independent and Non-Executive)		   2005   Chief Investment Officer, University of Michigan   1   None
Helmut Mader, 72   1986   Managing Director, Mader Capital Resources GmbH   1   None
Aje K. Saigal, 58   2000   Chief Investment Officer and Chief Executive Officer, Nuvest Capital Pte Ltd; former Director of Economics & Investment Strategy, Government of Singapore Investment Corporation Pte Ltd   1   None
David H. Zellner, 59   2010   Chief Investment Officer, General Board of Pension and Health Benefits of The United Methodist Church   1   None

 

“Interested” directors5

 

Name, age and
position with fund		   Year first
elected
a director
or officer
of the fund2 		  Principal occupation(s) during past five years and
positions held with affiliated entities of the fund 		  Number of
portfolios in fund
complex3 overseen
by director		   Other directorships4
held by director
Victor D. Kohn, 56
President and
Chief Executive Officer 		  1996   President and Director, Capital International, Inc.; Senior Vice President — Capital International Investors, Capital Research and Management Company;6 Director, The Capital Group Companies, Inc.;6 Senior Vice President — Capital International Investors, Capital Bank and Trust Company6   1   None
Shaw B. Wagener, 55   1997   Chairman of the Board, Capital International, Inc.; Senior Vice President — Capital International Investors, Capital Research and Management Company;6 Chairman of the Board, Capital Group International, Inc.;6 Director, The Capital Group Companies, Inc.;6 Director, Capital Group Private Markets, Inc.6   1   None

 

Chairman emeritus

 

Walter P. Stern, 85 Vice Chairman of the Board, Capital International, Inc.

 

32 Emerging Markets Growth Fund
 

Other officers

 

Name, age and
position with fund		   Year first
elected
an officer
of the fund2 		  Principal occupation(s) during past five years
and positions held with affiliated entities of the fund
Walter R. Burkley, 48
Vice President		   2011   Senior Vice President and Senior Counsel — Fund Business Management Group, Capital Research and Management Company;6 Director, Capital Research Company6
Michael A. Felix, 53
Vice President		   1993   Senior Vice President, Treasurer and Director, Capital International, Inc.; Senior Vice President, Treasurer and Director, Capital Guardian Trust Company;6 Senior Vice President and Treasurer, Capital Guardian (Canada), Inc.;6 Senior Vice President and Head of Investment Operations – Investment Operations, Capital Research and Management Company6
Peter C. Kelly, 55
Vice President		   1996   Senior Vice President, Senior Counsel, Secretary and Director, Capital International, Inc.; Senior Vice President and Senior Counsel – Fund Business Management Group, Capital Research and Management Company;6 Senior Vice President, Senior Counsel and Director, Capital Guardian Trust Company;6 Secretary, Capital Group International, Inc.6
Abbe G. Shapiro, 54
Vice President		   1997   Vice President – Investment Operations, Capital Research and Management Company6
F. Chapman Taylor, 55
Vice President		   2011   Senior Vice President — Capital International Investors, Capital Research and Management Company6
Laurie D. Neat, 43
Secretary		   2005   Assistant Vice President, Capital International, Inc.; Assistant Vice President, Capital Guardian Trust Company;6 Assistant Vice President and Trust Officer, Capital Bank and Trust Company;6 Assistant Vice President – Fund Business Management Group, Capital Research and Management Company6
Bryan K. Nielsen, 41
Treasurer		   2006   Vice President, Capital International, Inc.; Vice President – Investment Operations, Capital Research and Management Company6
Dawn J. Duffy, 42
Assistant Treasurer		   2011   Assistant Vice President, Capital International, Inc.; Assistant Vice President, Capital Bank and Trust Company;6 Assistant Vice President – Investment Operations, Capital Research and Management Company6

 

The fund’s statement of additional information (SAI) includes further details about fund directors. The address for all directors and officers of the fund is 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA 90025, Attention: Secretary.

 

The fund’s SAI, Proxy Voting Policy and Procedures, and proxy voting record for the 12 months ended June 30 are available free of charge on the U.S. Securities and Exchange Commission (SEC) website at sec.gov or upon request by calling (800) 421-4989.

 

The 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. This filing is available free of charge on the SEC website or upon request by calling (800) 421-4989. You may also review or, for a fee, copy this filing 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 The term “independent” director refers to a director who is not an “interested person” of the fund within the meaning of the Investment Company Act of 1940.
2 Directors and officers of the fund serve until their resignation, removal or retirement.
3 Capital International, Inc. serves as investment adviser for the fund and does not act as investment adviser for other U.S. registered investment companies.
4 This includes all directorships (other than those in the fund) 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 company registered as an investment company under the 1940 Act.
5 The term “interested” director refers to a director who is an “interested person” within the meaning of the Investment Company Act of 1940, on the basis of their affiliation with the fund’s investment adviser, Capital International, Inc., or its affiliated entities.
6 Company affiliated with Capital International, Inc.

 

Emerging Markets Growth Fund 33
 

Offices of the fund and of the investment adviser

Capital International, Inc.
11100 Santa Monica Boulevard, 15th Floor
Los Angeles, CA 90025-3302

 

333 South Hope Street
Los Angeles, CA 90071-1406

 

400 South Hope Street
Los Angeles, CA 90071-2801

 

6455 Irvine Center Drive
Irvine, CA 92618-4518

 

Transfer agent for shareholder accounts

JPMorgan Investor Services Co.
One Beacon Street
Boston, MA 02108

 

Custodian of assets

JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070

 

Counsel

Dechert LLP
1900 K Street, N. W.
Washington, D.C. 20006-2009

 

Independent registered public accounting firm

PricewaterhouseCoopers LLP
601 South Figueroa Street
Los Angeles, CA 90017-3874

 

Principal underwriter

American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406

 

This report is for the information of shareholders of Emerging Markets Growth Fund, but it also may 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.

 

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is in the prospectus, which can be obtained from Capital International by calling (800) 421-4989 and should be read carefully before investing.

 

Lit. No. MFGEARX-015-0814P (NLS) Printed in USA TAG/AFD/6391-S42549
© 2014 Emerging Markets Growth Fund, Inc.

 

 

 

ITEM 2 – Code of Ethics

 

The 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 calling 800/421-4989 or by writing to the Secretary of the Registrant, c/o Capital International, 333 South Hope Street, 55th Floor, Los Angeles, California 90071

 

 

ITEM 3 – Audit Committee Financial Expert

 

The Registrant’s Board has determined that each member of the Registrant’s Audit Committee, Helmut Mader, Aje K. Saigal and David H. Zellner, is an “audit committee financial expert” and "independent," as such terms are defined in this Item. This designation will not increase each designee’s duties, obligations or liability as compared to his duties, obligations and liability as a member of the Audit Committee and of the Board, nor will it reduce the responsibility of the other Audit Committee members. The Board believes each member of the Audit Committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition.

 

 

ITEM 4 – Principal Accountant Fees and Services

 

Fees billed by the Registrant’s auditors for each of the last two fiscal years, including fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant, and a description of the nature of the services comprising the fees, are listed below:

 

Registrant:

a)Audit Fees:

2013 $130,900

2014 $134,700

b)Audit- Related Fees:

2013 none

2014 none

c)Tax Fees:

2013 $76,800

2014 $18,000

The tax fees for 2013 and 2014 consist of professional services relating to: preparing the fund’s federal and state income tax returns (2013: $12,700; 2014: $13,000); preparing the local tax return and routine tax compliance services in India (2013: $38,300; 2014: $5,000); other tax services in India (2013: $19,500; 2014: none); and other tax services in the U.S. (2013: $6,300; 2014: none).

d)All Other Fees:

2013 none

2014 none

 

Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below):

 

a)Audit Fees:

Not applicable

b) Audit- Related Fees:

2013 none

2014 none

c) Tax Fees:

2013 none

2014 none

d) All Other Fees:

2013 none

2014 none

 

The Registrant’s Audit Committee will pre-approve all audit and permissible non-audit services that the Committee considers compatible with maintaining the auditors’ independence. The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant. The Committee will not delegate its responsibility to pre-approve these services to the investment adviser. The Committee may delegate to one or more Committee members the authority to review and pre-approve audit and permissible non-audit services. Actions taken under any such delegation will be reported to the full Committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the non-audit services listed above provided to the Registrant, adviser, and affiliates.

 

Aggregate non-audit fees paid to the Registrant’s auditors, including fees for all services billed to the Registrant and the adviser and affiliates that provide ongoing services to the Registrant, were $18,000 for fiscal year 2014 and $76,800 for fiscal year 2013. The non-audit services represented by these amounts were brought to the attention of the Committee and considered to be compatible with maintaining the auditors’ independence.

 

 

ITEM 5 – Audit Committee of Listed Registrants

 

Not applicable to this Registrant, as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.

 

 

ITEM 6 – Schedule of Investments

 

The Schedule of Investments is included in the Annual Report to Shareholders.

 

 

ITEM 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

 

Not applicable to this Registrant, 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, 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, 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 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. The Committee also evaluates, selects and nominates independent director candidates to the full Board. 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, 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)(1) The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto.
   
(a)(2) 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/ Victor D. Kohn
 

Victor D. Kohn, President and

Chief Executive Officer

   
  Date: August 28, 2014

 

 

 

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/ Victor D. Kohn

Victor D. Kohn, President and

Chief Executive Officer

 
Date: August 28, 2014

 

 

 

By /s/ Bryan K. Nielsen
Bryan K. Nielsen, Treasurer
 
Date: August 28, 2014